How Much Does Life Insurance Cost: Five Real-Life Scenarios

Posted on May 26, 2014 and updated March 20, 2015 in Insurance Types, Life Insurance Canada News, Non-medical, Permanent Insurance, Term Insurance 6 min read
Blackberry
With so many insurance calculators out there,
sometimes it’s important to get real.

There are all kinds of life insurance calculators on the Internet, but what does it all really mean when we ask you to click on one at the end of our articles? Is it all just an elaborate sales pitch? Truth is, we’re trying to help you. There are so many variables and factors that go into determining how much you’ll pay for life insurance that only specific real-life circumstances will suffice in determining price.

To show you what we mean, we’ll look at five real-life scenarios featuring clients looking for life insurance, outlining the best solution and how much it costs.

1. An age-nearest 42-year-old, male non-smoker who is a non–insulin dependent diabetic but has it under control and has no other major health issues, looking for $500,000 of term 15 coverage

This client was able to get a fully underwritten traditional life insurance policy with a 50% rating — meaning the client paid an extra 50% above the standard rate. Their total premium ended up being $76.20 a month as a result, but at least they still got the insurance. They received a substandard rate or policy rating due to the client’s past health history, though not as high as some ratings can go. Policy ratings can range anywhere from 50% to 300% on top of standard rates. If the insured receives a policy rating of 100%, they would pay double the normal standard rate.

2. A young, healthy couple looking for $300,000 of joint term 20 coverage to cover their mortgage. The husband was age-nearest 33 the wife was age-nearest 31.

Since they were both in very good health and had a very good family health history, we looked for a company that offered preferred rates. This means that they received a discount above the standard rate for being in excellent health. However, not all life insurance carriers offer preferred rates. The monthly premium for their preferred $300,000 joint term 20 policy was only $28.53 a month. This was a very substantial savings above the mortgage insurance rate quoted through their lending institution and the plan offered better coverage. Preferred rates are generally further divided into preferred and super-preferred rates. Life insurance companies will look at many variables when analyzing whether an applicant qualifies for preferred rates, including smoking or tobacco use, height and weight, blood pressure, cholesterol, driving record, family health history, risky sports and occupations (including flying), and past substance abuse.

3. A 36-year-old, male non-smoker with HIV,  but who was working full-time and had not missed 15 consecutive days due to illness in the last two years, was looking for $150,000 of term 20 coverage.

His options with traditional fully-underwritten carriers were minimal, as they will not underwrite someone with HIV. Though he was not completely out of luck. His options came down to guaranteed issue coverage, which has no health questions and no medical tests but offers very limited face amounts. Humania Assurance, a new player in the simplified issue market, was able to offer $150,000 of term 20 coverage at a monthly premium of $117.45. Humania has three sets of classifications: bronze, silver, and gold. The more questions you can answer no to, the better the classification and the lower the premium.

One thing to keep in mind when it comes to Humania’s policies is that there is no benefit for life insurance payable during the 24-month period following the effective date of this coverage. If the death is the result of a pre-existing condition in these instances, the death benefit is limited to a return-of-premium. A pre-existing condition in their policies is defined as any illness or condition that manifest during the 24 months prior to the effective date of the policy.

4. A healthy couple with no major health issues, other than high blood pressure, but the high blood pressure is under control with medication, was looking for $300,000 of coverage to offset taxes on the family cottage. The husband was age-nearest 65 and the wife was age-nearest 63. Both are non-smokers.

They qualified for standard rates on $300,000 of joint term 100 last-to-die coverage. The premiums on the last-to-die policy are much lower than a single-life policy, as the death benefit is not paid out until the death of the second spouse. This was a perfect fit in this instance, as there would be no tax owing on the cottage until the death of the second spouse. Since the couple qualified for standard rates, the monthly premium was $461.70 a month.

This was great news for this couple since the largest burden on their estate could be the taxes they owe upon their death. This could’ve forced the sale of all of their assets, perhaps below fair market value, in order to pay these taxes. Their family could’ve been forced to sell the cottage to pay the taxes owing on those assets increasing value. This would’ve potentially reduced their legacy and limited the amount of cash left for their heirs or their favourite charity. Of course, life insurance is one way to offset these taxes.

5. A 66-year-old male who was a non-smoker and an insulin-dependent diabetic was looking for $15,000 of life insurance to offset final expenses.

After submitting several preliminary insurance inquires, it looked like a new policy would either be highly rated or declined, so the insured went with $15,000 of no-medical simplified issue coverage, which started on an immediate basis. This meant that there was no waiting on the death benefit. The monthly premium came out to 94.23 a month. The premiums on the plan were guaranteed for life and the coverage never expired. Since a traditionally underwritten plan offered a high likelihood of being highly rated or declined, it made sense to go this route first. Getting declined would have limited the insured’s options. The policy he qualified for would’ve only been available on a deferred-basis, meaning that if he passed away in the first two policy years, the death benefit would’ve been limited to return-of-premium plus interest.

More details on life insurance in Canada, please contact us at 1-866-899-4849 or visit our No Medical Life Insurance Quote Page.

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Julie
Julie

How was an insuline diabetic able to get life insurance I thought this would be a decline

LSM Insurance
LSM Insurance

Some simplified issue carriers including Assumption Life do not ask an insulin dependent diabetes question.

The key with Simplified issue plans is to be able to find a plan where you can answer “no” to as many questions as possible.

Lonnie
Lonnie

Which companies offer coverage to a 62 year old who had a heart attack

LSM Insurance
LSM Insurance

Depending on when the heart attack was you could qualify for a fully underwritten or a Simplified Issue Life Insurance plan