Family Protection > Life Insurance
A life Insurance Policy is a legal and binding contract made between a life insurance company and a policy holder which will pay a predetermined lump sum amount upon the death of an insured individual sometime in the future. This policy will stay in effect as long as the premium, which is agreed upon, for the required interval. A Life Insurance contract can vary in type and amount based upon the need or purpose of the policy holder. Some examples of how life insurance can be used are:
- to protect the value of a mortgage
- loss of income
- estate tax
- final expenses
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This is insurance purchased for a specific period of time. This type of insurance does not accumulate any cash value upon expiry of the term. Usually the term can be renewed for a substantially higher cost. The policy may also be converted to a permanent type of policy. Both the option to renew or convert will have an expiry date which will leave the insured without coverage beyond these dates. This is usually the cheapest form of life insurance initially, but becomes progressively more expensive as you get older.
Whole Life Insurance:
This type of insurance covers an individual for the entirely of their life at the same annual cost. Whole life insurance has a cash value component which may result in the policy being paid up and not requiring further premium payments to keep the policy in force. This type of insurance is usually the most expensive at the time of issue.
This insurance is similar to whole life insurance in that it provides permanent coverage without the cash value component. Universal life however, has a unique internal investment component which allows the insured to deposit money within the policy in a tax sheltered manner. This allows for the accumulation of cash build up through numerous different investment vehicles.
This insurance is a form of life insurance designed to eliminate the burden of the loan bade by the borrower to purchase a home. Unlike loan insurance purchased from a bank, mortgage insurance purchased from a broker is underwritten at the time of application, therefore eliminating unnecessary shock or surprise due to an unexpected death.
Watch this short video on the hidden dangers of purchasing mortgage insurance though a bank. This video was released through CBC Marketplace.