Pop quiz: The top questions to ask when you start shopping for life insurance

By Jiten Puri on October 23, 2019

Three quarters of Canadians with financial dependents are dramatically underinsured—partly because misplaced assumptions around how the life insurance buying process works lead to procrastination. It’s time to demystify it.

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Since launching PolicyAdvisor.com earlier this year, we’ve discovered life insurance isn’t an area of expertise for most Canadians. This is through no fault of their own! The details and intricacies of life insurance are obscure, and that makes navigating such an important decision difficult.

According to a recent PolicyAdvisor.com* survey, almost 50% of Canadians with financial dependents in the family put off getting life insurance because they think, incorrectly, that it’s too expensive; more than 20% do the same because they think life insurance is too complicated.

Those aren’t great statistics. But we believe knowledge is power, and to combat the misconceptions out there, we’ve answered the basic and not-so-basic questions we’re often asked by Canadians starting to shop for life insurance. Not every question and answer may apply to your situation right now, but they are worth knowing as you navigate the insurance buying process, whether that’s today, or sooner than later in life.

When should I get life insurance?

It’s often said (maybe just by insurance brokers) that life events (like marriage, having a child, or buying a house) beget life insurance. A better answer, however, is that there’s no magic age or stage of life that you should wait for. When you buy life insurance should instead be determined by the onset and level of financial responsibilities on you and those that depend on you.

More clearly: Do you have dependents or loved ones who count on your income for raising children, mortgage payments, education costs, and more? Protecting them financially through life insurance should be on your mind.

In some cases, reliance on your income isn’t necessarily the indicator. For example, if your parents are co-signing your student loans while you rack up degrees, you may want to get life insurance to protect them too.

The other factor to keep in mind is your age. It’s much cheaper to buy life insurance early in your life. By purchasing it in your younger years, when you are less susceptible to serious illnesses and health scares, you can considerably lower the price.

Procrastination can also cost you by driving up the price of your premiums later in life for reasons not always in your control. Get a mild hypertension condition from work or relationship stresses in your thirties? As innocuous as it may be, there goes the life-time preferred rate discount you could have secured in your late 20s. An adverse medical condition in your immediate family can also cost you through a rise in your insurance pricing. Covering your future debts or starting to provide for your planned family additions while you’re still in your younger years saves you thousands of dollars in premiums over time.

How do I know how much life insurance I need?

How about we say “10 times your income and you’re good to go?” Just kidding—we’re not that kind of a broker. There are no one-size-fits-all answers to this question. Life insurance needs are best figured out based on your individual circumstances: your mortgage and other debts, your number of dependents and their individual needs, what you want to leave behind after you pass away, your assets and savings, plus other such factors.

You can certainly make an educated guess, but luckily we know of an easier way. Our online life insurance needs calculator is a free and easy-to-use tool that allows you to plug in information like your income, mortgage, dependents, debts and more to give you an informed estimate of your insurance needs. Go ahead and try it out—no strings attached.

Why should I shop for life insurance online?

The obvious answer is shopping online for life insurance can save you money. It’s just like when you visit any of your favourite shopping or comparison sites: When you see all the products available and how much they cost, you can make a decision based on price. And, hey—why pay more if you don’t have to?

That said, there are usually several considerations other than just price when you compare policies amongst the largest Canadian insurance companies. Whether it be different term lengths, features and policy add-ons (such as coverage for your children or a critical illness rider), or simply checking out the financial health of a certain insurer, when you compare quotes online, you have more choice and transparency than if you worked with a traditional broker beholden to a select few companies.

The other reason to shop for life insurance online is even more relatable—you save time. By starting your search online and entering the details of exactly what kind of protection you’re looking for, you jump-start your search and skip over the mundane acts of stalking yelp reviews for insurance agents, booking meetings with them at your neighbourhood coffee shop and combing through hundreds of company brochures, which are not always in PDF form. What may have taken weeks or months before can now be accomplished in minutes.

Do I need life insurance if I already have mortgage insurance from my bank?

Now we’re getting to the interesting stuff. In our opinion, the answer is: absolutely! Your banker won’t tell you this, but most people are better served by protecting their mortgage with simple term life insurance.

Mortgage insurance offered by your lender offers inadequate financial protection. It’s expensive and, worse still, gets more expensive as you age. It’s not portable, which means the price is reset every time you refinance or switch your lender. You pay a fixed fee with your mortgage payment while your coverage (the amount of your mortgage debt) shrinks. And it does everything to protect your lender ahead of you.

There are certain circumstances where lender-offered mortgage insurance makes some sense, such as in cases where you can’t obtain underwritten life insurance for yourself for some reason. But for most situations, it doesn’t make sense to pay more for a product with limited, inflexible coverage when term life insurance fulfills your needs and offers you more protection. And did we mention at a lower cost?

Do I really need to do a health exam to get life insurance?

Yes, there are non-medical options when it comes to life insurance, and any insurance agent would be happy to sell you such a policy—because they can be quite lucrative from the perspective of the commission the agent will pocket!

But the truth is, you can save yourself a lot of money in the long run by undergoing medical underwriting, a process that allows an insurance company to determine how much risk they would take on by insuring you. If an insurance company can determine there is less risk involved in insuring your life, they’ll happily pass some of those savings on to you.

There can, however, be good reasons to go for non-medical policies—like when you are not a fan of needles, short on time, or have some health considerations. If any of those reasons apply to you, then choosing the simplified, non-medical policy options may be the right approach. Whenever in doubt, ask an independent insurance expert. Luckily we know someone….

Jiten Puri is the CEO of PolicyAdvisor.com*, a Canadian insurance broker providing a digital solution to an archaic industry, combining modern technology, intuitive design and human expertise to make insurance buying simpler, straightforward and stress-free.

What does the * mean?

If a link has an asterisk (*) at the end of it, that means it’s an affiliate link and can sometimes result in a payment to MoneySense which helps our website stay free to our users. It’s important to note that our editorial content will never be impacted by these links. We try our best to look at all available products in the market and where a product ranks in our article or whether or not it’s included in the first place is never driven by compensation. For more details read our MoneySense Monetization policy.

What does the * mean?

If a link has an asterisk (*) at the end of it, that means it's an affiliate link and can sometimes result in a payment to MoneySense which helps our website stay free to our users. It's important to note that our editorial content will never be impacted by these links. We try our best to look at all available products in the market and where a product ranks in our article or whether or not it's included in the first place is never driven by compensation. For more details read our MoneySense Monetization policy .