How Life Insurance Works in Canada (Part 1)

Life insurance refers to a contract between a person and an insurance company in which the latter pays a sum of money to the designated beneficiaries upon the insured’s death. It is a way to provide financial protection to your family or other loved ones in case of your unexpected passing. Life insurance is a helpful financial tool that can help secure your family’s future and give you peace of mind.

What Is Life Insurance?

It is a type of insurance that pays out a certain sum of money to the beneficiaries indicated in the policy upon the death of the insured. The policyholder pays a set premium to the insurance company to maintain the policy. The premium amount can vary depending on the age, health, and lifestyle of the insured. The younger and healthier the individual, the lower the premium amount.

How to Determine If You Will Benefit from Life Insurance

Determining whether or not you need life insurance can depend on your individual circumstances. If you have dependents who live on your income, such as a spouse or children, life insurance can help provide financial stability in case of unexpected passing. Life insurance can also be beneficial if you have outstanding debts, such as a mortgage, that would need to be paid off in the event of your death.

Life insurance may be unnecessary if you are single and have no dependents. However, having a small policy to cover any final expenses, such as funeral costs, can still be a good idea.

Term Life Insurance and How It Works

Term life insurance refers to the type of life insurance that provides coverage for a set period, typically 10, 20, or 30 years. The premium amount for term life insurance generally is lower than permanent life insurance because it only provides coverage for a set period.

If the policyholder passes away during the term of the policy, the beneficiaries named in the policy will receive the death benefit. If the insured survives the duration of the policy, the coverage will expire, and the policyholder has the option to renew the policy or let it expire.

Term life insurance should be considered by those needing coverage for a specific period, such as until their children are grown or until they pay off their mortgage.

Permanent Life Insurance and How It Works

Permanent life insurance is a specific type of life insurance that covers for the insured’s entire life. Unlike the previously discussed term life insurance, permanent life insurance does not expire as long as the premium payments are current. The premium for permanent life insurance is typically higher than term life insurance because it covers the insured’s entire life.

Permanent life insurance comes with a cash value component that can be used as a savings vehicle. The cash value grows tax-deferred and may be borrowed against or withdrawn during the insured’s lifetime.

Conclusion

In Canada, life insurance is an important financial tool that can help protect your loved ones in the event of your unexpected death. While it is easy for most to get personal loans in cases of emergency, it is an entirely different thing if someone dies and a family is left behind. There are a number of life insurance types available, the two main ones being term life insurance and permanent life insurance. It is important to assess your individual circumstances to determine if life insurance is necessary and which type of policy is best suited for your needs. 

365 Loans Canada provides PolicyMe, a trusted name for online loans is also a reliable Canadian digital insurance platform designed to offer easy and cost-effective financial security for families. With PolicyMe, obtaining a quote and applying for term life insurance and critical illness insurance online can be done in 20 minutes or less. Get a quote today!

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