Mackay Insurance Blog
Choosing Affordable Life Insurance for Your Family's Future
Life insurance is not likely to ever make your list of favourite topics to talk about. But it is a topic that can keep you up at night worrying over your family's future.
One of the reasons life insurance feels so complicated is because different people choose life insurance for different reasons.
For example, to some people, a life insurance policy is a smart investment strategy and part of their greater financial and retirement planning portfolio.
To other people, life insurance is simply insurance to protect their family's finances in case anything ever happens to the primary breadwinner.
What does life insurance mean to you? What type do you need? How can you choose an affordable policy that meets your current known and future unknown needs? Read on to find out!
Meet the Two Types of Canadian Life Insurance
As you have probably guessed by now, there are two basic types of life insurance here in Canada.
The first type is called "term" life insurance and the second is called "permanent" life insurance.
If you are already feeling confused again, you are not alone! These names do not necessarily make intuitive sense. So, let's define them before we go any further.
Term Life Insurance
Term life insurance gets its name from its function - you select this type of insurance for a specific period of time, or “term”.
If anything happens to you during that term, your family's finances are protected under the benefits of your life insurance policy.
After the term ends, the policy expires.
This simple and straightforward type of life insurance is also the most affordable option - something to keep in mind for big families!
Permanent Life Insurance
Permanent life insurance is more confusing, especially because it is sometimes called whole life insurance or universal life insurance.
But you can find the clue you need to understand this policy type in the word "permanent." This type of policy does not expire. It follows you throughout your life and functions as both a protective and investment policy.
For this reason, permanent life insurance tends to be pricier and also more complex to manage. But permanent life insurance also has lots of perks and benefits that can really make sense for some families.
If you are interested in a whole life insurance quote, contact your Mackay Insurance broker today for more information!
Term Life Insurance Versus Permanent Life Insurance
So what is the best way to determine what type of life insurance you need and how much life insurance you need?
Here at Mackay Insurance, we always recommend starting your life insurance journey by identifying your main purpose for carrying life insurance.
There are two main reasons people choose to carry life insurance:
1. Family Protection
Family protection is nearly always what initially drives a person to start researching life insurance policies.
Whether your primary concern is paying off debt, affording funeral and memorial expenses, saving for a child's college education or maintaining a certain standard of living, life insurance is first and foremost designed to protect your family.
Both types of life insurance - term and permanent - can achieve this goal.
2. Retirement Investment
For some people, life insurance can also make a smart addition to their greater investment and retirement portfolio.
Only permanent life insurance can meet this particular need.
Depending on how the individual policy is structured, permanent life insurance can come with several attractive perks.
Permanent life insurance policies are generally interest-accruing. In some cases, the value of the policy itself may exceed the value of the death benefit payout.
Permanent life insurance often offers the option to borrow against the value of the policy for short-term emergencies or use the policy as collateral for another loan.
How to Choose Between Term Life Insurance and Permanent Life Insurance
In the greater life insurance marketplace, these two life insurance products generally appeal to people in different stages of life.
Read the following descriptions and see which one most closely matches your current situation.
Term Life Insurance Policy Holders
Term life insurance tends to be more attractive to single adults, couples and young families who are carrying some amount of debt and are just starting to build their savings.
Term life insurance premiums are typically very affordable and remain constant for the duration of the term. However, re-upping for a new term may come with cost increases.
Most importantly, when the policy expires, there is no residual value and no return on investment. You are simply purchasing peace of mind in the event a "what if" scenario becomes a reality.
Permanent Life Insurance Policy Holders.
Permanent life insurance, on the other hand, tends to be more attractive to individuals, couples or families who have sufficient means to max out contributions to other retirement investment vehicles.
With premium costs being less of an issue, permanent life insurance holders view the policy as an investment in and of itself with multiple perks depending on how the policy is structured.
There are three levels of permanent life insurance and each confers different benefits to the policyholder and beneficiaries.
Most importantly, there is a guaranteed payout with permanent life insurance regardless of the policy subtype you select. For some policyholders, there is no peace of mind like permanent peace of mind!
Why You Shouldn't Wait to Choose Your Life Insurance Policy
Life insurance premiums will be cheaper if you choose term life insurance.
But all life insurance premiums - term and permanent - will be cheaper when you buy now versus later.
This is because, statistically speaking, the insurer's risk of a potential payout is lower when you are younger and healthier.
The best way to get the most life insurance for the most affordable price is to buy it now rather than later.
Mackay Is Your Belleville Life Insurance Expert
Get in touch with your friendly, knowledgeable brokers at Mackay Insurance to get all your affordable life insurance questions answered and even get a free quote!