How Life Insurance Works in Canada (Part 2)

Years ago, life insurance was created mainly to cover funeral costs and provide immediate financial support for the deceased’s family members.

Today, however, life insurance is deemed by many to be a necessary financial product. Millions of Canadians own a life insurance policy.

In the first half of this two-part post, we defined life insurance, discussed how to determine if you need one, and shared the two main types of life insurance. Here, we’re sharing other important information on life insurance you need to understand:

Who Needs Life Insurance?

Life insurance is an essential financial tool that can provide financial protection for your loved ones in the event of death. Anyone who has dependents or liabilities should consider purchasing life insurance. Dependents can include spouses, children, or elderly parents who rely on your income for daily living expenses. Liabilities could include mortgage payments, car loans, or credit card debt that may burden your loved ones if you pass away.

Choosing Your Life Insurance Policy’s Beneficiary

When you purchase life insurance, you will need to choose a beneficiary. A beneficiary is a person or entity receiving the proceeds from your life insurance policy after your death. You can name anyone as your beneficiary, including your spouse, children, a trust, or a charity. Reviewing and updating your beneficiary designation regularly is important to ensure that your wishes are reflected accurately.

How Life Insurance Payouts Work

When you pass away, your life insurance policy’s death benefit is paid out to your named beneficiary. The death benefit amount is determined by the policy’s face value, which is the amount of coverage you purchased. The payout is usually tax-free and can be used by your beneficiary to pay for any expenses, such as funeral costs, outstanding debts, or living expenses.

Payout Options

Life insurance policies offer several payout options to the beneficiary. The most common payout option is a lump-sum payment, which pays the full death benefit to the beneficiary at once. Another option is to receive the death benefit in installments, such as a monthly or annual payment. A third option is to receive the death benefit as an annuity, which provides a guaranteed income stream for a specified period.

When Are Life Insurance Benefits Paid?

Life insurance benefits are paid out after the policyholder’s death. The payout can be delayed if the death is under investigation or if the beneficiary is contesting the payout. If the policyholder died by suicide, there may be a waiting period before the death benefit is paid out. It is essential to understand the terms of your policy to know when your beneficiary can expect to receive the death benefit.

Conclusion

Life insurance is an essential financial tool that can help to protect your loved ones financially in the event of your death. Anyone who has dependents or liabilities should consider purchasing life insurance. When buying a life insurance policy, you must choose a beneficiary and determine the payout option.

The death benefit is paid out after the policyholder’s death. It can be used for any expenses, such as funeral costs or outstanding debts. 

When you’re ready to get life insurance, consider PolicyMe from 365 Loans Canada, one of the trusted providers of personalized loans in the country.

365 Loans Canada presents PolicyMe, a reputable provider of online loans and a dependable Canadian digital insurance platform created to deliver convenient and affordable financial protection for families. With PolicyMe, you can quickly acquire and apply for life insurance and critical illness insurance online within 20 minutes or less. Request a quote now!

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