Have you just recently had a brush with death? Maybe you are thinking about starting a family. Whatever the situation is, there really are tons of reasons that one would want to look into life insurance. After all, we are talking about the well being of your family. Don’t you want to do everything within your power to ensure that they are cared for when you are gone? Of course, you do and that is exactly what you can do when you invest in the right insurance policies. The key phrase here being- the right insurance policies.
Whether you are getting older or just getting, there is no denying that insurance is confusing. This is especially true in the Canadian market. Not only do you have tons of providers to choose from, but you also have different policies that you have to sort through. And, not every policy is right for every situation. This is why it is more than important to clearly understand what is available to you and how you can benefit from the ones you choose.
Term Life And Whole Life Insurance
When you are out there shopping for your next policy or shopping for the first time it will be easy to get confused. There are all kinds of different terminology that will be thrown in your face along with a bunch of different pricing options. The thought of buying the wrong insurance alone is probably enough to frighten you. Buying the wrong kind of life insurance will not only ensure that your family isn’t protected to the fullest, but it could spell financial ruin. This is why it is important to break down each offering and understand what they bring to the table. Currently, the two most popular types of policies are the term life and whole life policies.
Understand How Whole Life Insurance Works
Permanent life insurance pretty much holds true to its name in the fact that it is permanent. What does this mean? It literally means that it is a policy that will stay active for the entirety of your life. Yes, this could be for 80 years or more. This coverage is pretty basic right when you get down to the heart of it. It is a type of coverage that will pay out a certain amount of money in the event of your death. Your death will, however, have to fall within the guidelines of the insurer, which usually constitutes natural causes. If you get into a car accident, have a slip and fall, or drowned, permanent life will not cover you. This is where accidental coverage will come in handy.
Understand How Term Life Insurance Works
Term life insurance is a completely different beast although even though it is still a form of life insurance. Term life insurance works basically in the same manner as whole life insurance. The only difference is that it only offers coverage for a certain term. This term is usually either 10, 20, or 30 years. There are some providers out there that offer even longer and shorter coverage. Some have been known to offer as little as 5 years. If you die within the term then your beneficiaries will be awarded a certain amount of money.
This amount of money will be agreed upon when you enlist in the policy, and this amount can vary from provider to provider. For instance, some providers in Canada might offer you $250,000 for 10 years, whereas some might allow you to sign up for a $500,000 policy for 20 years.
A Comparison Of The Two
There is simply no getting around the fact that life insurance is necessary. It doesn’t really matter if you are going to invest in a whole life policy or if you are going to invest in a term life policy, the most important thing is to make sure that you are covered in some manner. However, if you want your loved ones to get the most out of the coverage then you will make sure that you are doing everything you can to leave them sitting pretty when you are gone. And, you can do just exactly this by investing in the right insurance policies. Below, you are going to learn where the two policies are different and how one might benefit you more than the other in certain situations.
The Cost Of The Two
The cost will without a doubt be one of the biggest deciding factors. In fact, the cost alone helps determine whether some will get term life or whole life coverage. It is probably pretty obvious that your whole life is going to be more expensive because it is covering you for the entirety of your life. Not only this but with whole life, you can expect the payments to increase as time goes along. As you grow older the insurance companies see you as more of a risk, which means that you will have to pay higher premiums in order to cover those additional risks.
Term life insurance policies are not only cheaper, but the premiums are usually fixed. This means that they do not change over time. That being said, the premium will vary from individual to individual depending on several different factors. Your age, as well as your current health and lifestyle, can factor into what you end up paying monthly or yearly for life insurance.
Convertibility Of The Insurance
It is also important to know that term life can usually be converted to whole life insurance at any time. This means that if you have a term life policy for 9 years and decide that you want to make it permanent, you have that option. That aside, it should also be noted that when you reach age 65, you may not have any option but to convert. Many Canadian insurance providers do not offer term life insurance to persons over the age of 65. What’s even more important is that most of the time, you can have the insurance converted without undergoing a medical exam.
Whole life insurance can also be converted back down to term life insurance at any point if this is something that you might be interested in. However, if you are already paying for whole life, you would probably be best off just keeping that policy and not reverting back down to term life. You might be saving yourself some money, but you are also loosening that security blanket around your family.
A Saving Or Investment Vehicle
If there is one aspect that makes whole life insurance a real winner it is the savings and investment aspect. That’s right when you buy a whole life insurance policy, you aren’t just getting a life insurance policy, you are getting an investment. Whole life insurance not only offers a death benefit, but it also offers an account that can be used as a savings or investment vehicle.
What this basically means is that part of your monthly or yearly premium will be deducted and placed in a special account. This account can then later be used to increase your coverage or pay your premiums. Not only this but whatever is in the account when you pass will be handed down to your beneficiaries.
When Whole Life Makes Sense
There is simply no denying that term life is sufficient for a lot of Canadian families. It can be just the exact amount of coverage that you need to provide a safety blanket for your family. However, there is also no denying the fact that whole life, as well as other forms of permanent insurance, can be useful in certain situations. If you are looking to provide money for your heir to pay estate taxes then whole life might be your best option. If you have heirs that are going to be forced to sell off parts of your estate to pay tax bills then whole life insurance can be the right policy for you.
If you have children of a lifelong dependent that is going to need financial support after you are gone then whole life insurance could provide the funds that these individuals need to live out the rest of their days. At the very least, it could sustain them until they reach the point to financially care for themselves. Keep in mind that it also might be a good idea to set up trusts in situations like this. This is something that an attorney could help you out with.
You work your whole life for your retirement. So, it only makes sense that you would want to enjoy it and spend it. It probably also makes sense that you would want to save some of it so that you can leave it behind as a safety net when you are gone. Well, if you want to have the both of best worlds then you should consider investing in whole life insurance. This policy will let you spend your retirement savings and still leave behind an inheritance or money for final expenses.
Whole life insurance policies are also excellent when you want to equalize things. For instance, say that you have a large estate or business that you are going to leave behind. Well, maybe you only have one child that is interested in carrying on the family legacy. That’s okay, and you can make it work by providing the business to one child and your life insurance policy to the other. This will ensure that each heir is equally compensated after your passing.
When Term Life Makes Sense
There are also a number of situations where term life insurance can come in handy. For instance, if you only need life insurance to replace your income over a certain number of years when you are raising a child or paying a debt then term policy will be your best option. It will allow you to be covered for a certain time until the debt is paid or the child is raised. If you are looking to save a little bit of money on your coverage then you can’t go wrong with term life. Term life is not only for a limited amount of time, but it is a policy that is going to come at a cheaper rate.
Maybe you are just testing the life insurance waters. You know that you need to be covered but just aren’t willing to jump in headfirst. That’s okay, and that is exactly where term life insurance can come in handy. This policy can also be converted to whole life insurance later down the time. Just keep in mind that there might be a deadline for the conversion, and this is something that is going to vary from provider to provider. Some providers might offer longer deadlines, whereas some will set the deadline for the next year or two.
Other Types Of Policies Available
While whole life and term life insurance are two of the most popular policies that we offer here at Sim Gakhar, they are not the only ones. In fact, we specialize in life insurance and offer a variety of different unique policies for each situation. Whether you are looking for permanent coverage or just want to make sure that you are covered for the next 20 years, we can help. We always have knowledgeable and helpful techs standing by ready to assist. All that aside, here are some of the other policies that we offer:
Universal Life Coverage
This is another type of permanent coverage that is similar to that of whole life insurance. Universal life insurance offers a death benefit along with a cash value component, where the funds are allowed to grow tax-deferred. Universal policies are just much more flexible than whole life because the policyholder gets a say so in his or her premiums. For instance, with this type of policy, you will be able to choose how much of your monthly premium goes toward the death benefit and how much goes towards the cash value aspect.
Variable Life Coverage
This is another form of permanent life insurance, as it also offers a death benefit as well as a cash component. However, the cash component is the major difference in this situation. With this type of policy, the policyholder can take part in a variety of different investment opportunities. This means that the funds not only have the potential to grow a great deal over time, but it means that they can be utilized when you are still alive. However, it should also be noted that there are more risks with these policies because of the volatility of the market.
Get in touch
I am always a call away. If you are looking into life insurance coverage for the very first time or would like to discuss your existing policies, I would be glad to be your Markham life insurance advisor.
My contact information can be found here.