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Types of Life Insurance
1. Term Life Insurance
Term life insurance provides affordable coverage for a specific period — such as 5, 10, 15, or 20 years. You can choose the term that best fits your needs. If you pass away during that period, your beneficiaries receive a death benefit. This payout is typically tax-free, and its amount depends on the coverage you selected. Beneficiaries may use the death benefit for any purpose, including:
Childcare expenses
Paying off debts
Covering mortgage or rent payments
Funeral and memorial expenses
Education tuition
Or other ongoing living expenses
2. Permanent Life Insurance
Permanent life insurance provides lifetime coverage. Premiums are generally fixed and do not increase as you age or if your health changes. Upon death, your beneficiaries receive a tax-free death benefit. This type of insurance is suitable for individuals who want lifelong protection along with the opportunity to build long-term financial security.
One of the key features of permanent life insurance is the cash value component. This portion of the policy grows over time and can be used to:
Borrow against it
Use it as collateral
Or withdraw a portion of it (which typically reduces the death benefit).
3. Participating Life Insurance
Participating life insurance is a type of permanent coverage that, in addition to lifetime protection, may offer dividends. These dividends are not guaranteed and vary based on the insurance company’s performance. With this type of policy, your beneficiaries receive the death benefit after your passing, and you may also benefit from its potential financial advantages during your lifetime.
Dividends can be used in several ways:**
Reducing or paying premiums
Increasing the insurance coverage
Receiving dividends as cash
4. Universal Life Insurance
Universal life insurance is a type of permanent coverage that provides lifetime protection along with various investment options. Any premium amount paid beyond the cost of insurance can grow in a tax-advantaged savings account.
This savings component can complement your other financial plans, such as an RRSP (Registered Retirement Savings Plan) or a TFSA (Tax-Free Savings Account), helping you grow your investments over time.
Which type of insurance is right for you?
The type of life insurance you choose depends on your financial goals and personal circumstances.
If your needs are simple, term life insurance may be sufficient. If your goal is to build financial legacy or accumulate cash value over your lifetime, permanent, participating, or universal life insurance may be more suitable.
To determine which policy is the best fit for your situation, consulting with a licensed insurance advisor can be extremely helpful. An advisor can help you:
understand the different types of insurance more clearly
identify the benefits and features of each type of coverage
and align life insurance with your overall financial plan.