LIFE INSURANCE
What is Life Insurance? Life Insurance is a legal contract between you and a life insurance company. The contract delineates how much money will be paid to your beneficiaries upon your death, how long the insurance will cover you, and the cost of your premium which is the amount of money you will pay every month to get the insurance.
Why should you buy Life Insurance? Life Insurance protects the financial security of your beneficiaries by paying them a tax free, cash benefit upon your death. In addition it can be a valuable tax planning tool and offer many benefits that can be used during your lifetime, depending on the type of insurance that you purchase and your individual plan.
There are several different types of Life Insurance.
Term Life Insurance is temporary and covers you in case of death for a specified period of time. It pays a tax free cash benefit to your beneficiary. Term Life Insurance provides coverage for one person or you can purchase Joint Term Life Insurance to cover two people who share a joint risk. It offers the lowest initial cost and does offer some degree of flexibility so that you can adjust your insurance as your needs change. Term Life Insurance Policies may be renewable without providing proof of health; however the cost of the premiums will increase so that they are appropriate to your age at the time of renewal. In addition Term Life Insurance Policies may also provide the option to convert to a Permanent Life Insurance Policy without providing proof of health; however age restrictions will apply.
Permanent Life Insurance provides coverage for as long as you live and pays a tax free cash benefit to your beneficiaries. The premiums can be guaranteed for life which means that the premiums will not increase as you age and/or if your health changes. Some Permanent Life Insurance plans allow you to pay for a limited number of years although you will be covered for life. There are two types of Permanent Life Insurance.
Participating Whole Life Insurance:
- Combines lifetime coverage with an investment component
- Provides a guaranteed basic death benefit paid tax free to the named beneficiary
- Offers the potential for tax-advantaged growth within the policy without the risk of loss associated with equity markets
- Provides protection for your lifetime as long as your premiums are paid when due
- Offers guaranteed premiums
- Provides guaranteed cash values which increase over time and grow on a tax-advantaged basis
- Offers flexible coverage with a variety of riders and benefits that can be added to the basic policy
- During your lifetime it can build tax-advantaged savings that you can draw upon as needed for personal or business opportunities (any cash values withdrawn from the policy may be subject to tax), supplement your retirement income, or provide funds for long-term care or home care
- Can be used to pay final expenses and any debts you may have, ensure your family has the resources to maintain a comfortable standard of living, pay any taxes owing on your estate, leave money to charity, provide your business with the money necessary to fund a buy-sell agreement, or protect your business against the loss of a key employee
Universal Life Insurance:
- Provides a tax free death benefit plus the option to invest and earn tax-deferred interest
- Deposits to the policy fund can be used for funding the insurance portion and/or investing
- Offers a diversified range of interest options
- Can be used as a financial planning tool particularly if you have significant disposable income
- Is an good option if you have maximized your RRSP contributions, want to maximize your estate for your children and grandchildren, or you are a business owner who needs a tax-efficient way to protect the value of your business
- During your lifetime it can build tax-advantaged savings that you can draw upon as needed for personal or business opportunities (any cash values withdrawn from the policy may be subject to tax), supplement your retirement income, or provide funds for long-term care or home care
- Can be used to pay final expenses and any debts you may have, ensure your family has the resources to maintain a comfortable standard of living, pay any taxes owing on your estate, leave money to charity, provide your business with the money necessary to fund a buy-sell agreement, or protect your business against the loss of a key employee
What does Life Insurance cost? The cost of Life Insurance depends upon many factors including the type of insurance, the amount of insurance, your plan, your age, your gender, your current health, your medical history, whether or not you smoke, and your lifestyle.
Contact the Blevins Team for more information.
