The concept of life insurance can raise questions such as, “What is life insurance?”, “How does it work?”, “What kind is the best?” or maybe even, “Do I need it?”. This article discusses some life insurance basics without any confusing jargon.

What is life insurance?
Life insurance is a key part of your family's financial planning, offering you and your loved ones peace of mind. A life insurance policy is a contract between you and your insurance company. Your insurer agrees to pay a specified amount to the person (or people) you chose to be your beneficiary in the event of your death. You pay your insurance company a certain amount for this coverage, also known as a premium. When you pass away, and an eligible claim is made, a lump sum tax-free death benefit is paid out to your beneficiary.

Do I need life insurance?
Most likely, people in your life depend on you. Life insurance can guarantee your family's financial stability in the event of your death and loss of income. Your loved ones can use the money they receive however they like, such as helping with monthly expenses, retirement funds, children's education, and emergency savings.

What factors are considered in calculating premiums?
Insurance companies consider various factors when calculating premiums. It's important to understand these factors, which may include your overall health, lifestyle, age, sex, and smoking status.

What types of life insurance plan options does OTIP offer?
We offer four life insurance plan options, so you can select the plan that meets your unique needs.
 

• Renewable term life insurance automatically renews at the end of the initial term, and you don't need to worry about a health questionnaire or medical evidence at the time of renewal. It's important to note that your rates will increase at the time of renewal based on your age.

• Non-renewable term life insurance covers you during the term that you select. Once that term ends, your coverage ends as well. If you'd like to continue with term life insurance, you'd need to apply for a new policy at that time.

• Term 100 life insurance is a lifetime policy and offers long-term security. Your policy is active until death, and your premium payments end once you reach 100 years old, so there's no need to worry about whether your loved ones are covered.

• LifePlan 10 life insurance is renewable and can be converted to any permanent Manulife insurance policy up to 69 years old.

How does a term life insurance policy differ from a permanent life insurance policy?
Term life insurance is life insurance that lasts for a specific period, also known as a term. The term can be a fixed number of years or until you reach a certain age. You pay premiums until the term’s expiry. Your beneficiary will receive a tax-free death benefit if you pass away within the policy’s term. If it's non-renewable, once the term ends, your coverage ends, and you stop paying premiums. Simply put, term life insurance is easier to understand and has lower rates.

Permanent life insurance provides coverage from the day the policy is active until the day you pass away. These policies usually build up a cash value¹. This means you get cash value back if you cancel your policy¹. However, the amount you receive would be less than what you paid in premiums for the insurance costs¹. Since the coverage extends to your entire life and you retain the value you put into it, permanent life insurance typically has significantly higher premiums.

How much life insurance coverage do I need?
The amount of coverage you require depends on your family's needs, debts, and other obligations. Remember to consider coverage available through your group plan as well. Our licensed insurance brokers can help you determine the best coverage and term to meet your unique needs. Call us at 1-833-494-0085 or visit www.otip.com/life-insurance-quote to get a quick quote and complete our online application at your convenience.
 

1. Government of Canada – Life insurance