What is life insurance?

Life insurance is basically a contract between the policyholder and the life insurance company. This contract, or life insurance policy as it is more commonly known, is an agreement between you (the policyholder) and the life insurance company where the life insurance company promises to make payment of the face value of the policy, upon the death of the policyholder.

Affordable life insurance policies offer the policyholder’s dependents financial protection. The best life insurance option will depend on your personal circumstances. That’s where a life insurance agent or life insurance broker can help; a qualified life insurance agent/life insurance broker is key in helping you decide what types of life insurance will best meet your needs, and how much life insurance you should have; both which ultimately affect your final life insurance cost.

The types of life insurance

What types of life insurance are out there? Life insurance can be boiled down to two basic forms: Permanent Life Insurance and Term Life Insurance.

As the name suggests permanent life insurance is designed to cater to permanent needs. For the average person, these needs include supplementing a survivor’s income, as well as financial security for children who may remain dependent for their lifetimes due to disability or other factors. As a rule of thumb, permanent needs require permanent life insurance.

Term life insurance on the other hand, covers temporary needs. The primary examples include mortgage obligations and support for dependent children to maturity.

Disability insurance replaces an insured person's income in the event that he or she becomes disabled due to injury or illness.

Most group policies break down disability insurance into short-term and long-term disability coverage. Short-term plans generally cover the insured from the first day of disability up to the 120th day. Whereas, most long-term group disability policies can cover the insured from 120th day up to age 65.Both short-term and long-term disability plans can work in tandem on an individual policy, so once short-term expires, long-term kicks in.

Individual disability policies do not break down short-term and long-term disability coverage. Individual disability policies allow the insured to choose an elimination period, generally anywhere from 30 days to 180 days. The elimination period is the period of time the insured must wait before collecting his or her disability benefit. The benefit period on an individual policy determines how long the insured will receive his/her disability insurance for. It can be two years, five years, or until age 65.

It's important to consider that long-term disability claims are going to be the ones that have the greatest impact on the insured's financial situation. If the insured is off work for 30 or 60 days, odds are he or she will be able to cope financially. However, If insured is off work due to an injury or illness for an extended period of time the financial impact can be devastating.

Types of disability insurance

Individual disability insurance

Those whose employers do not provide benefits, and self-employed individuals who desire disability coverage, may purchase their own policies on the open market. Premiums and available benefits for individual coverage vary considerably between different companies, for individuals in different occupations, and by state and country. In general, premiums are higher for policies that provide more monthly benefits, pay the benefits for a longer period of time, and start payments for benefits more quickly following a disability. Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances. There are many web-based disability insurance calculators to determine the disability insurance needed.

High-limit disability insurance

Traditional disability carriers have limitations on the monthly benefits that can be purchased, which limit the benefits for high income earners. Benefits will normally cap at $20,000-$25,000 of monthly benefits except in the high-limit disability market. High-limit disability insurance is designed to keep individual disability benefits at 65% of income regardless of the income level. Coverage is typically issued on top of coverage that is already in force. With high-limit disability insurance, benefits can be anywhere from an additional $2,000 to $100,000 per month. Issue and participation coverage has gone up to $30,000 with some companies.

Key-person disability insurance

Key Person Disability Insurance provides crucial benefits for any functioning business to protect the company from financial hardship that may result from the loss of a key employee due to disability. Key Person coverage provides cash flow to help a company move forward and maintain a profit in the event a key employee becomes disabled. The company could use the disability benefits to hire a temporary employee should the disabled employee's prognosis appear to be a short-term disability. In the unfortunate circumstance of a permanent disability, benefits would then be used to help defray the costs related to hiring a replacement employee, such as recruitment, training, startup, loss in revenue and unfunded salary continuation costs.

Business overhead expense disability insurance

Business Overhead Expense coverage is designed to reimburse a business for overhead expenses should the owner experience a disability. Eligible benefits include: Rent or mortgage payments, utilities, leasing costs, laundry/maintenance, accounting/billing and collection service fees, business insurance premiums, employee salaries, employee benefits, property tax, and other regular monthly expenses.

If you have further query feel free to contact Canada Insurance Plan .