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Types of Insurance
Life Insurance
Term
What is Term Insurance?
Term is the most affordable kind of Life Insurance. With Term Insurance the benefit remains the same over the life of the policy but premiums remain level, only up to a certain point in time, known as the term. After the term expires, the insurance premiums increase. Common terms are Term 10, Term 20 and Term 30.
Who is Term Insurance for?
The most important part about insurance is that one has coverage. If one cannot afford to buy a permanent policy right now, it is better they buy something and have coverage for their loved ones in case of their premature death. Term is often the cheapest and best option for young families who want to insure their loved ones don’t face financial hardship on their unforeseen death. It may also apply to anyone who has debts they are responsible for, like a line of credit, mortgage or a loan.
Term to 100
What is Term to 100 Insurance?
Term to 100 Insurance is a permanent Life Insurance product. The premiums remain level for the entire policy and so does the benefit. If one were to purchase Term to 100 at the age of 30 and had a benefit of $500,000 and a monthly premium expense of $200, both the benefit and monthly premiums would never change. Worth noting is that there are no cash values or cash surrender values, something other permanent insurance products do contain, but at an increased premium.
Whole Life
What is Whole Life Insurance?
Whole Life Insurance is another permanent insurance product that provides coverage for a policyholder’s entire life.
Similar to Term to 100, Whole Life Insurance premiums remain level throughout the life of the policy. But unlike Term to 100, Whole Life Insurance has cash surrender values, so if one were to need to cancel the policy they could withdraw these built up funds. One can also borrow against these cash values, but any amount not repaid upon one’s death, reduces the insurance payout.
Universal Life
What is Universal Life Insurance?
Another permanent insurance product, Universal Life contains an insurance component as well as an investment component. A policyholder purchases the insurance component of the Universal Life for a premium similar to Whole Life, however with Universal Life there is an additional feature and option where the policyholder could pay additional funds that would be used as their investment. This investment can grow tax free within the policy and build up an additional insurance payout or be used to pay off the premiums of the existing insurance. Think of Universal Life Insurance as an opened shell. The shell is the insurance that the policyholder originally purchases, and the opened shell is open to put more funds into as a tax shelter.
Guaranteed Issue
What is Guaranteed Issue Insurance?
Guaranteed Issue Insurance is a common product purchased by those who believe they would not be accepted for insurance for any number of reasons. There are no health questions asked or medical exams performed.
Simplified Issue
What is Simplified Issue Insurance?
Simplified Issue Insurance is a common product purchased by those who believe they would not be accepted for insurance for any number of reasons. Similar to Guarantee Issue in that there are no medical exams, however different, in that with Simplified Issue, the questionnaires tend to ask a handful of health related questions.
Critical Illness Insurance
​What is Critical Illness Insurance?
Critical Illness Insurance pays out a tax-free lump sum amount if one is diagnosed with a critical illness ranging from Cancer (half of Canadians will develop cancer in their lifetimes, according to a recent poll by TD Insurance) to a Stroke to Multiple Sclerosis to heart disease (something 1 in 2 men and 1 in 3 women in Canada will develop in their lifetimes, according to the same report from TD Insurance). Most insurance companies are offering coverage for 24-28 different illnesses.
Who is Critical Illness Insurance for?
The question one must ask themselves when it comes to Critical Illness Insurance is, if I were diagnosed with an illness like Cancer, would I be able to afford to fight it? Once must consider that the government pays for some of the expenses in helping to fight these illnesses and diseases, but not always will they have the best technology and doctors, not will the treatment be as timely as going to the USA and paying for it. Critical Illness Insurance is for everyone. No matter if they have expenses or are still living at home with their parents. The question remains, no matter what one’s financial liabilities or age, would I be able to afford to fight Cancer or a similar critical illness? For those who are concerned with the cost of Critical Illness Insurance, there is something called a Return of Premium rider where the insured can elect to receive their premiums back after a set period of time, if they have not made a claim. Usually after at least 15 years.
Disability Insurance
What is Disability Insurance?
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Disability Insurance is an agreement with an insurance company to pay the Insured a monthly benefit if they are unable to work due to a serious injury or illness. The likelihood of this happening is much greater than we care to think. A 30 year old has a 4X greater chance of being unable to work due to an illness or injury than they are of dying before they are 65. There are many different definitions to consider with disability insurance plans. The difference between “any occupation” coverage, where you are paid or continued to be paid disability insurance if you cannot perform the duties of any job, versus “own occupation”, where you are paid only if you are unable to perform the duties of your job are very important to consider.
Who is Disability Insurance for?
The question one must ask themselves when it comes to Disability Insurance is if I were to get hurt or sick and cannot work, who will pay my bills? Anyone who has bills to pay, whether it be a mortgage, rent payments, groceries, taxes, hydro bills or electrical bills should consider Disability Insurance. Also one must consider that even though they have disability insurance coverage at work, it may not be enough and they may not be at that company forever. Like with Critical Illness, a Return of Premium rider is available with Disability Insurance. For an additional premium one can receive half of their paid premiums back after 8 years, if they have not made a claim.
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