Life Insurance
Thinking about or discussing your mortality and life insurance is often uncomfortable for many people, but if you change how you think about life insurance it makes it easier. Life insurance will not prevent death but it helps you protect your family when it occurs. Life insurance is one of the building blocks in financial planning. It can help you protect and preserve the wealth you have earned. The death benefit provides a tax-free lump sum of money to your beneficiaries and depending on the type of insurance, your life insurance policy can act as an investment tool to provide you a return after a certain time period.
There are three main types of life insurance: term life, whole life and universal life. Within these categories there many variations and options. Speak with an insurance advisor to discuss which type and what options fit your needs the best.
Term Life Insurance
Term life insurance is most often purchased to fulfill a short term or temporary need. For example, it is especially great for young people who want to protect their mortgage. Term insurance is the cheapest form of life insurance due to the fact it only pays the benefit on death and expires when the term is over. Although, policies are renewable and often have an option to be converted to permanent coverage at a later age.
Whole Life Insurance
Whole life insurance is a permanent type of insurance. This means your coverage is in place for life, as long as your premiums are paid. Permanent insurance is used for needs that will be triggered by death. For example, the death benefit can protect your family by replacing your income during your working years or after you retire it can allow you to leave a tax-free inheritance to loved ones or a charity or pay for children’s education or cover funeral costs or taxes on properties/cottages. Unlike, term life insurance, whole life insurance policies also accumulate cash value ( that grows tax free while inside the policy) that can be accessed in the future.
Participating whole life policies allow policyholders to receive dividends if declared by the company. These dividends can become a part of the guarantees of the policy going forward. There are numerous benefits to participating whole life insurance policies. Speak to your life insurance advisor to see if they fit your needs.
Universal Life Insurance
Universal life insurance is permanent insurance that is more flexible to the policyholder with respect to payments and investments. As a policyholder, you select the term and have control over how the difference/cash portion is invested. Accumulated saving can be sheltered from tax if they form part of the death benefit or tax deferred if withdrawn prior to death subject to government limits.