Canada Life Insurance: What You Need To Know

Life insurance is a policy or contract between an individual and a life insurance company that can last for the rest of their life or a specific time period. It provides a one-time, tax-free payment, called a death benefit, to beneficiaries chosen by the individual upon their death. The beneficiaries can be family members, such as a spouse or child, or even a business partner, trust, or charitable organisation. The death benefit can be used to replace lost income, cover debts and expenses, such as funeral costs, or be donated to charity. In Canada, there are two main types of life insurance: term life insurance and permanent life insurance. Term life insurance covers an individual for a specific number of years and is the most affordable option, while permanent life insurance provides lifelong coverage and tends to be more expensive.

Term life insurance

Life insurance is a policy or contract between you and a life insurance company that can last for the rest of your life or for a specific time period. Term life insurance is a type of life insurance that falls under the latter category, providing coverage for a specific period. Term life insurance is temporary coverage that you can buy for a specific period, anywhere from 5 to 50 years, or until you reach a set age, such as 65. It is an affordable option, used to offset the risk of leaving behind large, unpaid expenses, such as a mortgage or children's education.

When considering term life insurance, it is important to evaluate your financial situation and goals. Term life insurance is often chosen by individuals or young families seeking more affordable coverage options or those focused on coverage with future flexibility. It is also a good option for those who want to ensure their loved ones are financially protected in the event of their death. Term life insurance provides a tax-free lump-sum payment, known as a death benefit, to your beneficiaries if you die within the term of the policy. Once the term ends, the coverage ends, and your beneficiaries do not receive any payment.

There are different types of term life insurance options available, such as single term insurance and joint first-to-die term insurance. Single term insurance provides each partner with their own policy and coverage amount, while joint first-to-die term insurance covers both partners under the same policy, paying a death benefit when the first partner dies. It is important to carefully consider your circumstances and seek advice from a financial planner or advisor to determine the most suitable type of life insurance for your needs.

Permanent life insurance

There are three types of permanent life insurance: whole life insurance, universal life insurance, and participating life insurance.

Whole life insurance is a type of permanent life insurance that provides coverage for your entire life. Your premiums won't change as you get older, and your policy will often have a guaranteed minimum cash value. This type of insurance may also allow you to access additional funds during your lifetime.

Universal life insurance combines life insurance with an investment account, allowing you to build wealth for your beneficiaries. It has a cash value and allows withdrawals and loans. The death benefit and cash value of your investment account may increase or decrease depending on the types of investments you choose and the returns on those investments.

Participating life insurance, also known as universal life insurance, allows you to choose your preferred premium schedule and investment mix based on your risk profile. The premiums you pay go into a participating account managed by the insurance company's investment team. Your death benefit and any potential dividends are paid from this account.

Whole life insurance

The cost of whole life insurance premiums depends on various factors, such as age, sex, current health, and the desired amount of coverage. Whole life insurance tends to be more expensive than other types of life insurance, such as term life insurance, due to its lifelong protection and fixed premiums.

Some whole life insurance policies offer customizable add-ons and additional benefits. For example, participating whole life insurance policies invest a portion of the premiums, and the earnings may be paid out as dividends. This type of policy is often used in estate planning to protect financial assets and pass them on to future generations.

Universal life insurance

However, it is important to note that the death benefit and cash value of a universal life insurance policy may fluctuate depending on the types of investments held within the account and the returns on those investments. If the investments perform poorly, it can negatively impact the value of the policy. Additionally, universal life insurance policies often come with complex statements and structures that can be confusing for policyholders. There may also be hidden fees associated with managing the policy or the investment portion.

When considering universal life insurance, it is crucial to carefully review the terms and conditions, seek advice from a qualified financial advisor, and compare it with other types of life insurance, such as term life insurance or whole life insurance, to determine the most suitable option for your needs.

Joint first-to-die term insurance

Life insurance is a policy or contract between you and a life insurance company that can last for the rest of your life or a specific time period. This contract guarantees that your beneficiaries will get a tax-free cash payment (also called a death benefit) when you die.

The surviving partner will receive a replacement income to keep the family afloat and pay off any debts. The death benefit can be used to replace lost income, pay off debts such as mortgages, cover funeral expenses, or provide for any dependents left behind.

However, one drawback of joint first-to-die term insurance is the lack of flexibility compared to two individual life insurance policies. In the event of a divorce or separation, the policy may be difficult to split, and changes may need to be made to the coverage or beneficiaries. Additionally, the surviving partner may need to apply for a new policy if they want to continue having life insurance coverage.

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