Blog Article

When I make decisions I like making a Pro/Con list.

Term insurance is the most popular form of protection. Generally, because, initially, it costs less for a higher benefit amount. People forget that when it renews the cost dramatically increases.

They’re also likely not told that Term is a shortened form of the word Terminating. Once you hit a certain age a Term policy will automatically end. After potentially several renewals, with ever-increasing costs, at about the time when your family may really need this money, it will either have ended or was so expensive that it was dropped long ago.

The Pros and Cons of Term Life Insurance
Pro: Higher benefit amounts to meet higher needs
Pro: The affordable option (initially)

Con: Coverage will end in the future (depending on the carrier either at age 80 or 85)
Con: No guaranteed payout
Con: Costly to renew
Con: No cash value

Whole Life Insurance (also known as Permanent Life Insurance you’ll also hear the word Universal Life) provides permanent protection. The policy never expires. If you pay your premiums, your policy is designed to have a guaranteed payout to your beneficiaries.

As the name implies, Whole Life Insurance covers you, for the rest of your life. Whole Life Insurance premiums are often fixed throughout the lifetime of the policy. There is no need to renew or renegotiate.

In addition to the guaranteed death benefit, there is an investment component to the policy. This is called the cash value or cash surrender value.

With the cash value, you can borrow against the policy if the need arises. You can use the cash value to offset your monthly cost. If there is a need, generally for business purposes, you can use a Whole Life policy as collateral for a loan. If you decide to cancel your policy before you die you can receive this money back.

Whole life insurance policies can also be used to pass on your planned inheritance to your loved ones in a very tax-efficient manner. Like all life insurance policies, the proceeds from Whole Life insurance policies are tax-free to your beneficiaries and therefore allow your dependents to retain a large chunk of the savings and assets you intended for them to have.

The Pros and Cons of Whole Life Insurance
Pro: Locked-in premiums
Pro: Guaranteed payout
Pro: Building Cash value
Pro: Can be used as collateral for a loan

Con: Cash value does not transfer (your beneficiary only receives the death benefit)
Con: It is more expensive.

This begs the question; What should you have? Depending on your situation I feel that having a combination of both is your best option. Please remember. When you decide to invest in a Life Insurance policy it’s vital to understand what you’re trying to accomplish.

Benchmark Insurance Ltd, is a niche insurance agency providing Life, Critical Illness, Long-Term Disability, and Group benefits to individuals and businesses throughout Ontario. Please let us know how we can help. info@benchmarkinsurance.ca 647-955-1242