A proper financial plan can mean the difference between leaving your loved ones well-positioned financially and leaving them to cope with debts and an inadequate income.
Life insurance can help create financial security for you and your family. If you should die prematurely, it can be used to:
- Pay final expenses and any debts
- Provide an income for your family
- Ensure your family has the resources to maintain a comfortable standard of living
- Leave a legacy to your favourite charity
While you’re still living, some life insurance policies can:
- Build tax-advantaged savings you can draw upon as needed for personal or business opportunities
- Supplement your retirement income or provide for long-term care or home care for yourself or a family member
Depending on an individual’s needs, desires and health condition,
there are many types of insurance available. The right life insurance solution for you depends on your immediate needs and long term goals.
Term Life insurance
Term life insurance is well-suited to meet high, short-term protection needs for the lowest initial cost. For example, the loss of an income earner, especially early in life can cause extreme financial hardship for those left behind. How will the mortgage be paid? How will the children’s education
be funded? Will the family have enough income to maintain their standard of living?
Term insurance is often used to provide coverage for these temporary situations. With term insurance policies, your premiums only pay for the cost of the insurance; there is no savings
component or cash value. As a result, the initial premiums on a term insurance policy are generally lower than the premiums on a comparable permanent insurance policy. If you stop paying premiums, the coverage expires. Term life insurance premiums often increase every 10 or 20 years, although some policies provide for level premiums over longer periods of time.
Permanent Life Insurance
Permanent life insurance can protect you for your lifetime. Regardless of when an individual dies, there will likely be taxes, funeral costs and other expenses due at death. In addition, some individuals may desire to leave a bequest at the time of their death or wish to maximize their estate value.
For business owners who have accumulated a sizable investment portfolio or estate, permanent life insurance can be an important tool in helping to transfer a business successfully, reducing taxes or as a wealth positioning asset with valuable tax sheltered accumulation and tax effective estate transfer capabilities.
For permanent needs, there are insurance products that provide primarily protection with the lowest annual cost outlay such as permanent term insurance (Leasing) or Limited Pay products (Owning), to those which allow substantial tax sheltered growth and asset allocation potential such as whole life and universal life insurance (Owning with Equity and Growth).
This graph shows how the premium of different life insurance policies will change during the life time.
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