How to choose the right life insurance
How to choose the right life insurance
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Make the right decision so your loved ones won't be left out in the cold after your death.
Are you looking to get life insurance? There are many options out there, so be sure to choose the right one to make sure your loved ones aren’t left out in the cold upon your death.
3 types of life insurance
There are 3 types of life insurance on the market:
- Term life insurance
- Permanent life insurance
- Universal life insurance
BEFORE trying to figure out which one is best for you, start by asking yourself these questions:
- How much do I need to cover my family when I’m no longer there?
- How much do I need to make sure they maintain their standard of living? To make sure my children go to school?
- Should I pay for my funeral expenses in advance? Should I pay off all my debts?
Term Life Insurance
What is term life insurance?
This is a type of life insurance whose coverage ends after a specific number of years (e.g., 10, 20) or at a specific age (e.g., age 70).
Who’s it for?
It’s for those who:
- Have significant and immediate financial obligations and very little disposable income to pay for life insurance.
- Appreciate being able to renew or convert their insurance into a permanent life insurance policy with no medical exam.
- May wish to add insurance products mid-contract (life insurance for children, critical illness) or change the insurance amount according to their needs.
What are its main characteristics?
- Benefits are only paid out if the insured dies during the term specified in the policy.
- It costs less because it has an end date.
- The premium remains unchanged throughout the term, guaranteed!
- You get nothing when you terminate the policy.
- If you renew or convert it, your premiums could increase, particularly due to your age.
Permanent Life Insurance
What is permanent life insurance?
As its name suggests, permanent life insurance covers you for your entire life.
It usually has a cash value as of its tenth year.
The advantage of a cash value is that it can be used to pay premiums, while maintaining reduced insurance coverage.
Who’s it for?
It’s for those who:
- Are able to pay a higher premium.
- Appreciate the flexibility that the cash value offers and the fact that it increases over time.
- May need to add insurance products mid-contract (life insurance for children, critical illness) or who foresee changing the insurance amount according to their needs.
What are its main characteristics?
- Benefits are paid upon the death of the insured, regardless of when this happens.
- It costs more than term life insurance because it has an undetermined end date.
- Premium payments will vary: they may be over a specified period (e.g., 20 years) rather than throughout your life.
- If you terminate your policy, you are entitled to a sum of money, referred to as the cash value.
Universal Life Insurance
What is universal life insurance?
This is a life insurance policy and investment account combo, in which gains are accrued and from which the insurer draws the premiums.
In certain situations, these investments are tax-free.
Who’s it for?
It’s for those who:
- Like to save while paying for life insurance.
- Like to generate tax-free income.
- Like the flexibility of the coverage: option of modifying the insurance amount and premium.
What are its main characteristics?
- Benefits are paid upon the death of the insured, regardless of when this happens.
- It costs more than term life insurance because it has an undetermined end date.
- The premium may be higher than the cost of insurance. The difference is deposited in a capitalization fund.
- If you terminate your policy, you are entitled to a sum of money, referred to as the cash value.
- The investment account also has a cash value (however, it is not guaranteed). In some cases, withdrawing or borrowing money from it is permitted.
It’s your decision
Since each type of life insurance is different, ideally you should discuss your options with an advisor who will help you find the one that is best for you.
Note: This blog post is provided for information purposes only. It is not a substitute for professional legal, financial or fiscal advice. For advice specific to your personal situation, always speak with your advisor. SSQ cannot be held responsible for any decision made as a result of reading this blog post.
