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types of life insurance

What are the main types of life insurance


You’re not alone in thinking about life insurance. For many Canadians, it is an integral part of any good financial plan. When you die, it can help your designated beneficiary, like your family, replace your income and achieve goals like going to college or retiring.

However, do you know which type of life insurance is best for .

Term life insurance

Term life insurance  is a less expensive product that protects you for a defined period, such as 10 or 20 years. Once this period has elapsed , your protection is renewed at a higher cost, if you do not cancel it. You can also turn it into permanent life insurance without having to answer questions about your health.

The initial cost of term life insurance is less than that of permanent life insurance, and it’s a fairly common way for those just starting out to protect themselves and their families. Term life insurance is usually less expensive than permanent life insurance, which could allow you to buy more protection.

Participating life insurance

Participating life insurance , also called permanent life insurance, will protect you for life, as long as you pay the premiums.

This insurance is called participating life insurance because the premiums you pay for your coverage, as well as the premiums paid by other owners of this type of policy, are deposited into a participating account. The insurance company’s investment team manages this account and makes investments to increase its value.

It is from this account that your death benefit and potential dividends are paid. While dividends are not guaranteed, any dividends you may receive may be used to purchase additional coverage or reduce the annual premium. They can also be paid in cash; however, any cash value withdrawn from the policy may be taxed. 1Footnote 1

Universal life insurance

Like participating life insurance, universal life insurance is permanent insurance, meaning it protects you for your lifetime, as long as you pay the premiums. Universal life insurance combines the benefits of a permanent policy with a tax-efficient investment component.

So how is universal life insurance right for you right now? The short answer is flexibility. This type of insurance usually lets you choose your premium schedule, the amount you want to pay (subject to certain limits), and a combination of investments that best suits your unique risk profile.

What type of insurance is right for you right now?

Term life insurance is the least expensive option in the short term. However, while the cost of participating life insurance and universal life insurance tends to be higher initially, the cash value growth potential of these types of insurance may make them better choices in the long run. term.

If you borrow or withdraw money from your policy, the cash surrender value of your policy and the amount you wish to leave to the person(s) you have named as beneficiaries (death benefit) will be reduced Consequently.

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