You are not alone when considering life insurance. For many Canadians, it is an integral part of any good financial program. When you die, it can help your designated beneficiary, like your family, replace your income and achieve their goals, like going to college or retiring.
However, do you know which type of life insurance is best for you? Do you know what life insurance can do for you, other than helping pay for your funeral and related expenses?
Let's explore it all together.
Term life insurance
Term life insurance is a less expensive product that protects you for a defined period of time, such as 10 or 20 years. Once this period has elapsed , your coverage is renewed at a higher cost, if you do not cancel it. You can also convert it into permanent life insurance without having to answer questions about your condition.
The initial cost of term life insurance is less than that of permanent life insurance, and it is a fairly common way for those who are just starting out to protect themselves and their families. Term life insurance is usually less expensive than permanent life insurance, which may allow you to purchase more protection.
Participating life insurance
Participating life insurance , also known as permanent life insurance, will protect you for life, as long as you pay the premiums.
This insurance is called participating life insurance because the premiums you pay for your protection, as well as the premiums paid by other owners of this type of policy, are deposited into a participating account. The insurance company's investment team manages this account and makes investments to increase its value.
It is from this account that your death benefit and potential dividends are paid. Although dividends are not guaranteed, any dividends you may receive can be used to purchase additional protection or reduce the annual premium. They can also be paid in cash; however, any cash value withdrawn from the policy may be taxed. 1Footnote 1
Universal Life Insurance
Like participating life insurance, universal life insurance is permanent insurance, meaning that it protects you for life, as long as you pay the premiums. Universal Life insurance combines the advantages of a permanent policy with a tax-efficient investment component.
So what is universal life insurance right for you right now? The short answer is flexibility. This type of insurance usually allows you to choose your premium schedule, the amount you want to pay (subject to certain limits) and a combination of investments that best suits your unique risk profile.
What type of insurance is right for you right now?
Term life insurance is the cheapest option in the short term. However, although the cost of participating life insurance and universal life insurance tends to be higher initially, the potential for growth in the cash value of these types of insurance may make them better choices in the long run. term.