Term Life Insurance – Pitfalls To Look Out For
Term life insurance in Canada is considered to be the simplest form of life insurance. It gives you temporary life insurance protection on a limited budget. It offers you a death benefit, but does not give you cash value. Shopping for life insurance is very similar to shopping for – well, almost any item.
Take shirts for example.
When you are looking for a new shirt, it has to match your own style and suit your everyday life. You might need a shirt for home, for business, for holiday or for a night spent in the city. The shirt you choose has to serve the intended purpose, it has to fit comfortably and it has to be within your budget. And – just like a shirt – the insurance plan you choose can not be a one-size-fits-all solution.
Of course, you want to get the right fit and style, so you may want to do some research. Try to think of how much coverage you want – this time from your insurance policy – and what are your long term financial goals. As I mentioned earlier, the plan you choose has to fit your budget – which is why prudent purchasers usually shop for the lowest rates and the best value. It does seem reasonable, doesn’t it? All right, prize is a factor, but you have to realize that the plan with the cheapest rate is not always the best value. It’s just like with shirts.
Let me remind you that there are two types of insurance plans, Term Insurance and Permanent Insurance. The former has a lower initial cost; but the premiums only stay the same for a particular term – it’s usually 10 or 20 years. You have to be careful, because after the term ends the cost increases in a dramatic fashion, and if you don’t renew it your coverage ends and your premiums are gone. Initial premiums for a Permanent Insurance are higher than Term life insurance in Canada but your cost remains the same. If you choose this product, you have coverage for your lifetime and depending on the plan it may also generate a cash value.
But let’s return to our analogy with shirt shopping. Here’s the question you should ask yourself: Would I buy a cheap shirt that doesn’t fit just because it’s on sale? I know the answer is “No”. I am not saying that term insurance can’t turn into a good fit, but you have to know that many times it’s only sold because it’s a cheap and an easy sell.
Would you prefer buying a shirt in a small store or in a big one, lined with a wide variety of brand names, styles and sizes? I know you’d go for the big store. Don’t let your local “captive” agent put you in a size M term policy – you may rather want to take the time to work with an independent broker who can create a custom fit that will serve you well for years.