Life Insurance
Life Insurance is essential for the ultimate peace of mind and financial security for your family and your business. At The Benefits Edge Insurance, we tailor each life insurance plan to ensure we meet your every need. As one of the top insurance brokers in Ontario, we use industry comparison software to determine the competitiveness of the various insurers for our clients. Whether you need to cover a loan, mortgage, business debt or paying tax for estate planning, we can help you choose the best product for your circumstances.
The broad categories of Life Insurance are: Term Insurance, Universal Life and Whole Life. We make recommendations for the type of product that will cover the financial risks to your family or the business.
Types of Life Insurance
Life insurance coverage comes in many forms, and an expert will be able to determine what is best for you depending on your unique needs. You may need the least expensive life insurance possible for a short term to cover a debt or something permanent which will never reduce, expire and may also increase in coverage, or a more complex coverage plan may be more ideal.
Our life insurance industry software allows us to scan the marketplace for the best rates for various products. Details of life insurance policies can vary between insurance providers. It’s recommended that you consider the details of the policy before making your decision and consult with The Benefits Edge to understand the options available. Here are the common types of life insurance policies available in Ontario:
Term Insurance
Think of Term Life insurance as a safety net that covers a specific period, like a rental lease. You pay a regular premium for a set number of years, let’s say 10, 20, or 30 years. If something unexpected happens to you within this term, your beneficiary receives a lump sum, tax-free payment, known as the “death benefit.” It’s like ensuring your family’s financial well-being during the time they might need it most, such as while paying off a mortgage, raising kids, or managing other financial obligations. Term coverage will expire at a specific age.
Mortgage Insurance
Mortgage insurance is specifically designed to cover the outstanding mortgage balance if the mortgage holder dies. If bought through the bank or credit facility, the amount often reduces in coverage as the mortgage decreases and only pays for the outstanding mortgage, so the bank is satisfied. You can buy your own Life Insurance and include the amount of your mortgage for less cost than the bank will charge and allow your family the flexibility to pay off debts and have funds left over for living expenses. It is always best to have your own Life Insurance.
Permanent Life Insurance
Compared to Term Life, permanent life insurance offers coverage for life, as long as the premiums are paid. It includes several subtypes:
- Term to 100: this form of Life Insurance offers a fixed term at a fixed price, your age of 100. The cost includes the inevitability of a payout but there is not “extra” premium charged to shorten the payment term or accumulate funds as a form of savings.
- Universal Life Insurance: this product offers flexibility in premium payments and death benefit amounts. Policyholders can adjust these aspects based on their changing needs. Universal life insurance policies can be structured to just cover the cost of mortality (minimal funding) but can also be structure to include a cash value component that earns interest.
- Whole Life Insurance: When exploring whole life insurance options, you should understand that there are two primary types: participating and non-participating whole life insurance. Both provide lifelong coverage (not a specified term), but they come with different features and benefits. This product is sometimes known as Cash Value Life Insurance. There are 2 types of Whole Life Insurance, participating (Par) and non-participating (Non-Par).
Participating (Par) vs. Non-Participating (Non-Par) Whole Life
With Participating Whole Life Insurance, you may receive dividends based on the insurer’s performance. While not guaranteed, these dividends can be used to purchase additional insurance coverage, reduce your premium payments ( Pay to age 65, Pay for 20 yrs, Pay for 15 yrs, Pay for 10 yrs), accumulate Cash Value within the policy tax-free and you can withdraw the Cash Value at a date in the future (which may trigger tax). The Cash Value that builds in the policy can be used as a loan, collateral or income, offering financial flexibility. Premiums are higher than Non-participating policies due to the enhanced features.
Non-Participating Whole Life provides guaranteed coverage and guaranteed Cash Value growth, but does not pay dividends. It offers straightforward, predictable benefits. You can purchase these policies with a reduced premium payment schedule and the Cash Value can be used for retirement planning. Premiums and Returns are less than Participating policies.
How Much Life Insurance Should You Have?
A common way to determine the amount of Life Insurance you should have is to total all your debt and add a multiple of your income to replace your portion of the household income for a number of years. The multiple should be large enough to allow your spouse the time to refocus on next steps to secure your assets and put a plan in place for the future.
What Affects Your Life Insurance Premiums and Costs?
Several factors can affect your life insurance premiums and costs. Here are some key factors that can influence your life insurance premiums:
- Age: Your age at application is a significant factor in determining life insurance premiums. Individuals in a younger age band pay lower premiums as they are considered to be at a lower risk of mortality compared to older individuals. When you buy Life Insurance, you are creating an asset for your family.
- Coverage Amount and Policy Type: The amount of coverage you select and the type of insurance policy you choose will affect the cost. Policies with higher death benefit amounts or more comprehensive coverage (such as whole life insurance) tend to have higher premiums compared to policies with lower coverage amounts or term life insurance.
- Driving Record: Your driving history, including any traffic violations or accidents, can influence your life insurance premiums. A poor driving record may indicate a higher risk lifestyle and could lead to higher premiums.
- Immediate Family Medical History: A family history of certain genetic conditions or diseases in your immediate family may increase your premiums.
- Gender: Statistically, women tend to have longer life expectancies compared to men. Therefore, women generally have lower rates for the same coverage amount and age.
- Health and Medical History: Your overall health, including any pre-existing medical conditions, plays a crucial role in determining your premiums. Insurance companies may require a medical examination, blood or urine test or ask your doctor for your medical history to assess your health status. Factors such as high blood pressure, diabetes, obesity, or a history of serious illnesses can increase your premiums. Any outstanding tests or referrals to specialist can delay or postpone your application.
- Lifestyle Choices: Certain lifestyle choices can impact life insurance premiums. Factors such as smoking, excessive alcohol consumption, daily marijuana smoking and participation in high-risk activities (e.g., skydiving, scuba diving) can increase the cost of coverage due to the higher associated mortality risk.
- Occupation and Hobbies: Certain occupations and hobbies involving higher risk levels or exposure to hazardous conditions can impact your premiums. For example, individuals working in professions like aviation, mining, or firefighting may face higher premiums.
Underwriting guidelines can vary with each insurance company. To get an accurate estimate of your life insurance costs, ask for a quote from The Benefits Edge.
Are you a Business Owner? Life Insurance is Important for Your Business
Maximize Your Business Protection with Tax-Smart Life Insurance Strategies for Business Owners
As a savvy business owner, you’re always on the lookout for strategies to decrease your risk while optimizing tax advantages. Use life insurance to protect your business as well as your family.
1. Key Person Insurance
Keeping your business resilient in the face of unexpected challenges is a big concern for business owners. Key person insurance provides a tax-free payout to your business if a critical team member, like the business owner or executive, passes away. The company pays the premium and the company is the beneficiary. These funds can cover essential expenses and facilitate a seamless transition, ensuring your business continues to thrive.
2. Buy-Sell Agreements
If you have a business partner(s), an unexpected death can decimate a business and put you in business with your partners family members. Protect your business’s stability with a well-structured buy-sell agreement funded by life insurance. When a business partner dies, the insurance proceeds provide the funds for the surviving partners to buy out the deceased partner’s share without liquidity concerns. Enjoy a tax-efficient transition of ownership and maintain your business’s continuity.
3. Collateralize Business Loans
A lender may require that you purchase Life Insurance to cover your business loan. This allows you to have a business deduction on your life insurance premiums while ensuring your business has access to the funds it needs to grow and thrive.
4. Retirement Savings
Save money for retirement and diversify your strategy with a permanent life insurance policy. A permanent life insurance policy allows you to accumulate cash value over time in a tax efficient manner and secures a stable source of supplemental income for your future.
5. Charitable Giving
Demonstrate your business’s commitment to social responsibility through life insurance. You can designate a charity as the beneficiary of a policy, enabling your business to make a big social impact while potentially enjoying tax benefits.
6. Group Insurance Coverage
Show you care about your employees by purchasing a benefit plan that includes Group Life Insurance. Help your employees protect their family with this inexpensive benefit. As a group plan, the price of insurance is less that they would pay as individuals and no medical questions are required for the basic level of coverage, called a non-evidence maximum.
Stay Ahead with Expert Guidance from The Benefits Edge Insurance
Navigating the various tax-smart life insurance strategies requires expertise and precision. Keep your business on the path to success by using knowledgeable financial advisors and tax professionals who understands the intricacies of both life insurance and Ontario tax laws.
Optimize Your Business with Life Insurance Solutions that Give You an EDGE
For business owners, life insurance is more than just a safety net; it’s a strategic tool for growth and security. By implementing these tax-smart strategies, you can ensure your business not only survives but thrives in a competitive market.
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