Pros & Cons of Whole Life Insurance
If there is one thing Canadians do not suffer from it is lack of choice. The average consumer looking to purchase life insurance will find themselves choosing from 100 life insurance companies each offering their own unique take on basic policies. That’s why it is always best to arm yourself with a little education about the different options you have before speaking to a broker.
Whole vs. Term
The two most common types of polices are term life insurance and whole life insurance. For specific advantages about term life insurance we suggest our article on the advantages of term life insurance. For those that are already familiar with term life insurance and are just looking for more information about whole life insurance than you’ve come to the right place.
Whole life insurance is a type of permanent life insurance in that it never expires. As long as you continue to pay your premiums you are guaranteed that your beneficiaries will receive a death benefit. It is differs from term life insurance in that it is also an investment tool. With whole life insurance a portion of your premiums are invested by the life insurance company on your behalf. It’s for this reason whole life insurance is referred to as “forced” savings.
Forced Savings & Cash Value
Forced savings mean that every time you pay your premiums you are saving a portion of it in what is called the cash value. Over time the cash value amount in your policy which can be beneficial in a number of financial scenarios. For example, you can borrow against your policy as that cash value is available to you anytime. The one catch of collecting on your cash value is that you forfeit your coverage, effectively cancelling your policy. This also means no longer being able to collect dividends if they were to become payable with your policy.
Situations do arise where people no longer require their whole life insurance policy or have a greater need for the cash value. Situations like these include supporting yourself in retirement, or not having any beneficiaries to benefit from the policy. In those instances, opting for the cash value of your policy may be a smart financial choice. It is important that you speak with an professional insurance advisor.
Who is Whole Life Insurance For?
Whatever life insurance product you end up purchasing it is important to first focus on covering the main reason people buy life insurance – to provide financial support in the event of a death. If that is the only reason you are purchasing life insurance than term life insurance is probably a wiser choice as it is cheaper and does just that. Whole life insurance takes term life insurance, extends the coverage period indefinitely and adds a few fancy selling points like savings, dividends, cash value etc. It takes a trained licensed professional to actually determine if these would actually be beneficial to you. There exists many other saving tools and combinations of term life insurance and those that accomplish the same as whole life insurance but for a cheaper price with more coverage and more return on your investment.
There is a reason it takes a license in Canada to sell life insurance. Although the internet has changed how consumers educate themselves about life insurance, it still can’t replace professional advice and how it applies to your own financial situation. LifeCover.ca helps Canadians connect to independent brokers across Canada who are as committed as us to getting you the most coverage at the best price.