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Life insurance tips

We've assembled the following list of insurance questions and answers that many Canadians ask when faced with dealing with insurance related issues.

Just like the ever changing cost of money affects mortgage and deposit rates - Insurance rates change. Shopping around can either save you money or increase the amount of coverage.


Why do I need insurance?

What is the difference between life insurance and annuity?

Do I need a will? What if my spouse has one?

If I die early, who's responsible for managing the money I leave behind?

How much life insurance should I buy?

What is the minimum amount of insurance needed?

What type of life insurance should I buy?

What's the difference between Term and Whole life?

What is a Living Benefit?

Who can I name as my beneficiary?

What's needed to buy Insurance?

How much does it cost?

How can Fiscal Agents Insurance help?

Why do I need life insurance?

Think of insurance as income protection. If the insured passes away, the beneficiary receives the proceeds to offset the lost income. If you are married and your spouse is not working, you probably need insurance. The primary purpose of life insurance is to replace the insured person's lost income in case of death.

If you are independently wealthy, you may think that you don't need life insurance because you already have all of the money that you need. That may be true for some but estate and tax settlement considerations could disturb any bequests and/or obligations to your surviving family.

o I need a will? What if my spouse has one?

The importance of both spouses having a will can not be overstated. The main benefit if having a will is that it allows the individual to have control over their estate. Thus, you decide where your money goes. If you die intestate (without a will), a court appointed administrator decides how your estate is distributed. Also, keep in mind that the surviving spouse may not be able to take full advantage of allowable deductions if a person dies intestate.

Prior to death, a will may be changed or revoked at any time. A marriage automatically invalidates a current will so it pays to review your will periodically.

If I die early, who is responsible for managing the money I leave behind?

The executor of your will is responsible for managing your affairs after death.

How much life insurance should I buy?

A good way to begin to understand life insurance is to think of it as "emergency money". Should the person who is insured pass away, the insurance provides for the family left behind by replacing the income of the insured.

The actual amount of insurance that you should have at any given time will vary over the span of your life, as your overall financial picture changes.

As a general rule, when calculating how much life insurance you should have, it should be roughly between five and ten times your annual income depending on the circumstances of your particular life situation.

For example, a young couple with one wage earner and several children would need enough life insurance to cover several years of living expenses.

What is the minimum amount of insurance needed?

When deciding on the minimum amount of insurance needed, you should always consider whether anyone would suffer financially if you died.

The following four main factors should also be taken into consideration when determining the minimum amount of insurance needed for your particular life circumstance:

1) Monthly Expenses:- Calculate the amount that is spent on expenses such as groceries, utilities and transportation. Also consider the cost of health, car, house and personal insurance and expenses for children including pocket money and clothes. This should basically encompass all of the things that your income presently provides for.

2) Debts:- Look at the amount of money outstanding on your mortgage, car loan, credit cards and personal income taxes. Debts include all of the normal things you pay from the income you earn.

3) Future Expenses:- Do you have plans to send you children or grandchildren to college? What about the trips and holidays you would still have them go on, even if its without you? Some of the other items that can crop up include things like the replacement of a roof, the cost of health care needs for your spouse or your parents, and your future retirement goals. Without your income to pay the way, are they obtainable?

By calculating the money required for the above expenses, you should have a better idea of how much insurance you need.

We've developed this handy worksheet to help you to see How much is enough?

What is the difference between life insurance and annuities?

Life insurance protects an individual if they die too early whereas annuities protect an individual if they live too long.

An annuity is a contract between an insurance company and an individual in which the insurance company agrees to pay a certain amount of money every month for the rest of a person's life, beginning on a certain date. A Fixed Annuity is one in which the insurance company takes the investors money, invests that money, and then agrees to pay the investor a specified and predetermined monthly amount of money beginning on a certain date.

A will is a declaration of what people want done with their property after they die.

What is the difference between Term and Permanent insurance?

Term insurance is a type of coverage that is purchased in "renewable periods". For example, with a 10 year renewable term the payments would remain the same within that period. If the term life insurance was renewed, it would change to a new rate and remain level for a further 10 years. Term policies generally expire with no cash value or death benefit payable, at age 75

Permanent insurance provides for coverage for your entire life. This type of insurance coverage is more expensive, because the payments will remain the same and you do not have to renew. The age constraints are the same as term, and coverage will remain in force as long as payments are made.

What type of life insurance should I buy?

In many cases, dependent on circumstances, the amount of coverage purchased can be more important than the type of life insurance bought. Not having the proper amount can result in financial hardship for your beneficiaries.

In simple terms, Term insurance is used for temporary needs (usually 20 years or less), while Permanent policies are meant for permanent protection.

Term life insurance is cheaper if you need insurance for only a short period of time, such as until your children are supporting themselves. Be sure however that you have adequate life insurance to protect your family's financial security.

What is a Living Benefit?

Living benefits allow for a partial payment of the sum insured prior to the death of the insured person. Living benefits form part of the terms of insurance polices known as a "rider" to an existing policy. Some insurance companies provide this extra benefit without additional premium.

Living benefits could provide policy owners up to 50% of their total coverage amount if the insured is suffering from a terminal illness.

Who can I name as my beneficiary?

Most people choose their spouse or the person or persons who are the most financially dependent on them. Depending on the reason behind the insurance need, it could be any member of the family, a friend, or a business partner or even a charitable organization.

What is needed to buy insurance?

To purchase insurance, you need to:

1) Determine the amount of coverage required.
2) Complete an application for life insurance.
3) Have a standard medical exam performed to determine any preexisting conditions.
4) Make the first payment. The coverage will begin after this has been done.

How much does it cost?

As you will see (View sample payment tables), the monthly cost of buying $250,000 of life insurance can be less than a lunch time snack for two . Payments are based on your age, health and gender.
Payments for smokers are higher than illustrated.

Note: The sample figures from the above table are indicative of the lowest premium available for the preferred non-smoker. Fifty-five life insurance companies with over 400 plans where reviewed.

How can Fiscal Agents Insurance help?

Fiscal Agents Insurance Ltd. is an independent life insurance agency. We use LifeGuide®, a premier insurance rates software, to help monitor the insurance industry and its rates. We can work with you to determine the amount of coverage you need and set you up with a policy that will meet the individual needs of your family.

- Click to see more information on how Fiscal can help

Notice:- Fiscal Agents Financial Services Group are not engaged in rendering tax, accounting or legal professional services or advice. The comments in this Executive Notes are not intended, nor should they be relied upon, to replace specific professional advice. Before acting on material contained herein, readers should seek advice that is appropriate to their personal circumstances from a professional advisor.

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