Most familes need life insurance to protect their standard of living, but choosing the right plan to fit your needs can be a challenge.
TERM LIFE INSURANCE: Provides a benefit when the insured dies while the policy is still in force.
CASH VALUE LIFE INSURANCE: Often combines a death benefit with an investment program managed by the insurance company.
How Much Do You Need?
Although everyone's situation is unique, many experts recommend purchasing life insurance coverage equal to 5-10 times your gross income. Be sure to also consider the assets you own and your debt load when deciding how much coverage to buy.
Make the Right Choice for Your Family
Purchasing life insurance is an important decision. However you decide to protect your family, make sure you get the right coverage from a company you can count on. Do you understand the differences between term and cash value insurance?
| Buy Term & Invest the Difference |
|---|---|
Life insurance and investments are bundled together | Life insurance and investments are separate |
Higher initial premium for same coverage | Lower initial premium for same coverage |
Purchasing the needed coverage for your family can be cost prohibitive | Can purchase more coverage to protect family because term life insurance is generally more affordable |
Sometimes yields a lower rate of return on investment portion. For example, a traditional whole life policy might yield an average rate of return between 4 and 7% | Market rate of return on investment(10% average) |
To access cash value from your policy, you may have to pay interest to the insurance company | Do not have to pay interest to access cash from your policy because your investments are separate |
Investing in a cash value policy is not the same as investing in a retirement plan such as a RRSP account | You can invest your savings in a retirement plan(RRSP) that may have tax advantages |
Designed so that upon death, you receive your face amount of coverage, but not your face amount plus your cash value, in most cases | Upon death, your family receives the face amount of your term insurance plus your investmenst |
Consumer organizations do not recommend whole life insurance for families with few assets | Consumer organizations recommend buying term life insurance and investing the difference for most families |
