Why is life insurance important?
Life insurance can protect your family if you die prematurely. The death benefit (the amount paid or payable on the insured person’s death) can help your family cover funeral expenses, child care and education costs, home maintenance costs, legal claims, inheritance tax, and any unpaid debts or bills. It can also replace the income your family will lose when you die.
When should you buy life insurance?
There are three types of life insurance: term insurance, permanent (or whole life) insurance, and universal life insurance.
Let’s talk about permanent life insurance. If you’re looking for lifelong protection, permanent life insurance might be for you. It remains in effect throughout your life, regardless of your age or health, as long as you pay the monthly or annual premiums (the payments you make for your life insurance policy).
That’s all well and good, but is permanent life insurance right for you? Here’s what you need to know before making a decision:
How does permanent life insurance work?
Do you like to plan? Would you like guaranteed lifetime coverage? Do you want to know exactly how much your annual premiums are? Then permanent life insurance might be a good choice for you.
Here’s what you can expect:
Your life insurance coverage is guaranteed for your lifetime, as long as you pay the required premiums.
You can be sure that your premiums will not change, regardless of your age or your state of health.
How to make your money grow with permanent life insurance?
Most permanent insurance contracts have a cash value. Like the equity in your home, cash value increases over time, and you can get an advance on the cash value or use it as collateral for a loan. You can also withdraw it, but generally, this reduces the death benefit.
Permanent life insurance costs more than term life insurance but is beneficial in the long run. Term life insurance is affordable when you’re young and healthy but only provides temporary protection. Its cost can increase significantly over time, and you cannot access the policy’s cash value through withdrawal or borrowing.
Life insurance: term, permanent… both?
Is term life insurance right for you?
What about the life insurance offered under your group plan?
Do you have access to life insurance as part of your group plan? That’s a good start, but here are a few things to consider:
You cannot keep it if you change employers. You will have to take out another one with your new employer and not be covered in the meantime.
It ends when you retire.
Its cost may increase over time.
Buying life insurance offered as part of a group plan is often more advantageous than buying it individually. But would this plan cover your share of family expenses? Your mortgage? The costs related to your children’s studies? Consider purchasing individual life insurance that you will keep regardless of your employment status, then supplement that insurance with coverage from your employer.
How do employee pension plans work?
How much life insurance do you need to protect your loved ones? Use the life insurance calculator to get a quick estimate.
Speak to an advisor to learn more about your life insurance options
Once you have decided to opt for permanent life insurance, you will discover different types of contracts. In some cases, you stop paying premiums after a certain period while remaining protected for life. To determine the best life insurance for your financial situation, you need to know the different types of coverage offered, features, and benefits. If your needs are simple, a kind of life insurance might be enough to protect your spouse and children. If your situation is more complex (for example, if you own a business or have a blended family), you may need more than one type of life insurance.
When buying life insurance, it’s essential to explore your options with an advisor. Why? The advisor will help you integrate life insurance into your overall financial plan. His expertise and knowledge of insurance will be helpful to you, especially if you have a large inheritance to leave or if you are in a high tax bracket.
