Here at The Term Guy we've developed a distinct and specific process to guide Canadians through their life insurance decision making process. The process uses basic insurance principles instead of sales practices and keeps us focused on what's important.
It turns out, there are three decisions needed to get the right type of life insurance, and each of those decisions feeds into the next decision (order is important). First we determine how much coverage you need. Secondly, we determine the best type of life insurance for you (which will depend on how long you want the coverage for, which you likely determined in step 1). Then once you have a solid understanding of the amount of coverage and the type, then we look at quotes — the company, the budget, and so on. Once you understand how much and the type, then you have the understanding to tweak the quotes to find the best policy in the market.
Step 1 — How much life insurance do I need?
For any type of insurance — life, home, auto, it doesn't matter, we need two things. First, a random event; something unexpected happens. Secondly, that random event causes a financial loss. To determine the amount of coverage you need, just look at the random event and evaluate how much money you lost — that's how much insurance you should have. Don't cover more than the loss, don't cover less.
When the goal is to replace your family's standard of living over time, then the financial loss is your income. Not the mortgage, not debt, not savings — your income. You pass, we just lost your $X/year that you bring to the family, that $X that is paying all the bills including the mortgage or rent. Your income IS your lifestyle. Replace the income, the lifestyle is replaced and we've accomplished our goal. Unlike other types of insurance, with life insurance we're not doing a single replacement, we're doing an income replacement across a span of years so we use a calculator to translate your income across years, into a lump sum insurance amount.
The step 1 how much life insurance do I need? calculator is here.
Step 2 — Best type of life insurance
If we treat the problem we are solving as strictly an insurance problem with an insurance solution, the different types of life insurance simply become a matter of total cost over different periods of time — it's just the premiums that differentiates the different types of life insurance. So you likely want the cheapest coverage over the timeframe that you want the life insurance for. All we need to know then is how long you want the coverage for, and the best type (the cheapest over that time) becomes obvious. And the reason we do these steps in order? You already have this answer — in step 1 you would've determined how long you wanted to replace your income for. That's how long you need the coverage for, and that determines the type.
Our article on the best types of life insurance shows you how to select the appropriate type once you know how long you need the coverage for.
Step 3 — Life insurance quotes
The step everyone wants to do first, we do last. Yes, everyone runs life insurance quotes to see the price and you're welcome to do so on our quoting system. However the quotes are best done once you understand why you're purchasing that amount and that type. Once you know that, the third step of running the quotes lets you fit your quote to your budget. If you want to move amounts or types up or down to fit your budget, you're doing so with an understanding of why you've purchased that amount and type of life insurance.
At this step, we normally recommend the least expensive. And our online term quotes should be the least expensive renewable and convertible term life insurance available. If you receive a cheaper quote, either the policy has used different assumptions, or the policy is not renewable and convertible. That's partly because after the quotes we review 5 additional discounts not commonly found online.
You can run a term life insurance quote here.