Life Insurance

Life Insurance

Life insurance is a means by which we protect the people we love. More specifically, by depositing premiums into a pool of funds, your beneficiaries receive a tax-free cash benefit upon your passing. You can use this benefit to cover funeral costs, lifestyle-maintenance, debt repayment, or any other costs that may arise. Life insurance can be separated into two broad categories: Term insurance and permanent insurance.

Term Insurance

As the name suggestions, term insurance is used to insure oneself over a fixed amount of time. Term insurance is useful in a number of situations including:

  • Mortgage Insurance: To pay off your mortgage balance if death occurs.
  • Family Income Protection: Replacement of income earned by the deceased parent.
  • Small business owners: Insure an employee or pay off creditors, key person insurance, partnership insurance.

Some of the benefits of term insurance:

Renewable. There are many options available including renewable coverage meaning that you can renew the term with no additional health assessments.

Guarantee. For the duration of the term, your sum insured and premiums will not fluctuate.

Cost. Term insurance is the least expensive form of insurance available.

Convertible. Many term contracts can be converted into permanent insurance.

Flexibility. You can choose the length of your term. Common terms include 10 or 20 years.

Permanent Insurance

In contrast to term insurance, permanent insurance is meant to insure an individual for as long as they live. Permanent insurance can be divided into two subsections: Whole Life Insurance and Universal Life Insurance.

Whole Life Insurance

Whole life insurance insures an individual for their entire life and also offers a guaranteed cash surrender value including dividends in some cases (an amount that is paid out in cash should the individual decide to cancel their policy before expiration).

Key features and advantages:

  • Premiums, face value, and surrender values are all guaranteed under whole life. Your cash value and death benefit can never decrease in value unless you start withdrawing the cash value from the policy.
  • Limited Pay Options - You can choose the duration of your premiums (10, 15, 20, or 30 years, up to 65 or 100 years of age) based on your evolving priorities.
  • You have the ability to insure multiple individuals under the same contract.

Universal Life Insurance

With universal life insurance, an individual can pay premiums above the original cost of insurance. The extra premiums are invested into funds of your choice with the assistance of an advisor. In essence, you have a product that consists of both insurance and investments.

Key features and advantages:

  • A hybrid of a permanent insurance policy and a tax-sheltered savings account.
  • You can make partial withdrawals as needed.
  • You have the ability to insure multiple individuals under the same contract.
  • You can temporarily halt premium payments if you are unable to make them.
  • Very flexible in terms of amount of insurance, cost, frequency of payments, etc.

Universal life insurance is useful for a number of instances including:

  • Individuals/families wishing to accumulate additional savings (i.e. for retirement).
  • High-income individuals who would like extra tax-sheltered savings or would like to leave a investment to a beneficiary tax free.
  • Business people wishing to insure specific employees or wishing to finance a shareholders’ agreement.

Term 100

Term 100 provides coverage for life. This term policy will cover the life insured for life, even beyond age 100. This product may have cash values. Premiums are required on a monthly basis up to age 100. When the life insured reaches 100 years of age, this policy matures which means that future premiums are not required to keep the policy in force. Should you stop premium payment prior to age 100, the coverage will cease, and you will no longer be covered.

  • Term 100 pay adjustable – means that premium can fluctuate
  • Term 100 gtd life pay – means that premium stay constant throughout the life of the policy
  • Term 100 with Values - means that there are guaranteed cash values on the policy after a certain number of years.

Additional Policy Options

It is often beneficial to combine two different policies. For instance, you may need coverage for your entire life and additional coverage only for your mortgage. In this case, you may choose to put a term rider on the whole life policy. You benefit by only having one policy to pay for, resulting in overall savings.

There are a handful of companies that still offer participating life insurance policies. These policies combine guaranteed life insurance coverage and strong guaranteed cash values. The added bonus is the potential to receive dividends every year.

Riders with selected insurance companies include:

  • Critical Illness Insurance
  • Disability Insurance
  • Disability Waiver of Premium
  • Accidental Death and Dismemberment
  • Guaranteed Insurability
  • Child Life Rider
  • Child's Critical Illness Rider
  • Hospital Coverage
  • Accidental Fracture