Why have life insurance?

Life insurance pays out a sum of money when the insuredThe insured is the person covered by the insurance. For example, with health insurance, the insured is the person covered in the event of illness. The insured is not necessarily the beneficiary, meaning the person who receives the money. person dies. This money goes to the persons designated as beneficiariesThe beneficiary is the person who will receive insurance benefits (money paid by the insurer). For example, the beneficiary of a life insurance policy is the person who will receive the money if the insured dies. in the insurance contract.

The money paid out following death can be used to help the deceased’s loved ones maintain their lifestyle or provide them with the necessary funds to pay:

  • Funeral expenses;
  • The notary and testamentary executor (liquidator);
  • Taxes. On death, most of a deceased's assets are considered to be sold. Therefore, tax may be payable. (The amount of life insurance paid out by the insurer is always tax free.)
  • The insured’s debts: credit cards, mortgage, personal loans, etc.;
  • New expenses following death. For example, if a spouse took care of the children while the other spouse worked, childcare services might have to be arranged.

These are just examples. The insured might have enough money for his funeral or other expenses. If so, his life insurance wouldn’t be needed to cover these costs. Take, for example, amounts in an RRSP that would be taxable on death. The beneficiary could simply use these funds to pay the taxes owing.

Some people may also want to leave an inheritance or make donations on their death.

The amount you must pay to be insured is called the “insurance premiumA premium, or insurance premium, is an amount that a person or company must pay on a regular basis to keep their insurance in effect. For example, if Mary has to pay $200 per year to keep her life insurance in effect, then the premium is $200.

The premium should not be confused with the face amount, or insured amount, which is the amount that the insurance company has to pay out. In the same example, if Mary has life insurance that pays $100,000 to Peter upon her death, then the face amount is $100,000. 
.”

Insight

It’s important to shop around!

Before buying an insurance product, take the time to compare different insurers’ offers. Prices can vary significantly from insurer to insurer for premiumsA premium, or insurance premium, is an amount that a person or company must pay on a regular basis to keep their insurance in effect. For example, if Mary has to pay $200 per year to keep her life insurance in effect, then the premium is $200.

The premium should not be confused with the face amount, or insured amount, which is the amount that the insurance company has to pay out. In the same example, if Mary has life insurance that pays $100,000 to Peter upon her death, then the face amount is $100,000. 
 (fixed or that increase over time), contract expiry and options.

The right insurance product for you is available. It’s worth taking the time to find it.

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Insurability

Before insuring you, an insurer usually has to assess your “insurability” by checking whether you already have a critical illness. Insurance is a safety net: You put it in place before you need it. Once you start falling, it’s too late.

Warning

Insurance and illness

Some insurers may agree to insure you even if you are already ill, but the premiums will be much higher. It’s always less expensive to get insurance when you are healthy.  

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Some insurance policies cost less in the first few years but then their cost (premiumsA premium, or insurance premium, is an amount that a person or company must pay on a regular basis to keep their insurance in effect. For example, if Mary has to pay $200 per year to keep her life insurance in effect, then the premium is $200.

The premium should not be confused with the face amount, or insured amount, which is the amount that the insurance company has to pay out. In the same example, if Mary has life insurance that pays $100,000 to Peter upon her death, then the face amount is $100,000. 
) increases over time, whereas others have premiums that never change. Also, some policies have higher administration fees. Before buying insurance, make sure you ask the person who is offering you the product plenty of questions.

Warning

Check that your insurer and representative are authorized to practise

Make sure the person and firm are authorized to offer insurance . You can call the AMF at 1-877-525-0337 (or consult our Register of firms and individuals authorized to practise).

You can also contact our Information Centre if you still have questions.  

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Insight

Doubling up on insurance

If you like, you can insure your life with more than one insurer. On your death, your beneficiaries will receive several insurance payouts.

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