Life Insurance FAQs

Questions?  Glad you asked!

Our life insurance FAQs answer all of our most frequently asked questions.

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Why do you ask my date of birth?

Like many things in life, timing is everything. And this applies with life insurance too.

Life insurance companies use a method called ‘age nearest’ to determine the age the policy premiums are based upon.

The age nearest method calculates the issue age based upon the nearest age to your policy date. For example, If your date of birth is 20/09/84 and today’s date is 20/07/18, the issue age would be 34, even though your actual age is 33.

Why do you ask my gender?

Men and women have different life expectancies and therefore insurers take gender into account when pricing life insurance policies.

What if I’m planning to have kids?

If you’re expecting, first off, congratulations! You should include your expected child (or children if you’re having twins or triplets) and specify “0” when we ask for your children’s ages.

However, if you’re merely planning on having children in the future, you should not include your planned children. Until you are certain about if and when you’ll be having children, it’s best to not include them in your needs assessment to ensure you are not paying for coverage that you might not ultimately need.

When your family does grow, we recommend revisiting the PolicyMe needs assessment to get updated advice and understand how your coverage needs may have changed.

What if I used to smoke?

An insurance company will only consider you a smoker if you have engaged in smoking over the last 12 months. So if you quit smoking over a year ago, we have good news! No matter how long you were smoking for, or how often you were smoking, you can specify ‘no’ for this question. Your life insurance premiums will be the same as a non-smoker.

How does a health condition affect my insurance rate?

Your health tends to be an important factor in your insurance rate.  For example, if you’ve suffered from a recent heart attack, you will probably pay higher premiums that someone who hasn’t.   Most people aren’t too surprised by this.

Insurers are pretty comprehensive when it comes to assessing your health. They’ll ask you about everything from asthma to Alzheimer’s. (You can count on them being very thorough here.)   Each of these illnesses has different implications for your life expectancy, and each one gets factored into your life insurance rate.

Luckily, getting insurance with a pre-existing health condition is not impossible.  We are here to help you through the application process as your questions arise.

Should I include my non-employment income?

Please do not include any income that is not tied to your work, and would still be generated if you were to die. Some examples of non-employment income are: investment income, rental income on a property you own or even income you make off a business that is not tied to your time.

You should only include the income that is generated off of employment.

Should I include my investment income?

Please do not include income that you generate off of investments. We will cover your investments in the “savings” section. Some examples of income generated off of investments are dividends, interest payments and capital gains collected off the sale of an asset.

Why do we ask about your income?

It is important for us to have an accurate understanding of your finances, and your income is a key aspect of your financial situation. Our algorithms will use your income (along with many other factors) to evaluate how much life insurance protection your family needs. Same goes for your partner’s income.

Additionally, our algorithms have been designed to ensure that we never recommend more coverage than you need. This prevents you from becoming “overprotected”, keeping your costs low and freeing up money for you and your family. There are many features in our algorithms that help with this. One of which is including your partner’s future income (and your existing savings) as money that will be available to pay for some of your family’s future expenses. Our life insurance recommendation is the money that is needed to pay for the rest.

Why do we ask about your savings?

Our algorithms have been designed to ensure that we never recommend more coverage than you need. This prevents you from becoming “overprotected”, keeping your costs low and freeing up money for you and your family. There are many features in our algorithms that help with this. One of which, is including your existing savings (and your spouse’s future income) as money that will be available to pay for some of your family’s future expenses. Our life insurance recommendation is the money that is needed to pay for the rest.

Why do we ask about your debts?

One of the primary objectives of our life insurance checkup is to project how much money your family will need to cover their future expenses. One component of your family’s future expenses is the repayment of your debts. In order to be accurate with our projections, it is important for us to understand how much debt you currently have.

What if I’m in the market to buy a home?

First off, good luck!  However, you should only select ‘own’ if you currently own or if you are in the process of purchasing your place of residence. If you plan to buy a home in the future, you should not select ‘own’.

The time of purchase, sale price and mortgage payments you make can significantly impact your coverage needs. Until you are certain about those details, it’s best to not include them to ensure you are not paying for coverage that you might not ultimately need.

When you do buy your home, we recommend revisiting the PolicyMe needs assessment to get updated advice and understand how your coverage needs may have changed.

What if I have a defined benefit pension?

Defined benefit pension plans are tricky, as the monthly payment you’ll receive (or the death benefit your family would receive) is linked to a number of unknown factors, including your future income, future years of service and future economic conditions like interest rates and stock market returns.

However, most employers will send an annual statement indicating the estimated current value of all your future monthly payments. This will often be labelled as the ‘termination value’ or ‘commuted value’ of your pension statement.

If you have this number handy, please include it in your ‘retirement savings’. Don’t worry if you do not, you can proceed without including your defined benefit pension plan.

What if I own a business?

When a person dies, it’s likely that any businesses he/she owns will be sold to provide money for his/her family. Sometimes it is required, for example if the person has business partners and there is a contract in place that mandates the deceased person must be ‘bought out’. It can also be optional, for example the person’s family might want the money to cover expenses. Either way, it is important to include the value of the business in your ‘non-retirement savings’.

It might be difficult to know the exact value your family would get for your shares in the business, but it’s okay to estimate what you think your family would get if they had to sell your shares in the business (or the entire business if you are the only owner) today.

What if my savings are in an account owned by a corporation?

Savings within a corporation often have large tax implications upon withdrawal and transfer into personal bank accounts. Therefore, it would be wise not to assume that the full amount will be available to pay for personal or family expenses. While the exact amount that would be available is dependent on your personal income tax rate at the time of withdrawal, for purposes of this assessment please approximate the available amount by multiplying the savings by 80%.

For example, if you have $100,000 of savings in an account owned by a corporation, add $80,000 to your ‘non-retirement savings’ ($100,000 * 80% = $80,000).

Don’t forget to include this to all other ‘non-retirement savings’ that are in personal accounts. For example, if you have $100,000 of savings in an account owned by a corporation, and $200,000 of ‘non-retirement savings’ in a personal bank and/or investment account, then your total ‘non-retirement savings’ would be $280,000 ($100,000 * 80% + $200,000 = $280,000).

Why do my expenses look high?

The truth is, most people tend to underestimate their monthly expenses. When estimating monthly expenses, it is common for people to remember large recurring items like mortgage / rent payments, hydro bills, auto payments, cell phone bills, auto/home insurance and childcare/education costs. However, it is quite common for people to leave out the non-recurring ‘one-time’ costs like gifts (christmas, weddings, birthdays, anniversaries, the list goes on), vacations, recreational activities, tickets to concerts and sports games, taxis/ubers and nights out with your friends or family.

If your expenses looks off, click on the info buttons beside each category to see a description of the items included in that category. After doing so, feel free to adjust the numbers as you see fit to update your monthly expenses.

What if I am shopping for my spouse as well?

Most couples generally buy individual policies, instead of a joint policy. You’ll save money and have more flexibility in your coverage options.

Go through our personalized life insurance checkup twice – once for you and once for your partner.  We recommend choosing the same insurer for both policies to keep things simpler on your end.

How was my coverage amount calculated?

We calculated your total needs (all debts and family expenses) and offset this by your partner’s future expected income (if you are married) and any family savings.  This will ensure that your dependents will be able to cover the monthly expenses to maintain their lifestyle if anything were to happen to you.

Your insurance policy

What does my policy cover?

Your policy covers your death benefit (or your “coverage amount”) that is stated in your policy. This is the amount of money your beneficiaries will receive tax free if you die. For example, if someone tells you they have a $300,000 term life policy, the death benefit is $300,000.

If you pass away during the term of your policy (usually 10 years, 20 years or up to age 65), your insurance company will guarantee the payout of that death benefit.

What does my policy exclude?

This is question is very popular among our life insurance FAQs.  Exclusions are issued by insurance companies when there are certain activities that are too dangerous to be covered by life insurance. It’s fairly common for insurance companies to exclude coverage for dangerous hobbies, such as scuba diving or mountain climbing, or during travel to countries where the government has issued an advisory. (After all, unless someone’s forcing you to scale a mountain at gunpoint, these dangerous activities are probably voluntary).

If you have an exclusion on your policy and you die while participating in an excluded event, your insurer will not pay the death benefit.

However, these events will only be excluded for people who have typically engaged in the specific event prior to purchasing the policy. For example, if you are a frequent skydiver, your insurance company might specify that you will not be covered if you pass away while skydiving. However if you are not a frequent skydiver, your insurance company will not exclude skydiving from your policy.

Additionally, during the first 2 years of a policy, your life insurer will not pay your death benefit if your cause of death is suicide.

What is the suicide clause?

A hard topic to cover, but a necessary one. Given the risk of anti-selection when it comes to suicide (for example, someone buying life insurance right before taking their own lives), insurance companies usually exclude death benefits claims as a result of a suicide in the first two years.

Is my significant other covered?

Not unless you have a joint insurance policy (more on this here).  The truth is, joint policies are a lot less flexible than individual policies. Having separate single life insurance policies avoids these sorts of issues.

We recommend that you and your spouse complete our advice engine separately and buy individual life insurance policies.

How do insurance companies calculate my premium?

Premiums are calculated individually for each policyholder and are based on several different factors including your age, gender, health status, smoking history and hobbies.

The first quote you see will be based entirely on your age and gender. Once your insurer completes their underwriting (this is the part where they ask you about your health and medical history) they will potentially send you a revised quote that factors in your health status. This means that you first quote can go up or down based on the information they collect.

Will my premiums ever change?

Your premiums will remain the same for the entire length of your term (usually 10 years, 20 years or up to age 65). As long as you keep paying premiums, they will never increase.

How will I pay my premiums?

Premiums can be paid monthly, quarterly, semi-annually, or annually.

Insurers generally require that premiums are automatically withdrawn from your bank account. We collect your bank account details in the application process.

Are my premiums tax deductible?

Premiums paid for a life insurance policy are not tax deductible.

Is my death benefit taxable?

Death benefits paid out to your beneficiaries will not be taxed. Your family will keep the entire amount.

What if I miss a premium payment?

Insurance companies generally specify a grace period (usually 30 days) which acts as a cushion to ensure coverage is not cancelled if a payment is missed. If a payment is not received within this period of time (or grace period) from the date a payment is due, the insurance policy is cancelled.

Can I increase or decrease my coverage?

This will depend on the exact terms in your insurance policy.

It is very common for insurers to allow you to decrease your coverage amount throughout the term of your policy.

However, increasing your coverage amount is a little trickier. Insurance companies usually don’t allow this (or at least cap this) to avoid ‘anti-selection’. This means that they want to protect themselves against the scenario that one of their customers gets sick and immediately jacks up their insurance coverage. To avoid this, they typically ask policyholders to go through medical underwriting again before letting them increase their coverage.

Can I cancel my policy?

This is question is very popular among our life insurance FAQs.  Every life insurance is “cancellable”, meaning you have the right to cancel your policy at anytime without having to pay a penalty.

What is the ‘guaranteed renewability’ feature of my term life policy?

Guaranteed renewability is a policy feature that allows you to renew your term insurance policy at expiration without going through the underwriting process again. In practice, this means that you could renew your life insurance policy whether or not you get sick. The premiums are guaranteed, but they’re usually much higher than your initial premiums. These days, guaranteed renewability is pretty standard on all term life insurance contracts. However, because the renewal premiums are usually very high, if you still need coverage when your policy expires, it generally makes sense to buy a new policy instead of renewing. Don’t worry, when your policy is close to expiring, we’ll do the work and tell you whether to renew or not.

What is the ‘convertible’ feature of my term life policy?

A convertible is a car whose roof can be… (just kidding). If your life insurance policy is convertible, your insurer promises to let you convert your term policy into a permanent policy (some form of whole life or universal life) at any point within your term without making you go through further underwriting.

What is temporary insurance coverage?

When you apply for life insurance, the process can take a long time (that’s part of the reason we are looking to disrupt this archaic industry!). Usually the delay is due to the portion of the process after the application is completed (scheduling and completing the underwriting appointment, having your insurer review the information collected, waiting for your policy to be delivered by mail, etc.)

Temporary life insurance is coverage you get during the life insurance application process before your actual policy goes into effect. The coverage amount may be equal to the amount of coverage you’re purchasing, or it could be capped at some amount (for example, $1 Million). There may also be some exclusions in the temporary policy that don’t apply to your full policy (like only covering accidental death vs. death due to health reasons).

Temporary life insurance is free to you as long as you pay the first month’s payment for your life insurance policy. But don’t worry you can always cancel your policy at anytime during the application process or 10 days after the policy is in effect and receive a full refund.

Seem complicated? We will help you through this process each step of the way and make sure we get you the temporary insurance that you need during the application process.

How will I know when my policy goes into effect?

Once the application is approved, the policy will be finalized and delivered to you. You’ll have 10 days to sign a delivery receipt and authorize the payment method to activate the policy.

When the insurer receives your signed copy of the policy and the payment approval, your policy will be in effect.

What is a beneficiary?

Beneficiaries are the people who will receive your death benefit if you pass away. You designate them on your insurance policy. Anyone can be named as a beneficiary. You can even have more than one beneficiary as long as you specify how you want the death benefit to be split among them.

What does my beneficiary need to do to receive the death benefit?

Technically, your insurer should automatically pay the death benefit if you pass away. That is why it is important to check out your beneficiary designations whenever you have a major life change.

However, it’s always a good idea to tell any beneficiary about the policy so he or she will be prepared to take action should a problem arise. Usually, the insurer will require proof of death and a copy of the contract in order to disburse the benefit.

How will the death benefit be paid?

The insurer will pay a life insurance policy’s entire death benefit in one lump sum payment directly to the beneficiary (or split across beneficiaries if there are more than one stated in the policy document).

How do I make a claim?

Reach out to us at info@policyme.com and we will help you through this process immediately.

Policy underwriting

What is underwriting?
This is the process a life insurance company uses to decide whether or not to give you life insurance coverage and what price to charge you for it. The process is about understanding you and assessing your risk.

Once the application is submitted, a representative from your insurance company will call you to set up an appointment at your convenience. These appointments come in two forms:

  • Over the phone (known as the tele-interview)
  • In person at your home or place of work (known as the paramedical exam)

A paramedical exam is only requested when your insurance company needs to conduct a medical exam or collect fluids from you. This is typically requested if you are buying a larger insurance policy, are over 50 years old, or have a condition that was flagged in the application.

What is the tele-interview and how should I prepare for it?
This is a 30 minute phone call with a representative from your insurance company. They will schedule this at your convenience.

In general you’ll be asked questions about:

  • Your medical history
  • Your family’ medical history
  • Names and dosages of current medications
  • Your hobbies and lifestyle

You should also have the name, address and phone number of your primary care physician on hand for this call.

What is the paramedical exam and how should I prepare for it?
This is a when a paramedical technician from your insurance company will come to your home or workplace to measure your height, weight, blood pressure and pulse. Additionally, you might be asked to provide a blood sample and a urine sample as part of the exam.

To prepare, follow these simple steps:

24 hours before the exam

  • Avoid caffeine, sugar, and alcohol
  • Limit salt and high-cholesterol foods
  • Avoid over-the-counter drugs as they might interfere with your test results
  • Be prepared with photo ID (ie. driver’s license, passport, health card)
  • Reschedule the exam if you are sick

10 hours before the exam

  • Fasting is recommended (try to avoid eating or drinking)
  • Avoid exercise or excess activity (this will help keep your blood pressure and heart rate in a range that is typical for you)
  • Avoid smoking or other nicotine intake

Right before the exam

  • Drink a glass of water to help ensure you’ll be able to provide a urine sample.
  • Undressing is not required, but please wear a garment which has sleeves that can easily be rolled up
What happens if I lie about something in the underwriting process?
Life insurance policies come with something known as a contestability period (usually 2 years). That means if the insurer discovers you misrepresented your health or risk of death by denying medical conditions or failing to include information on any risk hobbies (that yearly mountain climbing trip up north!) in your application or during the underwriting process, your claim could be denied.  In this case, they may deny the death benefit and return any premiums paid (minus fees).

If they find out you misrepresented your health or risk of death after the contestability period, insurers can still adjust your policy to match what it would have sold you originally had it known all the facts. This can take the form of a reduced death benefit, a higher premium, or both.

When it comes to life insurance, it pays to tell the truth. If you are an occasional smoker, disclose that fact. Your family will be happy if you did if anything were to happen to you.

What does it mean if I have been rated?
A rating is a premium increase (or price increase) that an insurance company issues when they believe you have an above-average risk of dying (usually because you have below-average health or work in a dangerous occupation).

PolicyMe Corp

How does PolicyMe make money?
As a licensed brokerage, we get paid commissions on every policy we sell.  These commissions are paid to us directly by the insurance companies, so there are no charges to you beyond the premiums you pay if you purchase a policy.
Are you incentivized to sell more expensive polices?
Commissions are tied to coverage amounts and policy type, so we understand that this poses the risk of a potential conflict of interest into our business model.

However, we avoid that conflict by focusing on the advice. Our business model is built upon a foundation of doing right by our customers, and delivering quality and objective advice instead of maximizing our profits.  Our algorithms are not based on the products we sell or the commissions we get. Instead they are based on our customer needs and their situations.  They are designed to calculate the amount of money your family would need, and not penny more. We then find the most cost-effective way to fulfill this need, making sure our customers do not pay for anything extra.

We’re very passionate about insurance, and it’s important to us that you get the personalized advice you deserve in a convenient and stress-free environment (even when that means recommending $0 insurance coverage like here).

We are on a mission to make life insurance simpler and cheaper for everyone who needs it. Our goal is to improve financial literacy, put an end to the industry practice of upselling / overprotecting and reduce frictional costs in the existing value chain. We hope you join us in that journey.

Is PolicyMe affiliated with any insurance companies?
We are not affiliated with any insurance companies. We are an independent third-party broker, meaning we can sell life insurance products from whichever companies we choose.  We went through a rigorous process of analyzing each insurance company’s products, prices, and customer experience and handpicked the ones that will deliver the best overall value to our customers.
How do we choose the life insurance companies that show up own our quotes page?
First and foremost, we focus on those insurance companies that will provide the best overall value and experience for our customers.

That means, we look for:

  • Companies with the best products and prices
  • Companies that are in strong financial health
  • Companies that are easy for our customers to engage with both throughout the application / onboarding process and in managing their policies once purchased
Is my information kept confidential?
PolicyMe is committed to protecting the privacy and confidentiality of personal information in our possession and control.

The personal information we collect is used for the following purposes:

  • Helping us choose the life insurance policy that best fits you and your needs;
  • Verifying your identity and other information you have provided to us;
  • Helping underwrite and provide accurate insurance premium rate quotes;
  • Providing insurers with the required information for applications;
  • Communicating with you regarding the insurance products that you purchased through the website as well as other products and services that may be of interest to you;
  • Meeting legal and regulatory requirements; and,
  • As otherwise required or permitted by applicable law.

Check out our Privacy Policy for more detail.

Still have questions?