Becoming a parent is a life-transforming experience. This stage of life comes with a whole new set of responsibilities. Apart from caring for and raising a decent human being, you have to support your child financially up to their entrance into adulthood – and sometimes even longer.

It might be a tough situation to think about, but the reality is you will not always be there to provide for your children. That’s why planning for eventualities is critical for new parents.

Life insurance can help keep your partner and children covered when you’re no longer around. Let’s dig deeper into how the birth of a child affects life insurance.

Does having a child affect an existing life insurance policy?

If you already have a life insurance policy, it isn’t affected by the birth of your child. The policy remains as is, the cost of your premiums does not change, and the pay-out amount remains the same.

In fact, if you want your policy to remain completely unchanged, you don’t need to notify the insurance company or make any alterations.

However, it is highly advisable to make some changes to your coverage (like changing your beneficiary – more below). Beyond changes to your current policy, you may need to secure new coverage to increase your death benefit and lengthen the coverage term.

Many parents with newborns opt to increase or augment their coverage to ensure it remains in place until their child is in their twenties, providing continued financial support until they reach adulthood.

Increasing your coverage comes with higher premiums, which in turn creates the need to shop and compare different providers. Securing as many life insurance quotes as possible and comparing policies can help you save money when changing your coverage to cover a newborn.

Should I list my child as a beneficiary on my life insurance policy?

When your new baby comes, it’s important to have them listed as a beneficiary on your insurance policy. Even if your spouse or parent is already a beneficiary, you may also want to add your newborn to the same policy.

Adding your child to your life insurance policy is a simple process. Simply talk to your insurance provider or advisor, they’ll give you the change of beneficiary form to complete, and you’ll be all set.

It’s important to have your children listed as beneficiaries on your policy for many reasons.

• Listing your child as a secondary beneficiary helps to avoid any delays in the payout of your life insurance death benefit in the event of your passing, or in circumstances where both you and a partner pass at the same time. If your policy doesn’t have a beneficiary, it will fall under your estate, which is subject to a lengthy probate process before funds are distributed.
• Additionally, if both you and your spouse pass away unexpectedly, your children may not receive any financial protection until the probate period is over.
• Also, if you have any outstanding debt at the time of your death, creditors can lay a claim on the estate, including the insurance policy payout if it falls into probate.

Marking your child as the beneficiary on your life insurance policy ensures they (or their trustee) get immediate access to the life insurance death benefit.

Which life insurance policy is best for new parents?

There is no one size fits all answer to life insurance coverage. The policy that’s perfect for you will depend on your circumstances.

Whole life insurance

Whole life insurance covers you for life. Regardless of when you die, your policy will pay the death benefit to your beneficiaries as long as you paid the appropriate premiums. However, whole life coverage is typically more expensive than term insurance.

Term life insurance

With term life insurance, you purchase coverage for a specific period, generally 10, 20, or 30 years. When that term ends, you are still covered; however, your policy renews at a more expensive rate.

Because it has a finite term (and thus a lower risk for the insurance provider to give you coverage), term life insurance is less expensive than other coverage types.

Term life insurance is usually more appealing for young parents. It allows you to cover all your other immediate obligations while still providing adequate protection for your family in the event of an untimely death. It’s also a good augmentation coverage; if you already have existing term life or whole life coverage, you can add a smaller term life insurance policy to solely cover the needs of your newborn child.

Most insurers allow you to convert your term policy into whole life coverage at the end of the term.

Will my children receive a life insurance benefit if they are still minors?

Understandably you may be worried about your children’s financial situation if you pass before they reach adulthood.

In Canada, children below the age of 18 are not legally allowed to take full control of a life insurance policy payout. To ensure your children are fully covered, consider forming a trust. The trust will be responsible for administering and distributing the funds to your children until they reach the legal age where they can control their own financial affairs.

Read more about how to create a trust in Canada. 

Insuring your newborn baby

Providing the best for your children is often the goal of every parent. Establishing life insurance coverage for your newborn baby is another important coverage consideration.

• Premiums for children’s life insurance are usually less expensive at such a young age. What’s more, the policy covers your child for the rest of their life and gives them options to secure additional coverage as they grow older.
• Children’s life insurance provides a safety net to cover funeral and other expenses if your child passes before you. While this may be an unsettling thought, it’s always a good idea to prepare for anything.
• Lastly, life insurance coverage for children isn’t only about preparing for the worst. The cash value of a children’s life insurance policy can help your child start their adult life on a good note. It acts as a savings tool that your children can tap into for their education, first house, first car, or keep to establish their own retirement savings.

The steps to ensuring your child is protected are simple but no less important. Read more about choosing beneficiaries for your policy and getting life insurance cover for children, and get in touch with an advisor to help solidify your coverage profile with your new addition in mind.

You likely already know the importance of life insurance: it is extremely beneficial for your family when you pass away. But what about those tough financial times that can arise when you are still alive? If you were unable to work due to severe disability, would your family still survive financially despite your loss of income? 

An Extreme Disability Benefit rider is an additional benefit that you can add to your life insurance policy. It provides a financial payment if you’re in a state of “extreme” physical disability. Insurers might define “extreme disability” differently, but it commonly includes the inability to bathe, eat, or dress on your own — among other challenges.

At PolicyAdvisor, we have significant experience helping Canadians understand whether they need an extreme disability benefit rider as part of their life insurance coverage. We can also find alternatives that could better fill the gaps in one’s needs.

What is a life insurance rider? 

A life insurance rider is an optional feature added to your policy to better address your unique insurance needs. Insurance riders typically require an additional premium payment, which is added to your monthly premium. Some riders may also be included at no extra cost.

 Learn more about life insurance riders.

How does the extreme disability benefit rider work? 

The extreme disability benefit rider is a form of accidental death benefit. It provides an advance payment of your life insurance payout in the event of an extreme physical disability. For instance, it could be either 50% or 25% of your death benefit, up to a maximum of $250,000. The payment is made after a pre-determined waiting period that varies by insurance provider.

The extreme disability benefit rider provides you with extra funds in your time of need. Your ailment might mean you can no longer earn income to support your family. Additionally, your household might need to enlist Disability Support Services or hire extra help, depending on the nature of disability. They may even need to adjust your living environment, such as by purchasing accessible vehicles or installing stairlifts due to your health status. 

This rider isn’t to be confused with disability insurance or critical illness insurance, although all of these typesof coverage can help in the event of loss of income due to illness or injury. The extreme disability benefit rider provides partial benefits in the form of a lump-sum advance on your life insurance payout.

How extreme disability is defined

Statistics Canada has estimated that around 22% of the population has some form of partial or permanent disability. But the definition of extreme disability varies among service providers. Some use “Severe Loss of Independent Existence” to measure extreme disability. Severe loss of independent existence occurs when you’re diagnosed with a total inability to perform four out of six daily living activities without assistance. 

These daily activities include:

• Bathing: Washing yourself 
• Dressing: Putting on or removing clothing, braces, artificial limbs, and other surgical appliances 
• Toileting: Getting on and off the toilet and performing personal hygiene tasks
• Bladder and Bowel Continence: Managing bladder and bowel function with or without a protective undergarment or other appliance to maintain hygiene
• Transferring: Moving to and from a bed, chair, or wheelchair
• Feeding: Eating or drinking 

After you receive a diagnosis of extreme disability from a specialist, your insurance company may have a waiting period of 90 to 180 days before providing the advanced payout.

Who offers an extreme disability benefit rider? 

Beneva (formerly SSQ Insurance) and UV Insurance provide two of the most popular extreme disability benefit riders with their life insurance policies. 

Beneva Insurance

Beneva offers flexible life insurance coverage that reaches a maximum benefit of $10,000,000. They provide terms of 10, 15, 20, 25, 30, 35, and 40 years. Their life insurance policies generally include the extreme disability benefit for free. 

Beneva’s extreme disability benefit provides the perks mentioned earlier in this article. Before the age of 60, 50% or 25% of the initial insurance amount may be payable in advance, up to $250,000, if you face a state of extreme disability for at least six months. 

Read our full review of Beneva Insurance’s term life insurance. 

UV Insurance

UV Insurance provides a form of the extreme disability benefit rider as an integral part of their T-20 Superior+ policy and other products. This rider provides 50% of the insurable amount, up to $100,000, if you face a severe loss of independent existence before your 60th birthday. The benefit is paid after 90 consecutive days of severe loss of independent existence.

Extreme disability rider vs catastrophic disability rider 

A catastrophic disability rider usually comes as part of or as an optional add-on to disability insurance policies. Catastrophic benefits give extra coverage in addition to your disability policy’s monthly benefits payout. This rider is primarily an income replacement option. It allows your disability insurance benefit to replace 100% of your prior income instead of only partial benefits.

Is it possible to add a rider to an existing life insurance policy?

There’s no straightforward answer here. Whether you can add a rider to an existing life insurance or disability policy depends on your insurer and your policy’s terms and conditions. It could further vary between riders. 

Adding a rider to an existing application often requires submitting a new application. You may have to take a medical exam or submit an Attending Physician’s Statement (APS) to qualify. 

Dropping a rider from your policy is much easier than adding one. Your insurer generally won’t need additional information, so it’s commonly a matter of filling out an application or informing your insurer of your wishes. After you drop the rider, your insurer adjusts your premiums accordingly. 

If you’re interested in a life insurance policy with an extreme disability benefit or another rider, our expert advisors can help. We can assess what life or disability insurance policies are right for you. Schedule a call with one of PolicyAdvisor’s insurance experts today and learn more about our competitive rates and coverage options.

One of the biggest barriers for Canadians considering life insurance is what they perceive as the high price of insurance premiums. This is especially true for smokers. Those who are addicted to cigarettes often assume the price of life insurance premiums is so prohibitively high that they shouldn’t even attempt to apply.

The truth about term life insurance for smokers lies somewhere in the middle. While there are situations where the price of life insurance for a smoker can give one pause for thought, there are alternatives. This guide will shed light on how smoking affects life insurance premiums, and what a smoker can expect when searching and applying for life insurance.

Can I get life insurance if I smoke?

Yes, of course, you can get life insurance if you smoke or consume tobacco. That smokers don’t qualify for life insurance is and incorrect assumption. This assumption stems from the fact that coverage for term life insurance is much more expensive for those who smoke than those who do not.

How does smoking affect my life insurance?

The stress that cigarette smoking inflicts on one’s body has lasting detrimental health effects. Tobacco consumers are much likelier to have a health condition later in life like cancer, heart disease, and stroke. While there are many more repercussions to smoking, it is these deadly medical conditions that make a smoker’s life riskier to insure. Thus, life insurance for smokers, especially those past the age of 40, is more expensive than that for non-smokers due to these health risks.

How much more will it cost to insure me if I smoke?

Canadian insurance companies offer rates on most of their term life insurance products specifically for smokers. These rates may have a smaller difference between those for smokers and non-smokers at early ages, but the difference is substantial as applicants age. Depending on the age of the applicant and the amount of coverage applied for, the cost of life insurance for smokers can be higher by 50 to 100% compared to those for non-smokers.

The following chart shows representative monthly premiums for a 20-year term life insurance policy with a death benefit of $500,000. The model assumes the applicant is in good health.

Looking for more specific life insurance rates? You can always get an online life insurance quote from PolicyAdvisor for the most accurate estimated premiums in Canada.

What counts as smoking by life insurance providers?

Unfortunately, there is no sliding scale for what is considered smoking. Life insurance companies do not believe in an occasional smoker. If you have had a single cigarette in the past 12 months, you are considered a smoker in the eyes of any potential insurance provider.

There are also other tobacco and nicotine products that will affect your life insurance premiums. The use of cigars, cigarillos, chewing tobacco, nicotine gum, and a nicotine patch can all be considered the same as smoking by some Canadian insurance companies.

There is some leeway for a tobacco user that smokes cigars or cigarillos. The classification depends on how many you consume. An occasional cigar or cigarillo may be classified as a non-smoker as long as it averages out to one a month or less. As advisors, we have observed more flexibility on cigar usage by insurance providers than any other form of tobacco consumption when it comes to determining smoking status. So if you enjoy the rare stogie, you can still get affordable life insurance.

Will I have to take a medical exam to test for tobacco or nicotine?

In your application for life insurance, you will be asked if you smoke. You must answer this honestly. Depending on your age and the amount of insurance you are seeking, insurance companies may require you take a medical exam (that requires urine and blood testing). Among other things, the blood test will also help them determine your smoking habits.

Even without a medical exam, it is extremely important that you do not lie in your life insurance application. Insurance policies have a “contestability period.” This is basically a two-year period in which a provider can rescind your life insurance policy and refund the premiums if there is a material misrepresentation during the application process.

This period begins from the time your policy goes into effect. If you die within this period and the insurance company finds out that you lied about your tobacco usage, they have the right to rescind the policy and/or deny the death benefit to your beneficiary. 

Even after the 2 year incontestability period, insurance companies have the right to deny a claim. If they can establish that you had not correctly classified yourself as a smoker at the time of the application and paid a non-smoker rate, your claim could also be denied.

Can I quit smoking to lower my life insurance premium?

Yes, you can, but it’s not as simple as flipping a light switch. If you decide to quit smoking  there is no immediate effect on the price of your life insurance premium.

How long do you have to quit smoking to be considered a non-smoker for life insurance?

You would have to verify you have not smoked cigarettes or consumed any other tobacco products for 12 months. First have to sign a declaration stating that you have not consumed tobacco products in that time period. Then you would need to confirm your status through medical underwriting. This underwriting  would most likely include providing a urine sample to ensure there is no trace of nicotine or cotinine (a nicotine byproduct) in your system. At that time, the insurance company would also need confirmation of no adverse change in your health. Then you may be eligible for a non-smoker rate.

Other factors which affect life insurance for smokers

Vaping

Vapes and electronic cigarettes, as well as the flavoured tobacco products used in these devices, are usually considered the same as smoking. Insurance providers, like BMO, take into account the health effects of vaping, as well as unknowns like how some of the carcinogens found in vaping liquid (lead, formaldehyde) have long-term effects on e-cigarette users.

While classification for vapers may change in the future, you will still find yourself paying higher premiums today depending on the carrier you choose.

Marijuana and cannabis 

Marijuana smoking is another subject that is often conflated with its nicotine counterpart. With recreational marijuana usage legalized in Canada, the classification of cannabis smokers has changed. Once upon a time, if you were a recreational marijuana smoker, you would be considered a smoker in the eyes of your insurance provider.

While that is no longer the case, as a casual marijuana user you may still be asked exactly how much marijuana you consume. Depending on the specific insurance company, heavy cannabis use may still be classified with smoker ratings. However, if you mix marijuana with tobacco, then even a single recreational usage in 12 months would classify you as a smoker.

Read more about legal marijuana and life insurance.

Can I get preferred rates as a smoker?

There is some silver lining for the smokers among us. Most life insurance providers offer preferred rates, or better than regular health rates, to individuals that demonstrate better than standard health. These more affordable rates are available both to smokers as well as non-smokers. As you would expect, non-smoking preferred rates are substantially better than preferred rates for smokers. Nonetheless, if you are able to get preferred pricing while being a smoker, it will save you a lot of money over the term of your life insurance.

Preferred rate standards for smokers vary by company. Some companies may have easier norms for blood pressure, cholesterol, or even driving habits than others. Some of the Canadian life insurance companies may not offer preferred pricing to those that smoke cigarettes. Instead, they are only able to offer better pricing to cigar consumers. At PolicyAdvisor we work with 25 of the best life insurance companies in Canada and can guide you to make the right choice.

How to find the best life insurance smoking rates

Your best bet for finding the best life insurance company for smokers is to speak with an experienced insurance broker. Our brokers have experience pairing smokers with insurance providers who work well with cigarette smokers and offer the best rates for those searching for term life insurance. We work with Canada’s best life insurance companies and find you the right quote for your circumstances and budget. Schedule a call or contact PolicyAdvisor.com today.

Up-to-date COVID-19 information from trusted sources:

• • Gov. of Alberta
  • Gov. of Ontario
  • Gov. of Manitoba
  • Gov. of British Columbia
  • Gov. of Canada

On May 4, 2023, the World Health Organization declared that COVID-19 is no longer a global health emergency.

What is COVID-19?

Novel Coronavirus (COVID-19) is a new strain of coronavirus that was first identified in Wuhan City, China in December 2019 and has since been detected in more than 100 countries. The virus has been named SARS-CoV-2 and the disease it causes has been named Coronavirus disease 2019 (COVID-19). Coronaviruses are a large family of viruses that are common in humans and have typically been associated with mild illnesses, similar to the common cold. The novel Coronavirus (n-COV) is a new strain that has not previously been identified in humans.

Symptoms for COVID-19 have included fever, cough, difficulty breathing, and pneumonia in the lungs, with severe pneumonia cases leading to fatalities. Generally, Coronavirus can cause severe symptoms in people with weakened immune systems, the elderly, and those with long-term health conditions like diabetes, cancer, hypertension, and chronic lung disease. On March 11, 2020, the World Health Organization (WHO) declared the global outbreak of COVID-19 as a pandemic.

Since then, over the course of the COVID-19 pandemic, multiple variants of the virus have been identified. The most prominent ones were the Alpha, Beta, Delta, and Omicron strains. The Delta variant was classified by WHO on May 11, 2021, and quickly became the dominant variant circulating globally. Delta spreads more easily than earlier strains of the virus and is responsible for more cases and deaths worldwide. The Omicron variant was reported to WHO later that year, on November 24, 2021, and was classified as a variant of concern by WHO on 26 November 2021, due to its high transmissibility compared to other variants. As of June 2023, Omicron is still the most prominent strain being spread in North America.

As of May 4, 2023, the WHO does not consider COVID-19 a global health emergency anymore. However, it is still classified as a pandemic and a serious, ongoing health issue.

Does COVID-19 affect my existing life insurance policy?

If you already have an existing, active life insurance policy, then the short answer is you will be covered for any claims associated with COVID-19.

In other words, if you were to pass away due to COVID-19 or a Coronavirus-related ailment, your beneficiary will be able to make a life insurance claim. The claim would be treated in the same manner as a death caused by any other natural disease or ailment. Life insurance policies do not treat deaths caused by Coronavirus any differently from those caused by any other flu, infectious diseases, or natural causes.

In 2020, Canadian life insurance companies paid out over $154 million in claims for Covid-19-related deaths. While 2021 data has yet to be released for Canadian insurers, according to US trends life insurance payouts in 2021 were the highest they have been in over 100 years, with Covid-19-related death claims topping 2020 numbers.

Will receiving a COVID-19 vaccine affect my life insurance policy?

Despite what some online rumours may say, receiving a COVID-19 vaccination will not affect your insurance in any way. The Canadian Life and Health Insurance Association released a statement on March 8 2021 assuring Canadians that no life insurance provider in Canada will be denied coverage or benefits when using a vaccine approved by Health Canada.

From their release:

“Getting the vaccine will not affect your insurance coverage. No one should be afraid and choose to not protect themselves from COVID-19 because they are worried about it affecting their benefits. All of Canada’s life and health insurers are supportive of Canadians receiving government-approved vaccinations to protect themselves from serious illness and death.”

I have a deferred insurance policy. Can a COVID-19 claim be paid out during the waiting period?

If you currently have a deferred life insurance policy, owing to a prior health consideration, then any claims associated with COVID-19, will have to wait out the pre-specified deferral period. However, even in such cases, the claim and death benefit will be treated in the same manner as any other claim for a natural cause of death from an illness or disease.

Will COVID-19 be covered under a new life insurance policy, if I apply now?

Life insurance policies have continued to provide coverage for Coronavirus-related deaths for new life insurance applications, once those have been approved.

However, if you have been recently diagnosed with Coronavirus or are currently awaiting diagnosis or treatment of the same, insurance companies will likely defer the approval, until after such treatment or diagnosis is complete. Such a deferral will be similar to deferrals required for any other ongoing health condition or treatment.

For example, some companies may implement underwriting guidelines at the time of application that state, you must not have had Covid-19-related symptoms in the last month, that your case was only mild, or that you must wait two or three months following the resolution of all symptoms. As the situation evolves, companies may continue to amend their approval guidelines, so it’s always best to check with an insurance expert at PolicyAdvisor for the latest underwriting rules.

Does my travel history to a Coronavirus-affected region affect my life insurance application?

As part of standard life insurance applications, most life insurance companies will ask questions about your recent travels in the last year – as well as ask for information on your travel plans for the next twelve months. If you have travelled to a region that has seen a wide outbreak of COVID-19, particularly in the last 1-3 months, then you can expect the insurance company to ask you additional questions.

Similarly, any imminent plans to travel to any of COVID-affected regions invite additional questions about such travel plans. In some situations, where travel may indicate elevated risks to Coronavirus, insurance companies may choose to postpone the decision around approving a policy. Learn more about life insurance and travelling and applying for life insurance while quarantined.

Will a COVID-19 claim be paid out under Critical Illness Insurance policies?

A critical illness insurance policy is a contract whereby an insurance company agrees to pay out a one-time lump sum amount to the insured, upon the diagnosis of a specified critical illness and the completion of a survival period; usually 30 days.

COVID-19 by itself is not a covered condition as defined in Critical Illness policies currently sold. Therefore critical illness policies will not payout, purely, on a positive COVID diagnosis. The vast majority of people who contract the novel coronavirus are expected to make a full recovery within a relatively short period of time. However, if a claim is presented for a different covered critical illness (such as a major organ transplant, like a lung transplant) that is attributable to Coronavirus, then it will generally be viewed as a covered condition and insurance companies will consider such claims for approval.

If you are unsure what your policy covers, reach out to our licensed insurance experts. We will help explain your current coverage.

Am I covered for COVID-19 under my disability insurance policy?

Disability insurance products are designed to pay a monthly benefit to replace a loss of earnings if you are unable to work due to illness or injury for the length of the policy, or until you return to work. Typically, there is a waiting period before the benefit payments start. This waiting period can be between 1 to 26 weeks for short-term policies or up to 2 years for long-term disability insurance policies. Should a Coronavirus diagnosis lead to a loss of income, the insurance companies will make a payment as long as the minimum waiting period is complete. Some companies may even waive the waiting period in the case of a positive diagnosis. Learn more about Coronavirus and critical illness insurance.

Frequently Asked Questions

COVID-19 has been declared by the WHO to be a pandemic. Are there any exclusions on life insurance policies associated with pandemics that insurance providers may introduce in the future?

A pandemic is a global outbreak of disease. Pandemics happen when a new virus emerges to infect people and can spread between people sustainably. Most life insurance policies currently do not have a disease-related exclusion. The standard exclusions pertain to suicide/self-inflicted harm or criminal activity.

Currently, there are not any exclusions on coronavirus-related deaths. However, insurance companies continue to monitor the outbreak and they reserve the right to make any changes in their product or processes in the future.

Should I be buying insurance on my life or health at this time?

Regardless of this health scare, you should be buying the appropriate amount of insurance coverage to protect you and your family at the earliest time you can. Such coverage only gets more expensive with age.

COVID-19 is a reminder that life events can emerge quite quickly and it is prudent to secure coverage ahead of time. This is just as important a time as any other to protect those that depend on you for financial health. If you would like to discuss your insurance needs, our advisors are available to assist you.

Can I apply for life insurance coverage without having to meet an advisor or undergo a medical test?

When COVID-19 was still a global health emergency, many Canadians practiced social distancing to prevent the spread of Coronavirus to loved ones and community. By now, such restrictions are no longer recommended, but you may still be concerned about limiting your social interactions.

As Canada’s leading online life insurance brokers, the team at PolicyAdvisor has made finding life insurance quotes and buying life insurance an easy, quick and online process for consumers like yourself that seek the convenience of a non-face-to-face meeting to assess insurance needs. Our life insurance needs calculator can help shed light on your specific insurance requirements from your couch or kitchen table.

Our innovative algorithm parses through 100s of insurance products so you can find the best insurance policy and options for your needs. Our licensed insurance advisors are available online to answer any questions, curate your insurance choices, and help complete the application for you – all fully online.

While many life insurance products require a medical test, we have partnered with some of Canada’s leading insurance companies to arrange for life insurance coverage up to $1 million, without requiring an in-person, medical exam. We also have access to several non-medical insurance products; the coverage can be fully obtained without meeting with a medical representative.

You can easily get financial protection from the comfort of your home even if you are still practicing social distancing – like so many of us are – to protect our communities and those most vulnerable.

One’s insurance needs vary throughout their lives. Generally, less coverage is needed in one’s young and single years. But, needs do increase after major life events such as getting married, buying a house, and having children. Then, as more time passes, debts and obligations decrease, and coverage needs decline simultaneously.

So how does one ensure they have the right amount of insurance coverage throughout their lives? More importantly, how does one ensure that we are not overpaying for coverage that we may not need in future years?

One solution is laddering, also known as a life insurance ladder strategy, a comprehensive plan that ensures you have multiple coverages in place to address specific needs and periods of your life and are paying only for the amount of coverage you need during these periods.

How does a life insurance ladder work?

At its most basic level, life insurance laddering entails purchasing multiple life insurance policies with different coverage amounts and durations. Each of these individual policies expire at different times. They are chosen to address specific protection needs for specific periods of time in your life. For example:

• a 10-year policy to cover your outstanding student debt
• a 20-year policy to help protect your children from their youngest years until they can complete their education and gain financial independence, and:
• a 30-year policy to cover the amortization period of your mortgage

This can be executed two ways: through a base life insurance policy with term life riders added to it. Or by purchasing a set of individual life insurance policies, purchased simultaneously.

You can save substantially on your combined life insurance premiums by enacting an insurance laddering strategy, especially through a base-policy plus rider strategy.

How to save money on life insurance with a ladder

Foremostly, you purchase the bulk of your coverage when you need it most, using favourable rates due to your age.

As time passes, and you catch up to expiring debts like large loans or mortgages, your coverage will be timed to also decrease as shorter duration policies terminate. Once those policies terminate, you no longer pay their premiums.

Some insurance companies also offer discounts on premiums when an applicant takes out multiple policies and/or riders.

Lastly, laddering offers a great way to combine and mix term life and permanent insurance coverage. A policyholder can have permanent life insurance as their base policy, and add one or more term riders layered on top to achieve the coverage they need.

A life insurance ladder can seem confusing, but a real-life example tends to help those curious insurance seekers understand the concept better.

For example, say you’ve just finished a specialized graduate program like medicine or law. You’re now starting your career, getting married, perhaps starting a family, and purchasing your first home. Wow, that’s a lot to cover, but not an uncommon situation for many first entering their professional careers.

And while it is a lot to cover, those obligations all occur over different time periods. Your student debt can be taken care of in 10 years, your children most likely leave your care in their 20s, and your home will be paid off in 30 years. You need the most coverage in those early years, but once your obligations have diminished in the last years of your mortgage, you simply don’t require the same amount of coverage.

Here’s what a life insurance laddering strategy versus just term life insurance might look like in that situation.

*Premium figures for a 32-year-old non-smoker male.

Do I need a life insurance ladder?

Using a  life insurance ladder is largely dependent on your future plans. For many people, expenses decrease over time and, correspondingly, so do their coverage needs. For example, once you’ve paid off your mortgage and children are financially independent, the amount of insurance you actually need would be much less than before.

Laddering is for you if:

• You have large – but temporary – obligations: A mortgage or other debts, cost of living for children, funding children’s education, and other needs that taper off slowly as you age. Although you need a large amount of immediate coverage, this will greatly decrease as time passes.
• You have pre-existing health conditions or hazardous hobbies/travel plans that will result in higher future insurance rating, and thus increase your cost of insurance down the road.

But, if you don’t have solid plans for your future, a life insurance ladder may not be your best option at the moment. If you are very young without any liabilities or dependents, simple term life insurance may make more sense for your immediate needs.

This is also true if you want to leave a large financial legacy for your loved ones, irrespective of your needs.

How a  life insurance ladder differs from a single term life insurance policy

Can I use a ladder strategy to increase my coverage over time?

Speaking strictly on a technical level, a ladder strategy refers to coverages purchased at a single point in time. And if you purchase multiple coverages with varying lengths at one time, your initial coverage will always be of the highest value and reduce with time as shorter duration coverages lapse.

You cannot establish coverage that only starts a few years later since it will require new medical underwriting at that point in time.

So, while not laddering as we described it above, you can always purchase multiple life insurance policies over time that allow you to increase coverage. Additionally, some life insurance providers and policies have the option to increase your coverage amount once the policy goes into force. This is typically accomplished through optional policy riders such as guaranteed insurability – though, additional premiums are required for this rider.

How do I start a life insurance ladder strategy?

Most major Canadian insurers allow a form of life insurance laddering through their coverage options.

Some insurers such as RBC allow you to layer multiple term riders on top of your base coverage, within one policy. Others, such as BMO, let you apply for multiple separate term life policies simultaneously, to implement a ladder strategy, while availing a multi-policy discount on the premiums.

PolicyAdvisor can suggest the best ladder strategy for you, as well as the right insurer to match your needs. Schedule a call today and start building your own insurance ladder with one of our licensed insurance advisors.

It is possible to buy a life insurance policy for someone else. Generally, most people are shopping for insurance on themselves: they are intending to be both the policyowner and the life insured. But, that’s not always the case; sometimes you as the buyer and proposed owner of a policy may need to purchase a policy for someone like a loved one or a business partner.

That said, you can’t just choose someone you see on the sidewalk and purchase them life insurance. There are stipulations around insurable interest and consent. Read on to find out why and how you might buy life insurance for someone other than yourself.

How life insurance typically works

Life insurance is an agreement between you and a life insurance company, where if you die, they will pay a death benefit: a lump sum of tax-free money to someone you choose. In exchange, you agree to periodically pay them an insurance premium: a small amount of money over time.

How buying life insurance for someone other than yourself works

When you purchase life insurance for yourself, it’s usually because you envision someone needing your income should anything unfortunate happen to you, but the opposite can also be true. There can be people in your life, that should they die, would not only be a sad situation, but also represent a financial burden for yourself, your extended family, or your business.

In these situations, it is possible to take out a life insurance policy on someone other than yourself, as long as you can prove insurable interest and inform them of the life insurance policy you are taking out on them.

What is insurable interest?

Insurable interest is the technical term insurance companies use to describe your vested financial interest in the life of another person you seek to insure. Basically, to arrange insurance on the life of another person, you must prove that the insured person’s death would financially burden you. An insurance contract that you purchased on the life of a third person would not be considered legally valid unless there was a financial loss to you from the death of the insured. Insurable interest is the thin line that distinguishes an insurance contract from a wager.

In some cases like spouses, life-partners, parents, and minor children, insurable interest is considered obvious and you will not need to provide further evidence. With friends and business partners, however, insurance companies may scrutinize the situation more diligently and ask for further evidence of any shared finances or financial agreements.

Who can I buy life insurance on?

In addition to being able to buy life insurance on yourself, you may also choose to insure any of the following:

• Your spouse or partner
• Your child or a child of your spouse or partner
• Your grandchild or a grandchild of your spouse or partner
• Your parents or grandparents
• Your business partner or employees
• Anyone you have an insurable interest in

Why do I need to inform the person I am covering with a life insurance policy?

To cover an individual other than yourself with a life insurance policy, you require their explicit written consent. This is for several reasons. For starters, they need to sign the policy application so you can submit it to the insurance company. As well, there is more than likely medical underwriting, which could entail in-person medical exams or a medical questionnaire they would have to complete.

Minor children are exempt from the consent and signature requirements of life insurance application.

Reasons to buy someone else a life insurance policy

As we mentioned above, there are several situations where you are financially dependent on someone else and face financial hardship should something happen to them. Below are some of the reasons why buying someone else a life insurance policy makes sense.

Can I buy life insurance on my spouse or partner?

Covering a spouse is one of the most common reasons for buying a life insurance policy for someone other than oneself. If both you and your spouse or partner work, you may rely on your dual income to manage your financial obligations such as mortgage payments, raising children, higher education costs, paying down debt, and more.

But if you are the sole breadwinner, there are also reasons to buy a life insurance policy for your partner. Having a financial cushion should something happen to them can allow you to take time off, fund counselling services for yourself or your children, or generally help with any expenses that may accompany their unfortunate passing (funeral expenses, settling their estate, etc).

Can I buy life insurance on my former spouse or partner?

Yes, you can as long as you have insurable interest. If you have children together and share custody, then you may rely on your former spouse’s financial support in raising them. As well, some divorce agreements stipulate that ex-spouses must provide a life insurance policy as part of spousal support.

Can I buy life insurance on my parents?

Yes, if you are in any way still financially dependent on your parents, either through co-signed loans or business interests, you can consider buying them a life insurance policy to cover those. You can also consider purchasing a smaller permanent insurance policy for your parents to cover funeral and other end-of-life expenses.

Can I buy life insurance on my child?

Yes, you can buy life insurance on your children. And, as mentioned above, you don’t need the explicit consent of minor children to purchase them a life insurance policy.

In fact, many parents consider buying children’s insurance; you may choose a whole life insurance policy purchased for a child early in life. It provides coverage in the short term should anything happen to your child, to cover funeral expenses, and to support time off work. That said, you hopefully never utilize the death benefit, and instead lock in your child’s future insurability and provide them with an investment option through the policy. They can choose to keep the permanent coverage, or use the policy’s cash value to fund a big purchase like a car, house downpayment, or higher education.

For the same reasons you may consider coverage for your parents, you can choose to cover adult children as well if you share or have cosigned a debt, or rely on them for your financial well-being.

Can I buy life insurance on my business partner(s)?

While an insurance company will perform its due diligence in proving insurable interest, it is possible to buy life insurance for a business partner. In many cases, a business partner can be essential and integral in your company’s success. Covering them in case of an unexpected passing can ensure you keep your business afloat or obtain control of the business in what should be a tumultuous time while you reconfigure operations.

Providers such as Manulife offer policies like Business Term to cover specific business-related insurance situations like this.

Alternatives to buying life insurance for someone else

If you are not prepared to purchase a life insurance policy for another individual, there are alternatives. Life insurance riders like a child term rider or parent protection rider can provide coverage in the event of the passing away of these people in your life, though coverage is typically limited to the $20,000 – $30,000 range. In the case of child riders, you also obtain the option to lock in future insurability for your children once they are no longer minors.

Another simple alternative is speaking with the individual you plan on insuring and suggesting they take out their own coverage and name you or someone else (children, parents, other business partners) as the beneficiary.

How do I apply for life insurance on someone else?

As we mentioned at first, your initial step will be to determine your insurable interest in this person, and to inform them of your coverage plans. This can seem daunting, but by reaching out to a licensed insurance broker from PolicyAdvisor, we can quickly help you figure out your insurable interest and create the best insurance plan for that situation.

Life in your fifties can be a very transformational period. While most talk of change describes young adults evolving into home ownership and parenthood, there are several life-altering events that happen as you get older that affect your financial planning and protection. With that in mind, you may be wondering how much life insurance costs for a 50-year old and over, and which is the best type of life insurance for those at the age of 50 and above.

With prospects such as retirement, paying down the last of your mortgage, children entering university and starting lives their own, your financial needs can be so different from when you initially set up the tools and policies you use to ensure your loved ones are taken care of should something ever happen to you.

Whether you are looking at applying for life insurance for the first time, or want to change or update the coverage you obtained all those years ago, having some knowledge of what it may cost helps you start that process. With all that in mind, read further to find out what term life insurance costs for someone in their 50s, and why you should contemplate getting term life insurance now or making a change to your existing coverage.

Why should I get life insurance in my 50s?

The reasons at this age vary. While you won’t take advantage of the low rates offered to someone in their 20s or 30s, life insurance is still relatively inexpensive for someone in their 50s who is in good health. And actually, if you find yourself not having suffered any critical or recurring illnesses yet, it might be time to secure a great rate. And if you happened to have developed any health concerns, you may want to think about exercising options available within your existing coverages and/or asking an experienced insurance broker to guide you through new plans you may want to establish. Luckily, the best online insurance broker in Canada can help.

Which is the best life insurance at age 50 and over?

While you may have coverage through a group plan at your work – retirement is looming or you might find yourself in line for a final career change or promotion before you pack up the RV and live your twilight years sitting in a lawn chair in Arizona. In this case, you could find yourself with a gap in coverage or no coverage at all depending on your future plans. If you are dependent on group benefits for your life insurance at the moment, you should read why group plans can be lacking in life insurance coverage.

You may already have life insurance you purchased in your thirties or forties, but the plan, benefits, and options no longer suit your evolving needs. Be it marriage, children branching out on their own, or maturing mortgages, your financial and protection needs can change dramatically as you approach retirement age and consider life insurance as a senior – especially for such needs that are temporary in nature. Whether for full first-time coverage or to augment your existing insurance plans – the best term life insurance is simple and flexible insurance that can suit any of these situations.

How much life insurance does someone in their 50s need?

Before figuring the cost of life insurance at 50 years old and over, you need to know how much life insurance you should buy. Of course, the amount of life insurance you need at 50 years old depends entirely on your own personal situation – as we mentioned above.

However, there are some clear indicators of whether you need life insurance at the age of 50 and over:

• You are the main earner for your family, with dependents like your children, grandchildren, partner, or elderly parents
• You and your partner plan on spending the rest of your life together as you approach retirement
• You have children or grandchildren of any age
• You are paying for their education and plan to continue to pay for some of their education costs over the next few years
• You have a mortgage, or plan on buying or renovating your home in the near future
• You have other forms of debt like credit cards or a line of credit
• You are accumulating assets that you want to be able to transfer efficiently to your dependents

It makes sense that a Canadian in their fifties, with a remaining mortgage, children, and a partner also earning an income would need at least $500,000 in coverage to cover the last of the house payments, cost of living, and children’s education costs (or grandchild to spoil) in the next 20 years. However, like the Bermuda shorts you’ll need post-retirement, this isn’t one-size-fits-all. To find your specific life insurance coverage needs, try out our easy-to-use life insurance calculator. 

With all this considered, let’s take a look at what 20 year term life insurance costs for a 50-year old for some representative amounts.

What is the average cost of term life insurance for age 50 and over?

Term life insurance premiums are based on various factors such as your age, gender, smoking status, lifestyle, and overall health.

For a male non-smoker, $500,000 worth of 20 year term life insurance coverage starts at just over $123 at age 50 and rises from there through to the age of 59 years. Smoking adds another $200 to your life insurance rates at 50 and keeps that trend going up to age 59.

Life Insurance Premiums – Male, 20-Year Term Life Insurance

*Representative values, based on regular health

The story is similar for women in their fifties; 20-year term life insurance rates for women who are 50-59 years old are lower than men’s at this age. At 50 years old a non-smoking woman would pay $86 for $500,000 worth of 20-year term life insurance. Smoking continues to have a meaningful impact on premiums.

Life Insurance Premiums – Female, 20-Year Term Life Insurance

*Representative values, based on regular health

These are estimated prices for 20-year term life insurance rates for ages 50 and over based on representative data and will still vary depending on factors like health and medical exam results, smoking status (not just cigarettes), family medical history, and more. You may also want a higher death benefit or a longer year term depending on your financial situation, life insurance coverage needs, and all the other things that accompany life in your 50s.

Only you know how much coverage you require and can reasonably afford, but these numbers give an over-arching view of what the average cost of 20-year term life insurance for people who are 50 years old and over might pay for such coverage.

How do I buy the best life insurance in my 50s?

You now have an idea of what term life insurance might cost as you approach this exciting stage of your life – but everyone’s situation is different. If you have 5 minutes to spare, you can determine your needs and get customized term life insurance quotes for a 50 year old instantly with PolicyAdvisor’s online term life insurance quote tool. 

Still need help with your coverage needs? Try our life insurance needs calculator now. Otherwise, our licensed advisors are always here to chat.