Life InsurancePermanent Life Insurance

Permanent life insurance is coverage that is designed to last your entire lifetime. Securing coverage for life means that you can be sure that your family will be taken care of, no matter what happens.
Permanent Life Insurance

What Types
Are Available?

Whole Life

Whole Life Insurance is perhaps the most popular of the permanent insurance options. Whole Life includes all of the features previously mentioned, coverage for life, a cash payment at time of death, and both an insurance component and a cash value component. The cash value grows, usually at a moderate interest rate, over time. Premiums stay level for the duration of the policy and there are also options to shorten the premium paying period to a set term (20 years for example), after which there would be no more premium payments required.

Universal Life Insurance

Universal Life Insurance is similar to Whole Life. It provides coverage for life, a cash payment upon death, and an insurance and investment component. With Universal Life, the investment component is based on your selection of the investments held in the policy. This can be anything from investments that provide moderate interest, to more aggressive investments options, depending on your tolerance for risk. Universal life requires a more hands-on approach than other life insurance options, which makes it the right fit for some people, but not as attractive to others that want their insurance to be more self-sufficient.

Term-to-100 Life Insurance

Term-to-100 Life Insurance (T-100) is a whole life policy that doesn’t have a cash value component. It is exclusively for providing coverage upon death. This makes it a more affordable alternative to the other permanent insurance options as there is no desire to accumulate a cash value. In addition, although the name suggests it only provides coverage to age 100, the coverage will actually continue until death, with no premiums required after age 100.

Do I Need
Permanent Life Insurance?

Although the answer to this question varies for everyone. If you don’t require it right now, it’s probably because you have term insurance, but you will need permanent coverage eventually! The reality is that everyone is going to pass away at some point, and there will be expenses left to loved ones that can be covered by permanent life insurance. Some of the more common reasons for purchasing permanent life insurance are:

Final expenses.

Costs like funeral, burial, probate, legal and accounting fees to settle an estate, and other expenses at time of death can add up, and permanent insurance can ensures your family doesn’t have to pay for it out of their own pocket.

Tax-deferred investment growth.

If you have maxed out your RRSP and TFSA accounts, permanent insurance provides a vehicle to benefit from tax-deferred growth of your investment, which can also be paid out tax-free to your beneficiaries upon death, as an efficient way to transfer your wealth.

Increasing what you leave for your spouse and children.

Permanent life insurance allows you to multiply the amount of money you are leaving for your loved ones. The premium dollars you put in to the policy allow it to grow (on top of the insurance component), and then pay a tax-free death benefit to your beneficiaries.

Providing for a dependent with a disability or lifelong dependency.

Providing protection for a dependent that you provide care to will help to ensure that they are financially secure after your death. A trustee can also be named to help look after the money on behalf of the beneficiary, if they are unable to do so themselves.

Term life insurance will soon become too expensive.

As you age, term life insurance will continue to become more expensive, as the likelihood of you passing during the term increases. Exploring permanent options will allow you to lock in coverage for life at a set premium, to ensure you remain protected when you need it most.

If you are younger and have a high need for insurance, the best place to start is going to be term life insurance. It provides the most coverage, for the lowest amount of premium. While you are looking to protect your mortgage, income, and provide for your dependents, having the proper amount of coverage will always be more important than the term of the coverage. The great thing is, you don’t have to choose between term and permanent, there are actually options to convert your term policy to a permanent policy in the future without undergoing any further medical questions or tests.

However, life insurance only brings value if the policy continues to be in force when you pass away. As term insurance costs rise over your lifetime, converting all or a portion of your coverage to whole life insurance will allow you to keep coverage in place while term insurance premiums would continue to rise and coverage would eventually expire. Life insurance is about finding what is right for you, but that will change as you reach different stages in your life. The most important factor is ensuring that your coverage remains active throughout your life to provide security for you, and your loved ones, no matter what happens.

Why Does It
Cost More Than Term?

Permanent life insurance coverage is initially more expensive than term life insurance. Like term life insurance, it pays a one-time, tax-free cash payment to your beneficiaries when you pass away. The reason it is more expensive is because term life insurance pays IF you die during the term, permanent insurance pays WHEN you die because it is coverage for life.

Although there are different types of permanent insurance options, most include the following features:

  • All permanent life insurance policies pay out a death benefit in the event of your death.
  • You’ll pay premiums on a regular basis to keep the policy active, which will provide coverage for your entire lifetime.
  • Each month, a portion of your premium goes towards the cost of the insurance and the remainder is put into a tax-deferred savings component within the policy called the “cash value”. This cash value will continue to accumulate over time.
Permanent Life Insurance FAQ

Other Questions
People Ask Us

When is permanent life insurance the right fit?
  • Permanent life insurance provides coverage for your entire lifetime at a higher cost than term life insurance. Permanent insurance is more commonly used for final expenses including funeral costs and estate fees, providing funds for any taxes upon death, and for other estate planning needs like leaving a legacy to children, grandchildren, or a charity of your choice. Although the cost of permanent insurance is higher, you can purchase it at a young age to lock in the lower rates for life, which can be extremely beneficial in the long run.
What if I want to apply for term insurance instead?
  • You can apply for Term Life Insurance by clicking here.

Copyright © 2021 Hometown Life Insurance.

Copyright © 2021 Hometown Life Insurance.