What is Life Insurance and Why You Need It
Posted by Medavie Blue Cross on September 28, 2021
Getting married? Starting a family? Buying a home? Maybe you’re sending your children off to college or saving for your retirement. No matter where you are in life, life insurance can protect the financial security of your loved ones and your dreams for their future.
Life can take unexpected turns. Should something happen to you, life insurance provides your beneficiaries with a one-time lump-sum, tax-free payment to spend as they choose, from paying everyday bills to your mortgage or your child’s university tuition.
Life insurance can also be a key part of your financial plan, allowing you to access money in your policy while you’re alive to secure the future you are building with your family.
Life insurance is an important part of household financial planning
If you don’t have life insurance, here are some of the reasons to look into it:
- Supplement lost household income
- Provide a backup for major payments like a mortgage
- Help cover final expenses such as funeral costs
If you already have a life insurance policy, does it still cover your family both today and in the future? Many of us can be underinsured, meaning our coverage falls short of our financial expectations or changing needs. Don’t let it happen to you.
Make well-informed decisions with helpful advice from a trusted source like your insurance advisor. In doing your research — this is a great place to start! — here are a couple of key questions to ask:
How much life insurance do I need?
The amount of coverage you need is tied to your living expenses. What budget do you need to support everyday expenses ― and how much do you expect the benefit to cover?
- What budget do I need to support my family’s everyday expenses?
- Am I protecting any big-ticket items such as a mortgage?
- How much can I afford?
It’s a good idea to think about life insurance early on in life. If you are young, you may have more flexibility on premium as well as type of coverage.
How can the money claimed from a life policy be used?
There are different types of life insurance, such as mortgage insurance which can only be used to pay for your mortgage in the event of a benefit payout. This is not the case with Blue Cross Term or Permanent Life Insurance. Both can be used for different purposes, such as protecting an investment, the purchase of a home or for final expenses to cover funeral costs.
Proceeds from a life insurance benefit payment can be used for anything. And it is tax free.
Proceeds from any life insurance claim can be used for anything. And it is tax free.
Some common uses are:
- Pay off a mortgage
- Pay off household debts
- Cover funeral expenses
- Cover daily expenses over a period of grieving and adjustment
- Savings for future needs
How do you know what type of life insurance you need?
The basics of life insurance are simple. You pay premiums to ensure a predetermined cash payment, or insured amount, which is provided tax free upon the death of the person who is insured.
There are two main types of life insurance: Term and Permanent.
Term Life Insurance
Term insurance protects your loved ones or investments over a specific period.
- You choose the length of term that works best for you (10, 20 or 25 years).
- The premiums you pay are locked in so you know the amount you will be paying over the life (term) of the policy.
- The policy is often renewable, enabling you to renew for another term without any break in coverage.
- Or you can convert to a permanent life policy once your term policy ends.
Many people start out with a term policy and eventually convert over to permanent insurance to meet changing requirements in their lives. Learn more about Blue Cross Term Life Insurance.
Permanent Life Insurance
Permanent covers and pays the benefit (insurable amount) on the death of the insured person. It’s referred to as lifetime coverage.
- Premiums are fixed at the outset and do not change over the life of the policy so it’s easy to determine your long-term investment.
- Permanent insurance allows you to plan well into the future and make sure that you leave something for your children or other loved ones.
- It also works well converted from term insurance, after the kids have grown and into retirement to cover final expenses.
Learn more about Blue Cross Permanent Life Insurance.
How do I purchase life insurance?
Purchasing life insurance has never been easier. You can get a quote online in seconds and set yourself up for coverage in roughly 15 to 20 minutes with Blue Cross Term Life Insurance offering. Of course, you may want to take more time to review your options and that’s ok too.
It is also easy to apply for Permanent Life Insurance. All it takes is responding to a few easy questions with one of our Advisors. Learn more about Blue Cross Permanent Life Insurance.
There is nothing more important than your family. Life insurance is the best way to ensure they will be taken care of financially if something happens to you.
Blue Cross Term Life Insurance
Ensure the financial health of your loved ones from one of the most respected life insurance brands in Canada.
Medavie Blue Cross is a premier all-in-one carrier that provides health, dental, travel, life and disability benefits and administers federal and provincial government-sponsored health programs. Together with Medavie Health Services, we are part of Medavie, a health solutions partner committed to improving the wellbeing of Canadians. We are in the...