Term Life Insurance
The primary purpose of life insurance in Canada is to move the financial risk faced by those you leave behind to the insurance company if you make an early exit. There are essentially two types of Life insurance – temporary life insurance and permanent life insurance. Most people have some type of temporary life insurance either as a term insurance policy, mortgage insurance with say a bank, or a group life insurance policy (likely through work or an association plan like an automobile club). Some also have permanent life insurance either in the form of whole life insurance, universal life insurance, or Term to 100 Life Insurance..
The purpose of Canadian Term life insurance is to provide cash in the event of your death so those who depend on you will have the money to:
- Settle your debts – mortgages, lines of credit and loans (business & personal),
- Remove guarantees by paying off the debt
- Make up for the income you provided to the family – Remember the impact of inflation when doing this calculation. At 3% inflation, a need to supplement income by $25,000 will grow to $50,000 in 24 years.
- Provide for children’s education, marriage etc.
- Complete the funding for your spouse’s retirement plan – very important and why many need some term insurance to age 65 – this is a consideration for those looking for permanent insurance as well.
- For businesses, it can fund a buy/sell agreement or to provide insurance on a key employee to provide cash to find a new person, absorb the financial shock of the loss and have additional funds to pass on to the family of the deceased.