The 3 most common types of Life Insurance.
Life Insurance is an incredible tool to protect your family's wealth, and give you peace of mind. But with almost 50 different Insurance Companies in Canada and each one having more than one product, it can be overwhelming for a consumer to sift through all the different options.
But from a simplicity standpoint, you should understand that there are only 3 types of Life Insurance in Canada.
1. Term Life Insurance
2. Whole Life Insurance
3. Universal Life Insurance
Term Insurance: As simple as it is Term Life Insurance, is Life Insurance to cover you for a specific term of time, for a specific cost. The typical Terms are 10 year Term, 20 year Term and Term 100. The costs are level for the particular Term, and generally renewable at the end of the Term without any more evidence of your medical conditions. So if you are not as healthy come the Term renewal, you will generally have to pay the increased amount of premium to keep your Life Insurance in force. Beware of Term Insurance though, as each Term renews, the increase in cost can be astronomical. This is the hopes of the Insurance company, that as you get closer to your mortality age, the Insurance will be so expensive that you will not be able to afford the premiums, and cancel the policy, foregoing all the money you have invested over the years.
Whole Life Insurance: The policy is designed to eventually pay out to your beneficiaries no matter how old you are when you pass away. The policy itself has a levelized premium structure so no matter what year of the policy it is, the costs will not increase. The cost of the policy in the beginning seems like a more expensive way to Insure yourself, but if you do the math compared to a Term Policy, you will always pay less for the Whole Life coverage over your lifetime. There are many enhancements to Whole Life Insurance as well, such as Dividends, premium offsets, increasing sum insured and policy loans. This means that your policy can create a cash value that you can use later in life, so it becomes a way to spend your death benefit before you die.
Universal Life Insurance: This is more of a hybrid in between Term Insurance and Whole Life Insurance. It provides the least expensive way to provide whole life Insurance, with the flexibility to over-fund the policy and have your extra premiums grow Tax Deferred inside of the policy. This is also an excellent way of providing extra funds that can be available at retirement time. The extra funds of the policy can be directly invested in the market giving you the benefits of both Tax Deferral and Investment opportunity, while providing the benefits of Life Insurance at the same time.
There is no one product that is perfect for everyone or every family, so it is important to work with a company who has the experience to be able to build a solution that meets your needs today and into the future. As a family business that has been working with all the different companies and products since 1969, we have the unique opportunity to help our clients sift through all the different products, companies and options.
Every client we meet with, has very unique needs, and it may be a combination of Insurance which best suits your needs. Please call our office today to see how we may best serve you and your family's financial future.