What is Life Insurance? It’s Peace of Mind.
Life insurance is protection of your future, your family, your favourite charity, your legacy—whatever is important to you. It is peace of mind that your loved ones will have the big debts paid off, that they will not be strapped for cash, that the bank won’t foreclose on the mortgage, or that the landlord will demand rent in the middle of the funeral. Life insurance ensures that the kids can go to college, that your spouse will not be running around trying to find another job to pay the bills and pay for daycare, and your taxes and the final costs too. Life insurance makes sure final expenses are paid up, but also future investments.
How Does it Work?
Life Insurance is a lump sum payment to a beneficiary in the event of the death of a breadwinner. Death and taxes are real—so is a homeless family when a parent is gone, so is poverty when there is no one to pay the bills. Kids do not need to suffer, their futures ruined because a parent did not care to insure the most important thing, a life. Never mind cars or fine art. A breadwinner is the most important thing to insure. You are it. And for the cost of a nice dinner out once a month, you can pay off all the bills.
Are there taxes? The beneficiary or beneficiaries (whoever you choose) or your estate will receive the lump sum payment tax free. For some permanent life insurance policies, if you cancel or withdraw money from the cash values, there could be some tax payment on the cash values.
Types of Life Insurance
There are a two general types of life insurances:
- TERM (could be a term of 10 years, 20 or 30 or even 100 years) or PERMANENT (for your whole life span).
- Permanent life insurance has an added investment feature that makes this type of insurance part of your investment portfolio, retirement plan, or even emergency funding.
Permanent insurance can be in the form of WHOLE LIFE or UNIVERSAL LIFE.
Is life insurance that provides protection for your entire life. Premiums are fixed from the application date and generally do not change. With a whole life policy, you often have the option to pay for life or pay up early in 10, 20 years, or until age 65. This unique feature of Whole Life Insurance gives you more freedom to determine how you cover your plan premiums. You can choose to have them spread out evenly for life, or you can choose to pay off your coverage faster.
Cash Value Options
Whole life insurance plans are also able to build guaranteed cash value. This money can be withdrawn or borrowed against. In addition, if you decide to cancel your plan you will receive the accumulated cash sum, subject to provisions of your policy. Your cash value accumulates over time as you own the policy and can be used in a number of ways, including: paying for premiums, add to retirement income, or emergencies loans.
This is a type of permanent life insurance that helps maximize your savings and wealth, while providing life insurance protection. This is good for business owners or for people who have topped up their tax free savings accounts and their registered retirement plans.
Universal life is life insurance with an investment package where you have several options on how the funds are invested and the level of premiums you want to pay. Premiums can be varied during harder business years and increased during the profitable times. This type of life insurance can be accessed while you are still alive. It is a very accessible life insurance program.
Universal life insurance can also create tax-advantaged savings to help you set aside money for your retirement, but also leave a legacy in your name to the ones you love and care about.