Life Insurance

The primary purpose of insurance is to provide financial compensation to family members or business partners at the time of insured’s death.

Although this primary purpose is as true today as it was when the very first life insurance policy was issued, there are other significant advantages available with specific kinds of life insurance.

Two Main Types of Insurance

There are two major categories of insurance, temporary coverage (term) and permanent coverage (whole life and universal life).

Term Insurance

Term insurance is designed to provide the maximum amount of coverage for the lowest initial premium. Rates for term insurance will remain the same based on the time frame or length of term purchased. Terms can be for 1, 5, 10, 20 years and up to age 100. At the end of each of the term periods rates will be re-calculated based on your current age and current mortality schedules.

Some term insurance also comes with the right to renew the policy regardless of your current health situation; you can also convert portions of your term coverage to permanent insurance without additional medical underwriting.

Permanent Insurance

Just as it's name implies, permanent insurance is designed to provide stable protection for your entire lifetime. There are two kinds of permanent insurance and each comes with its own unique set of features and benefits.

Universal Life

Universal life insurance differs from term insurance by allowing you to build up equity within the policy. There are a number of investment opportunities ranging from conservative to aggressive and investment purchases should be done based on your comfort level of risk and reward. The investment portion of these accounts are allowed to accumulate tax deferred within guidelines set by Canada Revenue Agency. Premiums may be adjusted due to performance of the underlying investments.

Whole Life

Whole life insurance offers the greatest number of guarantees and advantages over other types of insurance. Initially the premium is more expensive then either term or universal life insurance, however the rates are contractually guaranteed to never increase and provides the greatest level of security for a persons entire lifetime.

Most whole life policies are known as participating policy’s, which means they may be able to receive annual dividends. While dividends are not guaranteed, most insurance companies have produced annual dividends consistently for 50 years or more.

Unlike Universal life investment accounts, once a policyholder has been paid a dividend or interest the amounts can never go down regardless of market conditions.

There are significant "living values" of whole life insurance and they can benefit policyholders above and beyond just the death benefit.

Options:

The younger you are the less expensive life insurance coverage will be, consider purchasing a combination of both term and whole life insurance. As your income improves over the years you can convert portions of your term coverage to permanent whole life.