Life Insurance

Life Insurance

Life insurance is a mean 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, maintaining your lifestyle, repayment of debt, or any other- costs that may arise. Life insurance can be separated into two broad categories: Term insurance and permanent insurance.

1. TERM INSURANCE

As the name suggests, 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 or partnership insurance.

Key features and advantages of Term Insurance:

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

2. PERMANENT INSURANCE

In contrast to term insurance, permanent insurance is meant to insure a person for as long as she /he lives. Permanent insurance can be divided into two subsections: Whole Life Insurance and Universal Life Insurance.

2.1 WHOLE LIFE INSURANCE

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

Key features and advantages of Permanent Insurance:

  • Guarantees: 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.
  • Multiple Insured: You have the ability to insure multiple individuals under the same contract. 

2.2 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. 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 an investment to a beneficiary tax free.
  • Business people wishing to insure specific employees or wishing to finance a shareholders’ agreement.

Key features and advantages of Universal Life Insurance:

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

2.3 TERM 100

Term 100 provides coverage for life. This term policy will cover the life insured for life, even beyond age 100. 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.

Key features and advantages of Term 100 Life Insurance:

  • Term 100 pay adjustable: means that premium can fluctuate
  • Term 100 guaranteed life pay: means that premium stay constant throughout the life of the policy

3. 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.

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