Whole Life Insurance Canada vs. Term Life Insurance
Whole life insurance Canada, along with term life insurance, are two basic types of life insurance. Further reading is not for the faint hearted, but may help you make the right choice.
The easiest one to understand it term life insurance. At its core, this insurance involves monthly payments that insure you in case of death, but these payments are irrevocable.
The amount of payment depends on the age of the insured and the insurance company. The amount may vary greatly, therefore it pays to shop around.
During the first 10 years after you start your term insurance, the amount of payments is the same, but it increases every 10 years in increments.
When you reach 75 years of age, this coverage is automatically canceled. If you do not die before 75 years, then all money you paid becomes the property of the insurance company, which does not happen in case of whole life insurance Canada.
Accordingly, if you die before that age, your heirs will receive premiums.
In the event of termination of monthly payments, your insurance is automatically cancelled. Term life insurance Canada is very popular because its relatively cheap.
You can easily compare term life insurance Canada quotes online to find the cheapest one in your circumstances through this comparison tool:
If you want to increase your insurance premiums, payments will increase, too, but to a lesser degree. For example, if you double your insurance premiums, payments will only increase by 1.5 times.
The amount of payments for both term and whole life insurance Canada depends on your sex (men are paying more than women), the state of your health, on whether or not you smoke, etc.
The good news is that if you become sick after the insurance policy starts, it has no effect on the insurance conditions and your payments.
The bad news is that if you want to be insured after discovering that you have a serious illness, the insurance company will likely refuse to insure you.
Also, if you apply for insurance after you get sick and conceal this fact, your insurance policy may be cancelled.
Term life insurance Canada is mainly used when people want to protect their family from financial problems that may arise in the event of sudden death (eg, payment of a mortgage, or paying for children's education), or simply to maintain a certain standard of living for the family until children become independent.
Whole life insurance Canada is a cumulative, or investment type of insurance. It means that your payments will accumulate in your insurance account and your heirs will receive the money with interest (6-8% per year) in case of your death.
The peculiarity of this type of insurance is that the amount of your monthly payments is determined based on your age only once, when you sign the contract, and does not change subsequently.
In addition, after you have paid for 10 years for your whole life insurance Canada, you will be able to temporary stop paying or to terminate your payments altogether.
In any case, you will be insured for life. At age 65 you may choose to either take the accumulated amount, or to use it as supplemental retirement plan.
Regarding your retirement plan, there are two possibilities. The first one is to stipulate the period during which you will get your retirement payments, for example 10 years.
During this period you will be paid a certain amount of money, and after this period the payments will stop. If you die before getting all the payments, your heirs will receive the remainder of money.
The second possibility is a retirement plan for life. In this case, the amount of payments may be either smaller or larger than in the first possibility.
For example, if you die one month after signing the contract, you will only receive payment for one month, and if you live for another 25 years, you will be paid by the insurance company for all 25 years.
After your death, your heirs may immediately cash in for the rest of the amount, or to continue to receive benefits.
Whole life insurance Canada is of course economically more advantageous than the term, because your payments would not disappear but you will get them back with a good interest of up to 8-10% per year.
But the insurance payments for whole life insurance would be much higher than for term life insurance Canada, until you reach age of 55. At the age of 55, the amount if insurance payments will switch, and whole life insurance will be cheaper.
You also have the possibility to combine whole life insurance Canada with term.