Life Insurance Quotes Canada
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Life insurance in Canada is a product that many Canadians rely on to help protect their families from the financial burden that an unforeseen death may cause. Having a life insurance policy in place is the best way to shelter your loved ones from financial hardship should the unexpected happen!
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Types of life insurance policies in Canada
Life insurance in Canada can be categorized into three types:
Permanent or Whole Life Insurance
Permanent Life Insurance. Other names for permanent life are whole life or straight life insurance. Whole life insurance policies usually have cash value and provide coverage for the rest of your life.
Permanent life insurance shares the following attributes:
The cash value represents a savings element built into the permanent life insurance policy. The amount of cash value depends on the face value of the policy, the duration the policy has been in force and the length of the premium payment period.
Advantages of Permanent Life Insurance
Permanent life insurance has cash value liquidity. The equity can be used to borrow from the life insurance company, use as collateral for a loan, or simply turned in for their cash surrender value.
Permanent life insurance is considered to be a safe investment. Permanent insurance provides reasonable growth at a guaranteed rate, plus the cash surrender value is also guaranteed in some policies.
Disadvantages of Permanent Life Insurance
Permanent life also has its disadvantages. Permanent life insurance premiums are usually higher in the early years compared to term life insurance policies. A higher life insurance premium in permanent insurance reflects the higher probability of a claim being made considering the policy will remain in force for the lifetime of the insured. Term life insurance does not make that presupposition.
Term Life Insurance
Term Life Insurance is a basic form of life insurance with no cash value and provides coverage for a set amount of time known as the policy period. If you or any other insured survive past the expiry date of the term life insurance no benefit would be paid and the life insurance policy expires. Some Term life policies have an option to renew without having to redo the medical exam.
Advantages of Term Life Insurance
Disadvantages of Term Life Insurance
Whole Life Insurance
Whole life insurance can be categorized into two types, Adjustable whole life insurance, and Universal life insurance. Both types are “interest sensitive” and have both life insurance and an investment component. Additional premium deposits may be necessary for response to investment rate fluctuations. Both types of life insurance policies can be considered a hybridized version of permanent and term life insurance. The development of adjustable whole life and universal life insurance was a direct response from a perception that traditional life insurance didn’t offer more flexibility and high enough ROI from company profits.
Adjustable Whole Life Insurance
Adjustable whole life insurance was developed to give policyholders further premium reduction capability by allowing to change the premium rate at prearranged periods, based on the interest rate and mortality levels. This was seen as a way to reduce premium payments when interest rates were favourable to the policyholder. The result was the adjustable permanent life insurance policy. Adjustable whole life insurance policies are not marketed often today as the product wasn’t favourable for the life insurance company due to lowering interest rates.
Universal Life Insurance in Canada Explained
Universal life insurance in Canada was developed as a response to a market perception that traditional life insurance policies were lacking flexibility and also that life insurance companies were not sharing the return on investment proportionally with the policyholder.
Universal life insurance is not easily categorized as premium payments are neither rigidly scheduled nor guaranteed. Universal life policies are self-directed by the policyholder but payment structure can be varied by the insured or by the insurer. Factors such as mortality rates, company operating expenses can either increase or decrease premium payments.
The Death Benefit is guaranteed in a Universal Life insurance policy, as long as premium payments continue to leave the policy in force. The equity in the policy can also be used to pay down premiums or increasing insuring expenses so that the policy does not lapse.