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Life Insurance Comparisons

Individuals considering life insurance tell us they are overwhelmed with so many types of life insurance available for many different estate planning reasons.  Mortgage balance coverage, estate planning,  and many more advanced options like a private pension type funds.  Each insurance have their own unique, and sometimes confusing, product names depending on the type of insurance product and company offering the product.  Add to this the multitude of possible places to shop, banks, individual life insurance companies, life insurance brokers who represent most if not all options for you.

Simply put …

All life insurance plans are designed to pay a benefit when someone dies (called a “death benefit”) there are two basic categories of life insurance: #1 – term life insurance and #2 – permanent life insurance.

Term Life Insurance

Term life insurance is designed to provide a specific death benefit if you die during a specific period of time, or “term” as the name indicates. The term may be a fixed number of years (eg. 5 – 10, or 20 years) or to a set age (eg. age 75). If you die during the term of the policy, your beneficiaries will receive the death benefit. If you don’t die during the term of the policy, no one gets the death benefit and the insurance ends as do the premiums that kept the insurance in force.

Typically, term life insurance is purchased when there is a temporary need that will end at a future date, such as mortgage balance coverage, for a business obligation, a partner buy out if a business partner dies, or when funds need to be available for a child’s post secondary education or your spouse’s retirement.

Since term life insurance is designed to provide you with life insurance coverage for only a specific length of time, the amount you pay during the initial term is typically lower than for other types of life insurance products, and the longer the term you purchase, the less the initial cost can be per year.

For the cost of a daily cup of coffee, a healthy Woman or Man could have insurance to cover a typical mortgage

Based on available rates for a healthy, 40-year-old, non-smoker, purchasing $250,000 of Empire Life 20 year term life insurance as of June 2014.

When considering the length of term insurance, is that if your term life insurance renews at the end of the term,(as in the example above 5 year term)  the new costs will be significantly higher. So it’s very important to determine your overall needs. Some term life insurance automatically renew at the end of the term for additional terms, but usually the insurance can’t continue past a certain age (often age 75 or 80). Again, these are all options that can be considered when reviewing your life insurance options.

Permanent Life Insurance

Permanent life insurance is designed to provide you with insurance protection for your entire life, no matter how long that is. This means you can keep your life insurance coverage as long as you live and pay your premiums.

Many individuals consider one of the desirable benefits of permanent insurance is that with each payment you make, a certain portion of that payment can be deemed a savings component or contribute to your policy’s “cash value.” The interest earned is done so tax deferred, and is creditor proof.  As a result, this type of policy offers you several “living benefits”, you have the ability to access that money if you need it (for example, to pay tuition, contribute to a down payment on a home, or to help meet your retirement needs). However, accessing this money could reduce the death benefit or terminate the insurance.

In almost all cases, the payments for permanent life insurance are higher than for the same amount of term life insurance. This is a result of building up the cash values or savings in the policy, as well as the fact that this policy is guaranteed to last as long as you do, and you pay the premiums.

Comparing the Two Types

The difference between permanent life insurance and term life insurance is like the difference between buying or renting your home. You can rent a home to meet your temporary needs and if you decide you need it longer, you can usually continue to lease it again, and again, but the rent increases each time you renew the lease – similar to term life insurance. Permanent life insurance is like buying your home. You can keep it for as long you want, with the added potential of building equity and building your assets for your retirement years.

Please note that both term life insurance and permanent life insurance have many subcategories or variations that can allow you the opportunity to tailor your life insurance policies based on your needs.


Canadian households currently own:

13% both

46% permanent life insurance only

41% termi life insurance only

LIMRA, Canadian Life Insurance Ownership, Personal-Level Trends, 2013

Each type of life insurance has benefits, but the reality is most Canadians will have the need for both. This is where working with an independant insurance broker like can help get multiple quotes from insurers and present you with best personalized insurance options for you and your family.

Critical Illness Insurance.

A Critical Illness Insurance  policy guarantees the payment of a tax-free lump-sum benefit when a critical illness is diagnosed. Although certain illness-related expenses may be covered by provincial and/or private health plans, these programmes do not cover many medical costs.

Unlike other forms of insurance, Critical Illness Insurance can provide a lump sum payment and allows you to use the funds however you decide.

When you take out a critical illness policy, there are no restrictions when you are diagnosed with a covered illness.  Many life, disability and mortgage insurance policies now offer critical illness insurance as a rider to your policy.

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