Life Insurance
Life insurance comes in two types – temporary and permanent.
Temporary Life Insurance (Term Life Insurance)
The purpose of term life insurance is usually for temporary needs; for example, to provide financial protection while the family is growing up and you are saving for retirement. It is to provide financial stability in the event of your death so that those who depend on you will have the financial means to:
- Cover debts – such as mortgages, car loans, business and personal loans
- Replace the income you provided to your family
- Provide for your children’s education expenses (for example, future university costs)
- Complete funding for your spouse’s retirement plan
Term life insurance comes typically in 10 and 20 year terms. This means that the premiums are guaranteed for that period of time, and they will automatically renew at a higher rate for the next term period. Term life insurance policies typically provide coverage to a certain age (for example, age 80), at which point the policy will automatically cancel.
Permanent Life Insurance (Universal Life and Whole Life)
Permanent life insurance provides coverage for your entire life, not just for a specific time period such as term insurance. Your premiums, in most cases, will remain the same during the time you are covered, unless you choose otherwise. You will have lifelong life insurance coverage with no requirements for future medical checks, unless you make a change to your life insurance policy.
There are two major types of permanent life insurance: whole life and universal life. Both types of policies offer lifelong life insurance coverage with the additional benefits of investment cash values that carry tax benefits.
Permanent life insurance offers many benefits as part of your financial plan, including:
- Estate planning
- Leaving a legacy to your family and loved ones
- Tax benefits and cash values
- Retirement savings, including the Insured Retirement Program
Life insurance, both term and permanent, can be personally owned or corporately owned. Corporate owned life insurance is used for the needs of buy/sell agreements, key person insurance and the Insured Retirement Program.
Corporations can benefit from life insurance to ensure the company continues to run smoothly in the event of an employee death, absorb the financial shock of the loss of a key employee, offer corporate tax benefits, and have additional funds to pass on to the family.