Term? Permanent? How to match life insurance coverage to your unique needs
While life insurance can provide a tax-free benefit to help our beneficiaries meet their financial needs when we die, it can also do so much more, explains Tamara Carter, CHS Wealth Protection Specialist from Coastal Community Private Wealth Group in the Comox Valley.
When we think of life insurance, we typically think about providing for those we leave behind – giving peace of mind and security for our loved ones.
And while life insurance can certainly provide a tax-free benefit to help our beneficiaries meet their financial needs when we die, it can also do so much more, explains Tamara Carter, CHS Wealth Protection Specialist, from Coastal Community Private Wealth Group in the Comox Valley.
“In the case of the premature death of a spouse or parent, for example, life insurance can provide valuable security for the family at a difficult time, replacing lost income and paying debts such as the mortgage, not to mention unexpected costs like final expenses and taxes that can occur after a death,” Tamara says.
Additionally, as part of a comprehensive estate plan, life insurance can create, preserve, maximize or equalize an estate and provide a tax-sheltered investing environment. It can also help safeguard a business following the death of an owner or co-owner.
There are two main types of life insurance: Term and Permanent. Understanding the unique benefits of each will help you decide which solution will work best for you.
Term Insurance
Term insurance can be a good choice for those with debts, such as a mortgage, loans or credit cards, those with children to support, or who want to ensure their family is financially taken care of when they’re gone.
It can also be appropriate for a business owner or someone in a business partnership.
How it works: Attractive to individuals on a budget, term insurance can be purchased at a low cost that’s guaranteed for 10, 20 or 30 years. When the initial term is over, it can be renewed without medical evidence at a higher cost. While the coverage typically expires between ages 75 and 85, most policies allow you to convert to a Permanent insurance product before a specified age (usually 65).
Permanent Insurance
Permanent insurance is ideal for those who want coverage that will last their entire lifetime, who want to create or preserve an estate for their loved ones or charity, or who want to invest extra money in a way that’s safe and guaranteed.
How it works: While typically more expensive than term insurance at the outset, since premiums don’t increase, it can be a more cost-effective solution in the long run. There are also policies that feature a side account where extra money can be invested in a tax advantaged way. And, as long as premiums are paid, permanent insurance coverage is guaranteed for life.
The best of both worlds
Do both scenarios apply to you? Many people require elements of both kinds of insurance, and the good news is that you can structure a policy with both term and permanent life insurance coverage.
By layering coverage, you can customize a plan to meet your needs – now and in the future. You can also achieve premium savings by combining insurance types in a single policy and buying coverage at an earlier age.
When selecting any insurance product, take the time to ensure you’re getting the coverage that best suits your needs, circumstances and priorities. Learn more about your coverage option, contact Tamara Carter in the Comox Valley.
Coastal Community Private Wealth Group is a division of Coastal Community Financial Management Inc., which is a wholly owned subsidiary of Coastal Community Credit Union. Coastal Community Financial Management Inc. is a licensed life insurance agency offering financial planning, life insurance and investments. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal insurance advice. The views expressed are those of the author and not necessarily those of Coastal Community Financial Management Inc. All insurance products are subject to the limitations, terms and conditions in the applicable policy or insurance contract in force at the time of purchase or enrollment and applicable legislation. The products sold through Coastal Community Financial Management Inc. are not guaranteed or insured by a deposit insurer.