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Be Protected Financial | Life Insurance
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Life Insurance

Life Insurance

life insurance

Here are some reasons why life insurance is important…

To Replace Lost Income

Having a loss of income due to an unexpected event can have a devastating financial effect on the survivor. Buying life insurance as a means to replace income lost is the most cost effective way to achieve this.

To Pay Off Debt

Without your income available to help pay off debts, your family can be left with a large burden. Having the appropriate life insurance can be used to pay off debt and help create more financial security for your family.

To Pay Final Expenses

Final expenses can be very significant, especially if there are large medical bills, funeral or legal expenses to pay. Life insurance provides cash needed to be used to help your family cope in a time of distress.

To Help Pay for Your Children’s Education

A child’s education can be very expensive and often requires a long-term strategy. Many families contribute to education funds each year preparing the financial means for their children’s future career. Unfortunately, if something unexpectedly happens to you, there may not be enough time to set aside adequate funds for education. Purchasing life insurance can help by creating a lump sum of cash that can be used to pay for part of your children’s future.

Different Types of Life Insurance

I realize that choosing to purchase insurance can be an emotional and difficult, decision to make. With so many options, terms, and definitions, how does one decide?

The first steps are to understand your need for insurance, its purpose, and the different types, term insurance and permanent insurance. To help you through these steps, I usually ask the question, “Do you know the difference?” Usually, the answer is, “No,” so the next question is, “Would you like me to teach you insurance 101?” The answer is usually an enthusiastic, “Yes!”

This is how I explain it…

Term Insurance

Term Insurance is like renting an apartment as opposed to buying a house where there is equity built up. Term insurance policy premiums go towards the entire cost of insurance. Your rates are locked in for a specific time period — 5, 10, 20, or 30 years — and at the end of the term, the premium will increase — just as your rent would increase at the end of the lease on your apartment. Just as there is no refund of the rent you paid when you move, there is no refund of premiums or cash value within the insurance policy. If the insured dies during the term, the death benefit will be paid to the beneficiary named in the policy tax-free.

Term insurance is very inexpensive and well suited for families who have a strict budget and the need for insurance is for a fixed amount of time. At the end of the term, circumstances may have changed, i.e. mortgage, children’s educational needs, and family income protection and life insurance may no longer be required.

If you are certain insurance is required, I will sit down with you and discuss your situation, determine your needs accordingly and develop and appropriate plan for the future.

Permanent Insurance — 2 types

I will explain the basics of permanent insurance here, but if you are interested more detailed explanation of the differences between the two types of insurance, I would be happy to meet with you and review them in greater detail.

Permanent Insurance is exactly what it says. The need for insurance is indefinite and the insurance is to cover a long-term need. The premiums are guaranteed not to increase and added features are included inside the policy.

Whole Life
This type of insurance covers you for your entire life and a portion of the premium paid goes toward the cost of insurance and the remaining amount is invested by the insurance company, which is used to build what is known as a cash value.
Key Points of a Whole Life Policy
  • The premiums remain stable and do not increase.
  • You can surrender the policy and receive what is in the cash reserves, but in that case, you will no longer have coverage.
  • You can use the cash reserve to borrow against to secure a loan, which can be tax free up to the value of the total premiums paid.
  • Any death benefit paid out will be reduced by the amount of any outstanding loan.
It’s important to note that most of the cash value will be a refund of overpayment in premiums, not some sort of investment and is usually paid out as dividends, which can be used to reduce the premium payments or buy additional insurance; therefore, increasing the face amount of the policy.
Insurance company invests the portion of the premium on your behalf.
Universal Life
Universal Life can be compared to purchasing a home and not renting. Part of the premium goes towards insurance and a portion goes towards building up equity in your policy through an investment component.
Key Points of a Universal Life Policy:
  • The premiums remain stable and do not increase for the duration of the policy.
  • The insured party chooses the investment portfolio.
  • Borrow against or withdraw your cash reserves at any time.
  • Instead of earning dividends, you earn interest at a fluctuating annual rate.
  • Cash values grow tax-free and are added to the death benefit amount.
  • Incorporates a tax-deferred savings component.
  • Ability to overfund the policy, which allows you to increase the tax-free benefit to your beneficiary

Which one is for you?

I can assist you in establishing which type of insurance meets your specific needs and situation. To obtain a quote or enquire about Life Insurance, contact me at 604-730-7917.

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