Types Of Life Insurance
In Canada there are two main types of Life Insurance:
- Term Insurance: Typically available in durations of 10 or 20 years. Other options are available.
- Permanent Insurance: Available as Term to 100, Whole Life, or Universal Life.
Term Insurance is great for paying for short term needs, like:
- Children who are still dependent
- Guaranteeing income to your household while your family is young.
This type of insurance is only insurance. There is no cash value when you cancel the policy. Term insurance is inexpensive in the short term and becomes very expensive when the term renews. Usually this type of insurance is cancelled upon renewal.
Permanent Insurance is great for long term needs, like:
- Estate Planning
- Final Expenses
- Passing wealth to the next generation
- Paying capital Gains taxes
- Creating charitable donations
Permanent insurance is a combination of Insurance + Tax Sheltered Investment. Any investment growth can be paid out tax free to the named estate. Over time, this insurance is far less expensive as compared to Term Insurance.
For a better understanding of how the different types of insurance work, please click here Types of Life Insurance
When planning for the Long-Term, insurance can be purchased for pennies on the dollar.
For example: For $1,763 / year for 10 years, a 50 year old, non-smoking, couple, will end up with $113,400 of payable insurance at age 60. That is a cost of only $0.155 on the dollar.
This is the same as buying a $100,000 asset for $1,763 / year for ten years, and earning tax sheltered interest on your payments.