What kind of life insurance is there?


Disclaimer: This article is intended for information purposes, with the sole objective of providing food for thought. Under no circumstances should it be construed as advice regarding insurance solutions. Only a duly certified insurance professional is qualified to analyze your personal situation, discuss your needs with you and advise you on insurance solutions.

Why do I need life insurance again?

You probably already know why you should get life insurance, but in case you forgot, here is a quick reminder:
If/when you die, you’ll have to cover funeral expenses and fees related to liquidating your estate
Since many of your assets will be sold, you’ll have to pay taxes on the amounts paid
And don’t forget your outstanding debts and any money you want to pass on to your loved ones.

The different types of life insurance

Life insurance sounds really complicated but when you get down to it, there aren’t that many different types of life insurance products out there: term life, term 100, permanent life and universal life, plus group life. You probably already have the latter as part of your group benefits package, paid for in part by your employer. Remember those forms you filled out on the first day at work for your health and dental coverage options? Find out how much life insurance coverage you already have (and pay for) before you decide to get more. 

Term means increasing premiums

The premiums for term life insurance are much cheaper than for any other type when you are young and healthy, and they are fixed for the duration of the policy: 5 years for a T5 policy, 10 years for a T10 and 20 years for a – you guessed it – T20! Of course, your chance of needing this policy when you are young and healthy is pretty low, yet your premiums could become too high as you age to maintain your coverage. As its name indicates, term life is most appropriate for temporary insurance needs. Thankfully, it can usually be converted into permanent life.

Term 100 or permanent life?

The main difference between these two products is in the cash surrender value, only found in permanent and universal life products. That’s the money you can receive when you cancel your contract. Otherwise, both products can have fixed premiums or premiums that increase over time and the amount paid out is guaranteed. Both products are intended for people with permanent insurance needs, but T100 is cheaper because it lacks a cash surrender value. We won’t tackle universal life in this article, let’s just say for now that it’s like permanent life with an investment portion added on.

The pitfalls of group insurance

Don’t get me wrong, group benefits insurance is awesome, because it’s usually really well-priced and its benefits are tax free and guaranteed, but like term insurance, premiums may rise with age and benefits may end at retirement. The biggest risk you run is if you lose your job or switch employers, but you can circumvent this by converting your insurance into term or permanent life. 

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