If you’ve decided that you want the protection that only life insurance coverage can provide for your family, your next decision will be between term or whole life insurance. The obvious answer will really boil down to what else you want your life insurance policy to do. A better understanding of your own objectives with life insurance and how the different types of life insurance options fulfill them is your first step. From there, the choice should become pretty clear as to what coverage best suits your particular needs.
Both whole life and term life insurance fulfill the basic function of life insurance which is that they provide a death benefit to your beneficiaries if you were to die. Now the basic difference between the two is that this is where term life insurance ends, it just provides life coverage. When you take out a term life insurance in Canada policy, you are insuring yourself for a set period of time (or term) and, if you were to die during that term, then your beneficiary would receive the face value of your policy. These periods range anywhere from one to 30 years, after which they expire and the option to renew can be costly.
Whole life insurance (or permanent life insurance), is like a term policy, in that it provides life coverage, but with two major differences. The first is the savings component, meaning that your policy accumulates with it a cash value which can provide numerous benefits. The cash value, which can be borrowed against in the form of a policy loan, can be used for investment opportunities such as bonds, stocks or mutual funds. If you elect to keep your money invested with the insurance company, then you can also be entitled to the dividends that are paid on the cash value, as well as the interest that accrues.
The second difference, is that a whole life insurance policy never expires as long as you continue to pay your premiums. This component can be attractive for estate planning, as it guarantees your beneficiaries receive their benefits tax free.
Just starting the search means being bombarded with terms and concepts that seem more suited for advanced calculus that something that’s designed to protect your family. That’s why we have designed LifeCover.ca to be simple and straightforward, so you can make the decision that’s right for you. Find a broker that’s ready to work for you today, with LifeCover.ca.