Life Insurance

The primary purpose of life insurance is to protect against the personal and financial strain of an unexpected death. Whatever stage of life you are in, life insurance can be used to replace the cash that you do not have. While you are young, it is important to have life insurance in order to replace lost income, eliminate debt and support your family. As you get older, life insurance is required in order to preserve your estate for your loved ones. In the right situation, life insurance can also be used to supplement retirement income.

It is important to obtain professional advice in order to determine how much coverage you may require, as well as what type of insurance is appropriate for you. There are 2 main forms of life insurance, Term and Permanent.

Term Insurance

Term Insurance is a temporary product that provides coverage for a fixed period of time. The cost either increases periodically until the expiry date, such as 10 Year Renewable Term, or can be purchased with a level cost to the expiry date.

All programs that we recommend can continue to the expiry date (usually age 80) without having to provide further medical evidence of good health. These plans are also convertible to lifetime insurance without any further medical evidence. Generally, Term policies provide the maximum amount of insurance coverage for the least amount of premium. The primary limitation is that Term plans do eventually expire.

Permanent Lifetime Insurance

These types of policies continue at a fixed cost for the entire duration of one's life. There are essentially 2 types of permanent lifetime insurance. There are bundled products which combine life insurance and a savings component. The insured must maintain a continual premium in order to achieve the desired result. These are traditional Whole Life style products which either have guarantees of cash value throughout, or where there are variable premiums and cash value which depend on the performance of the insurer's general investment fund.

The other type of permanent insurance is an un-bundled product where there is a separate pure insurance cost, with the option of adding a cash value component to the plan. As with all life insurance, the advantage of accumulating cash inside a policy is that the investment returns are tax-sheltered while the funds remain within the policy. Universal Life policies require that you maintain the lifetime premium for the insurance, but may vary the additional contribution to the cash value from nothing, up to the maximum allowable in order to keep the policy within tax-exempt limits.

The cash value may be used in several ways:

Personal or corporate savings on a tax-sheltered basis
Generate a supplemental retirement income
Offset future insurance premiums

There are a number of variations to all permanent plans which allow you to limit the payment of future premiums to a specific timeframe. You can also buy insurance on multiple lives, with benefits payable either upon the first death, or last death.

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