Don’t you agree that buying term life insurance in Canada should be simple? But because you are unaware of some common mistakes, you end up paying thousands of dollars extra.
Do you know that when it comes to popularity, term life insurance generally stands number one in preference among Canadians? However, people still end up making some mistakes, which usually leads to them losing money and missing benefits.
Usually, buying term life insurance in Canada seems pretty convenient. Select the policy, choose the amount, and you are there. But unintentionally, we make some choices that not just cost us more, but also affect our families, leaving them unprotected in times of crisis.
You are capable and best suited to decide which term life insurance will be ideal for you. But the aspect that deserves attention is: are you sure you are buying it the right way?
Therefore, this life insurance buying guide in Canada is going to talk about 3 buying term life insurance mistakes that you definitely should avoid. Let’s find out.
3 Buying Term Life Insurance Mistakes in Canada to Avoid
There are several Canadians today who do not have proper insurance coverage, neither for themselves nor their family members, if anything happens tomorrow. Hence, it is important that you do not put yourself or your family members in such situations and get covered.
But make sure that you pay attention to the following.
Mistake 1: Waiting too Long to Buy
How many of you have thought to yourself at least at some point of buying term life insurance in Canada that: I am too young to buy the insurance right now. Should I buy it now, or should I wait for that promotion? Haven’t you?
But this will put you in even more challenging situations later. It is important to note that age and health play a crucial role in determining life insurance pricing. So, if you are delaying buying term life insurance in Canada today, you are just adding more dollars to the premium you will pay.
Just for example, at age 29, a $500K 20-year term might cost you $28/month. However, the same at age 40 would become $67 and at age 50, more than $160/month.
Think of buying term life insurance without delay as buying future security at today’s prices. So, rather than waiting, get in discussion with a financial consultant, research, and apply today. Moreover, you can adjust the cover at a later stage if you want.
Mistake 2: Undercalculating Coverage and Selecting the Wrong Term Length
Another mistake that people usually make while buying term life insurance in Canada is to fall into the “mortgage-only” trap or get a term that is too short.
Mostly, what happens is we buy the term life insurance, which would be just enough to clear the mortgage. However, have you thought about the fact that your partner might fall short on cash flow in managing aspects like childcare and tuition?
For example, the mortgage is $400k. But, the actual need of the family is $800k-$1M after including income, daycare, and even debts. How will they manage the remaining $600k?
Not only this, but choosing a 10-year term now, which would relatively be cheaper, will eventually cost you more later in renewal when you get older.
So, you should first make a list of all your needs, such as income replacement, debts, and costs related to kids. Not only this, but pick a term that covers your longest obligation.
Mistake 3: Overlooking Renewals and Conversion Options
Usually, what most of us believe is that our term life insurance policies would end when the term is complete. But that is not how it works. The policy generally gets renewed by most insurers automatically as the term ends.
For example, buying a term life insurance in Canada at the age of 30 for 20 years, you would be paying $35/month. However, after renewal at age 51, the per-month premium of the policy becomes $280/month. The real costs might differ, but just by seeing these enhanced costs, most of us would panic and cancel, leaving the family uncovered when it needs the insurance the most.
Therefore, do not ignore renewal rates and conversion options and keep waiting till the last year of your term. Plan if you need lifetime coverage, and choose the conversion option to select permanent coverage.
Wrapping Up
Hence, these are the top three mistakes to avoid when buying term life insurance in Canada. Term life insurance becomes much more effective if you keep these aspects in consideration and act accordingly.
Getting term life insurance is one of the smartest life decisions, but only when you do not make these mistakes. Keep in mind that you are not just buying a policy; you are laying the foundation of protection for your loved ones. Choose wisely!