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What Are The Different Types Of Life Insurance? Which One Is Right For You?

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There are a plethora of life insurance products in the market. The hard task is to choose the right one. We help you identify the best-fit products for you and your family’s life insurance needs.

Life insurance in Canada

Source: Freepik

You may choose to ignore the idea of getting life insurance, but accidents and misfortune wait for none. Life is unpredictable and unexpected things happen suddenly. Our motive is not to scare you but to highlight the importance of getting life insurance. It is a safety net that secures your family’s financial health in the event of your death.

A responsible person would not like to keep their family occupied with debts and loans. It is advisable to secure their future by investing in life insurance.
So, let us see how to go about it.

Insurance policy
Source: Freepik

What Are the Various Types Life Insurance?
Let us look at the different options one can get when looking to get insured.

1. Term insurance

Term life insurance is a life insurance that covers you for a fixed period, called a term, and pays the beneficiaries a tax-free lump sum pay-out in case of your death within the term.

There are various term lengths available for life insurance. The most popular options are 10 or 20 years. You can also choose a term of 25 or 30 years to cover up to the age of 65.

2. Permanent Insurance

This insurance offers lifelong coverage and helps you to save tax. It guarantees to remain active throughout the insured’s entire life. The only condition is to pay the premium regularly or till you reach the maturity date of the policy.

a) Whole Life Insurance

Whole life insurance (also known as permanent life insurance) covers you for your entire lifetime and protects your family in case of your death. It offers a cash value growth guarantee. You may withdraw some funds in your policy to use for other reasons, such as emergency expenses or support your retirement income.

We can use this as collateral for other loans and estate planning. The investment value of your permanent insurance policy grows over time as you pay into it. The beneficiary gets tax-free payment.

b) Universal life insurance

Universal life insurance offers the benefit of whole life insurance coupled with a self-directed long-term investment component. Your insurer provides you with options for investing the cash value of your policy after you have covered the cost of the insurance, which can save for retirement or the growth of your savings.

Whether you are an expert investor or thinking about property planning, universal life insurance may be a more attractive choice. However, universal life insurance plans need more hands-on involvement than other types of life insurance coverage. You can take help from your insurance agent or bank advisors to help you manage the insurance and the investment.

c) Limited Pay Coverage

Limited Pay Insurance is another variation of permanent life insurance. It is quite similar to whole life insurance. The Insured shall pay a premium for a limited period, but the life insurance guarantee continues without paying additional premiums. Hence, it is a limited-pay life insurance coverage where the payment term is shorter than the coverage term.

A 20-Pay plan is the most common type of limited pay insurance coverage. The insured has the cover for the entire life if the insured paid the policy premiums.

d) Term 100 Life Insurance

As the name suggests, this insurance plan covers you to the age of 100 years, even beyond without paying premiums. Term 100 is also a whole life insurance plan that does not allow you to withdraw cash or get any cash benefit. It will continue to offer you life coverage for your whole life if you pay the fixed amount of premiums.

Usually, the insurance company will cover you if you reach the age of 100 and continue to live without having to pay the premiums anymore.

Key BenefitsWhole Life insurance Term 100 Life insurance Universal Life Insurance
Investment component present?YesNo  Yes
Have cash value?yesnoyes
Life CoverageYesYesYes
Policy Expires?NoNoNo
Comparison between various Life Insurance Plans

What is the best life insurance policy in Canada?

While each type of life insurance has its pros & cons, term life insurance is good for most people in Canada. It is a straightforward product to understand. It is cheap and the most affordable protection among all life insurance policies. You can get your life covered and protect your family in case of your death. Term Life is the most popular type of life insurance protection in Canada.

For the short term, term life insurance is the cheapest and the most affordable option. Term life insurance is the cheapest and most economical solution for the short term. While purchasing universal life insurance is more expensive at first, the cash value growth potential of these plans may make them a stronger long-term value proposition.

Conclusion

We hope the ride was fun! and it might have helped you choose the right life insurance with an option to invest. Choosing the insurance to invest in might be a hard task for you. We can help you know more about insurance through our articles.

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