What are the different life insurance policies?

What are the different life insurance policies?

There are several types of life insurance available depending on your needs: term life insurance, permanent life insurance and universal life insurance.

Term life insurance

Term life insurance protects your loved ones with a tax-free lump sum payment in the event of the insured's death within the guaranteed period.

See the guide
Permanent life insurance

Permanent life insurance offers a life insurance component and a savings component with the cash value option.

See the guide
Universal life insurance

Universal life insurance is a real investment vehicle in addition to an insurance contract.

See the guide
Depending on the type of life insurance you choose, you may also choose to insure your spouse, family, children and grandchildren.

What is term life insurance?

Term life insurance pays out a death benefit if the insured:

or dies within the fixed period provided for in the contract (10, 15, 20 years)
or else dies before a certain age.
Term life insurance is obviously cheaper than permanent, although premiums increase when the contract is renewed, unlike those for permanent life insurance which remain the same.

On the other hand, if the insured does not die within the period mentioned in the contract, the life insurance contract ends and you have to pay substantial premiums for a large part of your life without your beneficiaries being covered in the event of loss. death.

You also cannot buy back part or all of your term life insurance, so it cannot be used as an asset to secure a loan.

What is permanent life insurance?

Permanent life insurance has no time limit, you are insured for life. The premiums are always the same. Your beneficiaries are covered regardless of when you die. Your life insurance has a cash value that you can use if you need cash, as long as you get permission from your beneficiaries if they are irrevocable.

Whole life insurance or permanent life insurance can be with or without participation.

Participating whole life insurance is insurance in which the insurer pays the holder of the insurance policy a share in the profits of the company. The payment of dividends can be made either by optimizing your death benefit or by offering relief or a holiday from the payment of your life insurance premiums or by maximizing your investment fund.
Non-participating life insurance is insurance for which the policyholder does not receive a share in the profits of the company. The premiums are however generally lower. Simplified non-participating life insurance is a type of life insurance that provides protection without a prior medical examination.
What is universal life insurance?

Universal life insurance is a type of permanent life insurance, along with whole life insurance. Universal life insurance includes:

a life insurance contract
an investment account for making financial investments.
It is a flexible contract which allows the subscriber to have great freedom. The subscriber can pay regular amounts and can choose how his premiums are invested according to different possible investments through his investment account. This investment account has a cash value.

Should you choose term or permanent life insurance?

The question often arises of paying for term or permanent life insurance.

Term life insurance may be suitable for young workers, for example, wishing to protect their mortgage and then subsequently be transformed into permanent life insurance, for example.

These are the main differences, advantages and things to know about the two types of contract.

 Term life insurance Permanent life insurance
What purpose ? Protection in the event of death for a fixed period or up to a certain age of the insured person Protection in the event of death throughout life
Advantageous taxation for financial investment
Target
People with limited means
Homeowner with a mortgage

Company shareholders
All adults wishing to protect their loved ones
People who have reached the limits of their savings accounts (RRSP, TFSA, etc.)
Investment option No Yes
Main advantages
Inexpensive premiums for the first subscription
Easy to understand contract
Lifetime protection regardless of when you die and even if your health decreases
The cost of premiums is guaranteed
Increasingly important surrender value
Advantageous taxation
Main disadvantages
Temporary coverage only
Premiums that increase when contracts are renewed