Basic life insurance
Basic life insurance
Life insurance can play an important role in helping you meet your estate and financial planning goals. For an overview of the basic types of life insurance available to you, please choose from the links below:
- Permanent life insurance
- Term insurance
- Term to 100 insurance
- Whole life insurance
- Universal life insurance
- Tax-exempt universal and whole life insurance
- Permanent life insurance provides protection for your lifetime and long-term needs
- When you pass away, the amount of your coverage is paid to your named beneficiaries
- The design and function of permanent life insurance is to appeal to individuals with different planning goals, whether its' for retirement planning, business planning or estate planning needs
- May also be able to build additional cash values in a tax-sheltered manner
- Three favourable forms of permanent life insurance are: Universal life, whole life and term 100
- Term insurance provides protection for a specific period of time or long term
- It pays a benefit only if you die during the term of coverage
- It can be used to fund a short-term estate need such as paying off an outstanding mortgage, business loans or to prevent financial hardship by replacing lost income
- Term to 100 coverage provides long-term protection.
- It often has a constant annual premium throughout your lifetime.
- This insurance remains in force as long as you pay the annual premiums and has no cash value.
- Whole life coverage is intended to remain in effect for your lifetime.
- In addition to the permanent insurance coverage, a whole life policy also includes a savings component.
- Over a period of time the policy's savings component will result in the accumulation of a cash value to the policy (referred to as a cash surrender value).
- A universal life insurance policy is a combination of insurance and a tax-deferred saving's component.
- Your premiums fund the insurance coverage with the balance invested in various investment options that you select.
- Premiums can be increased to raise the amount of tax-deferred savings (with some limitations) or reduced to simply cover the cost of the insurance coverage.
- Premiums may be suspended if sufficient cash value has been accumulated in the policy to fund the insurance coverage.
Both universal and whole life insurance can meet long-term needs by taking advantage of allowances by the government for cash accumulation on a tax-exempt basis.
Basically, you pay more than the actual cost for the coverage, and the excess money is invested within the structure of the plan. What's more, that money is not taxed annually as it grows.
The design and function of the two products is quite different as they appeal to individuals with different risk profiles, personalities and investment styles. Their purpose, however, is the same: to maximize the value of your estate.
Not only can tax-exempt life insurance cover your estate needs, it can be a significant asset within your overall portfolio.