Buying life insurance: Here are the risks to avoid

Buying life insurance: Here are the risks to avoid

Plusieurs facteurs tels que l’état de santé, l’âge, le type d’emploi et le sexe, parmi d’autres, sont évalués par les assureurs pour déterminer le montant des primes que vous devrez àrez police verst d’ en s Life insurance. (Photo: 123RF)

Guest expert. According to the Canadian Life and Health Insurance Association, about 22 million Canadians will have life insurance with a total coverage of $5.1 billion in 2021. This represents coverage of $442,000 per family, or five times their average income.

Since paying an insurance claim is tax deductible, life insurance becomes an interesting tool to help your loved one deal with the potential financial fallout after your death. However, there are a number of life insurance pitfalls that you should be aware of that may affect your financial security.

Trapoh1: Postponing the purchase of life insurance

For the financial well-being of your loved ones, it is better to get life insurance as soon as possible. The younger you are, the lower the cost of your premium, regardless of the type of protection chosen (temporary or permanent).

Plusieurs facteurs tels que l’état de santé, l’âge, le type d’emploi et le sexe, parmi d’autres, sont évalués par les assureurs pour déterminer le montant des primes que vous devrez àrez police verst d’ en s Life insurance.

So if you put off buying a line, it will be more expensive. Then, if you’ve ever had a health problem, either your policy will be more expensive or it will be impossible for you to get it because of your medical history. In any case, it is never recommended to wait.

Trapoh2: Not (re)assessing your needs over time

The amount of life insurance coverage must be determined to appropriately maintain your family’s cost of living in the event of your death. However, keep in mind that this cost will change depending on whether you have recently married, given birth to a child, purchased property, changed a job, or experienced any other significant life event.

In such cases, now is the time to re-evaluate your life insurance with the help of a professional.

Trapoh3: Not specifying a beneficiary

A beneficiary is the person you designate to receive the benefits of your insurance policy at the time of your death. It is important to identify a beneficiary for each life insurance policy you purchase. If you don’t, your insurance company will conclude that the default beneficiary is your estate.

If the beneficiary is your estate:

  • death benefit is part of your estate;
  • The service may be the subject of a claim by your creditors to pay your debts;
  • death benefit is granted in accordance with the provisions of your will;
  • The amount in question is taxable upon settlement of the estate.

Note that you can designate a secondary or contingent beneficiary. This is the person or persons who will receive the sum of life insurance purchased if the specified beneficiary dies in front of you or at the same time with you.

It is a good idea to review beneficiary assignments from time to time and update them as needed.

Mistake #4: Not understanding what you are buying

One last tip: if you don’t understand what you want to buy, don’t buy! The vocabulary used in the industry can discourage more than one and some terms can lead to confusion. However, all these concepts must be well mastered to make an informed decision.

It is precisely the role of a financial security advisor that exists to accompany you in the world of personal insurance. He should be available to answer your questions and be able to generalize concepts that seem more complex to you.

Take the time to understand the policy you want to buy, because the financial health of you and your family depends on it!

Pascal Duguay PL Finn, MBA

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