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Life insurance in Canada: What
you need to know
What is life insurance?
Life insurance is your family's guardian angel. It's the shield that ensures their financial security even when you can't be there to provide. With an active life insurance policy, your loved ones will receive a tax-free lifeline, giving them the freedom to use it as they see fit.
What is Term Life Insurance?
Term life insurance is simple and affordable protection that lasts for a specific period or until a certain age. You pay a fixed premium during this time. If something happens to you within the term, your loved ones receive a tax-free lump sum. No complicated bells and whistles – just straightforward security.
Some typical terms are:
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10-year term
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20-year term
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30-year term
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Until age 65
Additionally, some insurance providers let you pick your own term between 5 and 40 years that best suits your needs. These are all examples of level term policies where the death benefit and monthly premium remain the same through your chosen term.
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Lastly, there are specific term policies for unique applications:
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Annual Renewable Term. A short-term life insurance policy that locks in your premiums for one year and can be optionally renewed at the end of each year. Sometimes referred to as Yearly Renewable Term.
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Decreasing Term Policies. A form of term life insurance where the death benefit decreases in later years of the policy.
What is Whole Life Insurance?
Whole life insurance is the forever insurance. It's the kind that stays with you from start to finish, providing lifelong protection. As long as you keep up with your premiums, your loved ones are guaranteed to receive a tax-free payout when you pass away.
What sets it apart from term life insurance? No expiration date. Your coverage doesn't have a ticking clock. Plus, here's the best part: the premiums you pay remain rock-solid, never changing as you age.
But that's not all. Whole life insurance isn't just about protection; it's an investment in your future. Part of your premiums goes into investments, and those returns can be yours to use as cash value. That cash can be a helping hand in retirement, a fund for your kids' education, or whatever you dream up.
Ready to secure a lifelong safety net? Explore the possibilities with whole life insurance today. Your future, your way.
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What is the catch with whole life insurance?
There is no catch or gotcha with whole life insurance in Canada. While there are lower-cost alternatives for financial protection, whole life insurance delivers great value as the death benefit is guaranteed. Because of this guaranteed payout, whole life policies are often used for estate planning and covering funeral expenses.
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What are the advantages of whole life insurance?
Whole life insurance has many advantages. It provides you with guaranteed, lifelong protection and a death benefit for those you leave behind to cover end-of-life expenses or outstanding loans. Additionally, your policy accrues a cash surrender value that you can access while the policy is in force (or borrow against) after a certain number of years. Lastly, the premiums stay level, so you can budget your monthly insurance premiums accurately for the life of the policy.
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Are there disadvantages of whole life insurance?
One disadvantage of whole life insurance is the elevated premiums. Because this type of insurance protects you for your entire life and retains a cash value, the premiums you pay for coverage are much higher than other types of life insurance.
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What are the payment options for whole life insurance?
Whole life insurance premiums can be paid monthly or annually. But beyond that, there are alternative payment structures for whole life insurance coverage:
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Life Pay Whole Life Insurance: insurance that covers you for your entire life with a built-in savings component. You pay insurance premiums for this coverage for the rest of your life.
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Limited Pay Whole Life Insurance: the same coverage as above, but you only make a premium payment for a set period of time. Because of this limited pay period, the premiums are typically higher.
What is a 20 pay whole life policy?
A 20 pay whole life policy is a limited pay whole life insurance product where you pay the entirety of the premiums within the first 20 years of your policy.
What is a 10 pay whole life policy?
Similarly, a 10 pay whole life policy is a limited pay whole life insurance policy where you pay the entirety of the premiums within the first 10 years of your policy.
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Depending on the insurance provider, limited pay whole life insurance policies can also be structured as 15 pay or have the policyholder pay premiums until the age of 65.
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