Life Insurance: a Multi-Purpose Product
Article revised on 11 July 2018
Taking out life insurance has numerous advantages. Not only does this financial product provide you with the peace of mind of knowing your family will not be left destitute in the event of your death, but did you know that it can also be used to save money?
In fact, you can do a number of things with life insurance! There are numerous products, each offering various options. The best one for you is the one that meets your specific needs. A financial security advisor can help you make the right choice.
What needs can life insurance meet?
As a financial product, life insurance is practically made to measure. With all the options and additional benefits you can add, it becomes the perfect fit for your profile.
The main objective of life insurance is to protect your loved ones from need in the event of your death.
To determine what amount of coverage you need, the following may be taken into account:
- A detailed evaluation of your debts (mortgage loan, car loan, credit cards, etc.)
- An estimate of funeral costs
- The shortfall in the event of the loss of your income
- Education costs for children
- The wish to leave an inheritance for family members, etc.
How is life insurance a financial management tool?
- Universal life insurance allows you to save money in a tax-sheltered fund. This type of policy therefore allows you to leave a bigger, tax-free inheritance upon death.
- It has a surrender value guaranteed by the contract. This means you could get reimbursed for part of the premiums paid since the beginning of the contract.
- You could also use the surrender value to borrow against your policy or for maintaining coverage even if you stop paying premiums. You will, however, have to pay interest, and the death benefit will be reduced by the amount borrowed, unless you have repaid it before your death.
How does my policy evolve over the course of my life?
Life Insurance products are designed to adapt to people’s life cycle. Your needs change, so it’s important your policy does too.
For example, you can pay reduced guaranteed premiums during the first 10 years of your contract, allowing you to keep up with your other financial responsibilities, such as your children’s education or paying off your home. Then, premium increases, established and guaranteed when you signed your contract, will occur every five years for a set period.
On the other hand, you could take out permanent insurance with guaranteed premiums that are payable for a limited period, meaning you pay these premiums for a set time such as 10, 15 or 20 years. After that, your coverage remains in force for the rest of your life, without payment of premiums. This option allows for adapting the coverage to income, which is usually lower during retirement.
What options are available to meet my needs?
You can add various additional benefits to your insurance policy to meet your specific needs such as an accidental death or dismemberment benefit, an insurability option, waiver of premiums in the event of the policyholder’s disability or death, a disability benefit, monthly income for your loved ones, etc.
Ask your financial security advisor to explain all the options available with life insurance.
Note: This article is intended for information purposes only and should not be construed as legal, financial, tax or other advice. The circumstances or factors may vary depending on your individual situation. Before taking action, we encourage you to consult a professional. La Capitale may not be held liable for any consequences arising from any decision taken based on the content presented in this article.
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