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.
Men and women have different life expectancies and therefore insurers take gender into account when pricing life insurance policies.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
Premiums paid for a life insurance policy are not tax deductible.
Death benefits paid out to your beneficiaries will not be taxed. Your family will keep the entire amount.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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:
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.
In general you’ll be asked questions about:
You should also have the name, address and phone number of your primary care physician on hand for this call.
To prepare, follow these simple steps:
24 hours before the exam
10 hours before the exam
Right before the exam
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.
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.
That means, we look for:
The personal information we collect is used for the following purposes: