Here is a pretty important subject to master if
you want to protect the most important aspects of your life that you have build
throughout the years, either your family or your business. Once you know how it
works, you will be able to sleep well and to give your focus where it really
matters daily! I’ll discuss what It is, when you need it and the process of
getting your life insurance policy.
First, life insurance, at its most basic form,
exists because you have financial responsibilities AND you don’t have the money
now to cover those responsibilities in case of a disaster. What I mean is this.
If you are 69 years old, fully retired, living on a pension and you have enough
money set aside to live until 90, there is no use to have a significant life
insurance policy. On the other hand, take a look at this classic example. You
have a wife, 3 kids, a 325 000$ mortgage to pay every month, you are working
hard at your job and have set aside about 22 000$ for retirement or future
projects… you definitely need a proper protection.
Here are the four main points to look for :
1-Do you have a spouse? (or professional
relationship with someone)
2-Do you have kids still living with you?
3-Do you have debts or important monthly
payments (loans, mortgage, etc.)?
4-Do you rely on your paycheck to live day to
The more you answer yes to these elements, the
more you need life insurance!
So, if you have a professional or a personal
relationship with someone and there are financial responsibilities shared
between the two of you, you have to consider getting insured. Both of you! You
may have two different coverage because you don’t have the same financial
implication, but there is a need (see How To Calculate Your Insurance Needs
to know exactly who needs what coverage).
It’s not like you wanted to receive tens of thousands of dollars if you
neighbor died! This is immoral and not authorized by law anyways.
Now that you know what life insurance is, we
absolutely have to discuss how it works with the different types of insurance and when does your need start. It is
so not true to say that you have to be protected at the youngest age possible
for the biggest coverage possible. The question to ask yourself is not: how
much do I want to give to everybody close to me in case of a disaster? Because the answer would be… millions!
Especially if you ask the question in front of a life insurance agent.
Here is the simple question you may ask
yourself to identify if you need a protection now: If I die tomorrow, will someone
be in financial trouble, leaving him or her with monthly payments or some
future lump sums to pay? If the answer
is yes, call an agent right away. If not, maybe consider to only have funeral
insurance to cover your final costs.
If you consider a project in the near future,
like buying your first house, having a baby or an investment in real estate for
example, it may be a good idea to sit down with a professional right now. Because the death of could seriously undermine
the realization of the project if the money is missing.
Now that you KNOW you need life insurance and
you know how to calculate your needs,
here are the steps to issue an insurance policy.
You first complete a life insurance proposition
in which you have to answer medical questions. It is important that the company
become aware of your medical condition for the proper underwriting process and
the right premium to pay (tobacco, non-tobacco, diabetes, high pressure, etc.).
But most importantly is that in case of a death of somebody who is insured, if
all the medical questions have been answered, with all the underlying notes
from your previous medical challenges, the process to issue the check for the
beneficiary would be reduced. That’s why I strongly recommend that you
subscribe to an individual life insurance instead of loan or mortgage insurance
issued by your lenders. Those companies have the right, now that you are dead,
to ask for the physician statements and discover all you previous medical conditions.
And they have the right to challenge the coverage because you didn’t say
upfront, by yourself, some medical troubles you had in the past. Like if you
knew what to say and what not to say! So, in order to keep it simple and to
avoid the burden of medical proofs after the death of your loved one, take an
individual life insurance program.
Depending on your medical history, your age and
the amount required, you may have to do some medical tests (blood, urine,
pressure, measurement of height and weight, ECG, etc.).
Commonly, it takes between couple of minutes
and couple of months to complete the underwriting process, depending if medical
tests and physician statements are required. After that, you stay protected as
long as you pay your premium.
Here’s another advantage for an individual life
insurance policy… if, after your policy has been issued, your medical condition
changes or you start smoking, you coverage stays the same and you premium won’t
go up. If you add up some coverage later and your medical condition has
changed, you may have to pay an addition insurance premium.
So, pretty simple, isn’t it? Now you know what
life insurance is for, when does YOUR need starts and what the process is to
get one. Next up, let’s talk about one of the most challenging subject for life
insurance agents…the different types of