What is Life Insurance?
Life insurance is a contract that you enter into with an insurer to guarantee that your family is financially protected in the event of your unforeseen death. Nobody wants to think about the end of life. However, it’s essential to consider what will happen to your family if you have an unforeseen accident or illness that results in your death.
Employers often offer life insurance to their employees as a benefit. This can be a great way to get additional low-cost life insurance. However, employer-based life insurance policies are usually not enough to provide the full amount of coverage your family will need in the event of your unforeseen death.
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What Does Life Insurance Cover?
At the time of your death, your life insurance policy will provide tax-free funds to your dependents that they can use to pay for funeral expenses, final expenses (e.g., credit cards, mortgage, taxes), or daily living expenses. Life insurance also pays for capital gains tax on a willed estate. With some contracts, a critical illness or disability can also trigger a payment.
The total amount of your life insurance payout will depend on what you have been paying in premiums in the time leading up to your death. One of our Toronto life insurance advisors can help you decide the best option to choose to ensure your family has the money they need to maintain their lifestyle.
Types of Life Insurance
The three primary types of life insurance are term life insurance, whole life insurance, and universal life insurance. Your life insurance advisor in Toronto can help you figure out which one is best for your situation.
If you do not have dependents or you are a small business owner, then you may want to consider term life insurance. With this type of policy, the policy owner agrees to pay a premium for a set amount of time, usually 10 – 20 years. In return, the insurance company pays a specific death benefit to a beneficiary if the policyholder dies within that time frame. The benefit is generally tax-free.
At the end of the term, the policyholder can obtain further coverage, usually with different payments and conditions.
Who should get term life insurance?
Because it’s the least expensive way to get life insurance, those with a limited budget, including young adults, often get term life insurance. Additionally, small and medium-sized business owners may want to get term life insurance to cover expenses related to running the business in the event of their death or that of a key employee.
Unlike term life insurance, whole life insurance provides coverage for the duration of a policyholder’s life. When the policyholder dies, the insurance pays a lump sum to their beneficiaries. Additionally, with whole life insurance, you will accumulate a cash value through your premiums. Depending on your policy, you may be able to use your cash value to pay for your premiums or to use as collateral if you need to take out a loan.
Who should get whole life insurance?
Anyone who wants to ensure that their beneficiaries will be provided for financially should consider whole life insurance. Once you have it set up, your premiums are locked in. The younger and healthier you are when you set up your account, the lower your premiums will be. As long as you make premium payments on time, you will build up cash value that may be used in the future. The policy can be fully paid up in 10 yrs or 20yrs and cash values and Permanent Life insurance has the potential to continue increasing till the death of the policy holder making it one of the best ways of wealth creation and estate planning. Wealth is potentially transferred tax free.
Combining some elements of term and whole life insurance, universal life insurance is a flexible, permanent life insurance offering. It is lower in cost than whole life insurance and still allows for cash value buildup.
A significant difference between universal and whole life insurance is that universal life insurance policyholders can withdraw money from their cash value buildup. Also, universal life policies are flexible, so you can adjust yours as your circumstances change.
Who should get universal life insurance?
People who want life-long coverage with the added benefit of policy flexibility will want to pursue universal life insurance. Business persons or any individual needing a tax advantaged vehicle for investments bundled together with permanent life insurance, guaranteeing the best of both worlds. After topping your Registered Retirement Savings Plan (RSP) and/or Tax Free Savings Plan (TFSA), Universal Life Insurance offers an exciting tax shelter for your investments.
Get a Life Insurance Quote
Your life insurance cost will depend on several factors. These can include:
- Your current age
- Your current health status
- How long you’d like to have life insurance for
- Your current financial position
- How much money you would like your beneficiaries to receive upon your death.
Use our online life insurance rate calculator to get an estimate for your rates and determine how much life insurance you may need. Your life insurance advisor can give you a more accurate quote after speaking with you about your situation and talking to our expansive network of insurance providers.
Talk to a Top Life Insurance Advisor in Ontario
One of our expert life insurance advisors can help you determine the best type of life insurance based on your unique circumstances. Then, we’ll shop around to find the best rates for you.
At MoneyValue, we work with all of Ontario’s major insurance providers, which lets us give you unbiased advice. We want what’s best for you and your family, and we will work with you to help you make the right decision to protect yourself, your family, and your business.
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