The gist of life insurance is financial protection.
You may have something you want to protect, like a family. Perhaps you want to use life insurance to leave money for your children. Or, maybe you’re a business owner and you want to protect yourself, your business partners and key employees from an unexpected death.
In such cases, you may be looking into insurance. But how do you choose a life insurance plan that’s right for you?
There are two basic types of life insurance:
- term life insurance and
- permanent life insurance.
Understanding the difference between the two can help you choose the protection you need.
"When you're buying life insurance, you've got to think long term," says Mark Coutts.
Coutts is a CFP, CHS, CFDS, RPA, FCSI and president of Coutts Financial Services Inc. in Toronto.
"Mentally, you've got to 'put on your high beams,'” he says. “So you're looking farther down the road when deciding whether term insurance is always going to be right for you, whether permanent insurance is the right choice, or whether it's a combination of the two."
What is the difference between term and permanent life insurance?
The table below compares the features of each type of life insurance. So, put on your 'high beams' and consider what you expect from life insurance today and decades from now.
|
Term life insurance |
Permanent life insurance |
---|---|---|
What is it for? |
|
|
Who is it for, mainly? |
|
|
What are the advantages? |
|
|
What are the disadvantages? |
|
|
When is it most cost-effective? |
|
|
Can you convert it to the other type of insurance? |
Yes |
No |
Can it supplement the insurance you have at work? |
Yes |
Yes |
Trends to consider |
|
|
Talk to an advisor about your life insurance options
So, what's the best way to help protect your family and achieve your other financial goals? Depending on your circumstances, your choice could be either – or both. Maybe your needs are simple and you need just one type of insurance to cover your spouse or kids. Or your situation could be more complex, with a blended family or a business to protect, in which case you might need more than one type of life insurance.
Not sure what’s right for you? You may want to talk to an advisor.
An advisor can help you:
- fully understand your available options,
- see which coverage and payment features make the most sense for you, and
- make the best decision for your situation.
They can also answer any questions you may have and help you build life insurance into your overall financial plan.
- Most advisors now offer to meet with Clients virtually. Connect with an advisor today.