Is permanent life insurance right for you?

Life is full of milestones, like: 

• Graduating from school
• Starting a business
• Buying your first home
• Raising your children

If any of those milestones are still down the road, there’s usually a need to plan ahead. Your diploma may leave you with a student loan that your parents co-signed. Your business will need plenty of planning to get under way. That beautiful home will come with a mortgage you need to pay down. And your kids will depend on you for all sorts of living expenses – for quite some time.

There’s no question that milestones come with a lot of responsibility. This is where life insurance can give you a helping hand.

Why is life insurance important?

Life insurance can help protect your family financially through the death benefit. That's the money your beneficiaries receive when the insured person dies (provided all premiums have been paid). A policy death benefit can help your family cover all kinds of expenses. Some common examples: 

• Funeral costs
• Child care and tuition
• Home maintenance, repairs and renovations
• Estate and legal fees
• Outstanding debts and bill payments

There are two main types of life insurance: term and permanent. Let’s talk about permanent insurance.

How does permanent life insurance work?

If you’re looking for lifelong protection, this type of insurance may appeal to you. Why? Because permanent life insurance stays in effect until you die, no matter your age or health. You just have to be sure to pay the monthly or annual premiums. Premiums are the payments you make in exchange for your life insurance policy coverage.

Sounds like a solid deal. But how can you tell if it’s right for you? Here’s some of what you need to know before you buy:

Are you someone who likes to plan for the future? Do you want a guarantee that your coverage will last as long as you live? Do you want to know exactly how much you’ll have to pay for insurance every year? If you answered “yes” to any of these questions, permanent life insurance may be a good choice for you.

Here’s what you can expect from permanent life insurance:

• Your life insurance coverage is guaranteed for as long as you live and keep up the required payments.
• You’ll get the security of an expense that stays the same, regardless of your age or changing health.

The Canadian Life and Health Insurance Association (CLHIA) tracks life and health insurance statistics in Canada. According to the latest CLHIA figures, Canadians own a total of $5.5 trillion in life insurance. Of that, 25% is in permanent insurance. The average Canadian household carries $474,000 in life insurance, in some combination of permanent, term, group and individual. That’s about five times the average household income.

How can you grow your money with permanent life insurance?

Most permanent insurance policies include a feature called “cash value.” It’s like equity in your home: It grows over time. You can borrow directly against it or use it as collateral for a loan. You can also take money from your cash value, but this will usually reduce your death benefit.

While permanent life insurance costs more at first than term life insurance, permanent tends to pay off over time. Term life insurance is initially inexpensive if you’re young and healthy, but it only provides temporary coverage. Its cost can rise dramatically as you renew it in later years. And there's no cash value to tap or borrow against.

What about life insurance through your workplace benefits?

Does your employer offer life insurance through your benefits plan? That’s a good start. But keep in mind these points about your workplace life insurance:

• You can’t take it with you if you change employers. You’ll have to apply again at your new employer, and you won’t have any coverage between jobs. You may, however, be able to convert your group coverage into protection for yourself as an individual.
• It ends when you retire.
• It can increase in cost as you get older.

True, buying life insurance through a group plan is often cheaper than getting it as an individual. But is your group coverage enough to cover your share of your family’s expenses? Will it cover big-ticket items like a mortgage or university tuition for your kids? If not, you may want to consider buying individual life insurance. That way, you can take it with you regardless of your employment situation. And you can top it up with group coverage through your workplace plan.

Talk with an advisor about your life insurance options

Your situation may be simple. You may 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 that case, you might need more than one type of life insurance.

When buying any type of life insurance, it helps to sort through all your options with an advisor. Why? Because an advisor can help you build life insurance into your overall financial roadmap. An advisor’s professional expertise and knowledge about insurance can be particularly helpful. Prospr advisors are here to help! Contact us today to book an appointment.

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.