Buying life insurance can be a tough call. Apply too soon, and you’re paying for coverage you don’t need. Apply too late, and you could find yourself paying more, or worse, leave a financial obligation uncovered.
Using the Financial Consumer Agency of Canada’s life-insurance guide, the Financial Consumer Agency of Canada’s insurance-application guide, FSRA’s explanation of life-insurance policy types, and the Autorité des marchés financiers’ five steps before buying life insurance, our team of editors has created this guide on what really is costly about waiting, how your application could be affected by your health and age, and how to compare buying now against waiting.
The Real Cost of Waiting to Buy Life Insurance
There is no universal answer as to what it costs to wait. The main risk is dying before purchasing. Other factors include increased age, worse health, or other changes that could affect the cost of coverage or the terms on which you qualify.
On the other hand, if you don’t need insurance, you can wait and save by avoiding unnecessary premiums.
To estimate what it costs to delay purchasing life insurance, don’t compare different age groups as though they were the same people at different times. Compare like-to-like policies. Get quotes. Consider how long you’ll need insurance and how much you’ll pay in premiums in the meantime.
Do You Need Life Insurance Now?
Ask yourself what financial needs would arise after your death: replacement income for a partner or other dependants, children, debt you share with others, business buyouts, care for others, or taxes on an illiquid estate.
Subtract savings, individual policies and dependable group benefits.
Repeat this exercise after having a baby, taking on a mortgage, getting married, making a commitment to a business, changing jobs or separating.
Read More: Review When It May Make Sense Not to Buy Life Insurance
Potential Consequences of Waiting
Increased premiums
Get comparable quotes to determine how much coverage would cost. Underwriting factors can include medical history and age. How these factors affect a quote varies by insurance company.
Read More: Read About Buying Life Insurance at a Young Age
Limited coverage options
Different terms, amounts, riders or conversion periods may not be available at all ages. Do not rely on a general rule of thumb; check with different insurers to see what terms are available to you.
Health underwriting challenges
Changes in medical conditions, new diagnoses, treatments, upcoming tests or other medical facts could affect an underwriter’s decision. These changes may lead to questions about your condition, a delay in coverage, different premiums, limitations on benefits or a decline. Answer all questions completely and truthfully when applying.
Read More: See How Life Insurance Underwriting Works
Compare Buying Now With Waiting
| Question | Buying now | Waiting |
|---|---|---|
| Is the financial need already present? | Once your application is approved and your policy takes effect, you will be insured. | The need remains uncovered during the delay. |
| What premium is known? | Current approved premium and schedule | The future premium is unknown until you apply. |
| What do you pay before the later date? | Premiums for protection during that period | $0, but there is no individual policy benefit during the gap. |
| What can change? | Subject to its terms and payment requirements, your policy remains in force. | Age and health qualifications, product availability, prices and eligibility may change. |
For a fair calculation, request two current illustrations: one for the term that matches the need and one for a shorter term with its guaranteed renewal schedule. Compare the total guaranteed premiums over the years you expect to need coverage. Do not treat non-guaranteed cash values as certain savings.
How to Get Started Today
Assess your coverage needs
Estimate the cash shortfall and how long it would last. Include current group coverage, but check when it ends and whether it can be converted.
Use comparable quotes
Remember, a quote is not an approval.
If requesting quotes from several insurers, make sure the quotes are comparable in terms of amount insured, term of insurance, premium guarantee and riders.
Educate yourself on policy types
Term insurance suits many temporary needs. Permanent insurance can address lasting needs, but you should understand cash values, surrender terms, policy loans and which illustration values are not guaranteed.
Consult a professional
Use a licensed life-insurance professional to compare products. Use a tax, legal or investment professional when the plan depends on advice outside the insurance licence.
Read More: Read Whether Life Insurance Is Worth It in Canada
Read More: See How Life Insurance Rates Change by Age