Life Insurance
Providing Financial Security for Your Family
Life insurance can help create financial security for you and your family by ensuring your loved ones are taken care of financially when you die. It is simply a form of insurance that pays your beneficiaries a defined amount when you die.
What can I use life insurance for?
Upon your death, life insurance can be used to:
- pay any final expenses and debts, like funeral costs or mortgages
- provide an income for your family
- ensure your family has the resources to maintain its standard of living
- leave money to your favourite charity
While you’re still living, some types of life insurance can:
- provide tax-advantaged savings you can draw upon
- supplement your retirement income or help pay for home care or long-term care for yourself or a family member
What are the different types of life insurance?
There are two types of life insurance:
Deciding on the right type of life insurance will depend on your individual circumstances and what you are looking to achieve from having it. That being said, we do have some life insurance recommendations with respect to how you set up your policy.
Term Life Insurance
Term life insurance provides coverage for a designated time period at the lowest initial cost, so it’s ideal for short-term protection needs. The premium you pay is guaranteed to remain the same during the term. It can also usually be converted to permanent life insurance down the road.
Permanent Life Insurance
Permanent life insurance covers you for your lifetime, provided you pay your premiums when they are due. There are two types:
- universal life insurance: combines permanent life insurance protection with a tax-advantaged investment component. As the cash value of the insurance coverage increases, you can use that to pay all or part of your insurance premiums. Universal life insurance can provide an additional source of income for emergencies, retirement or for estate planning needs.
- participating life insurance: combines permanent life insurance protection with a tax-advantaged savings component because you have the potential to receive policyholder dividends. These dividends can be used to purchase additional life insurance or go towards paying your premiums.
How does participating life insurance work?
When you purchase participating life insurance, the premiums you pay go into an account, along with funds from other participating policies of the insurance company. If the performance of the fund performs better than expected, it generates a surplus and a portion of the surplus may be paid to policyholders by way of dividends.
Life Insurance Recommendations
Life insurance is a critical part of your financial wellbeing as it provides financial support for your loved ones when you die.
When should I review my life insurance coverage?
At the very minimum, you should review your life insurance coverage at certain milestones in your life, such as finishing medical school, finishing residency, getting a promotion, getting married, having a child or if your spouse dies.
Who should be the owner and beneficiary of the life insurance policies?
You should consider having your medical company or investment holding company be the owner and beneficiary of the life insurance policies. Having your company pay for life insurance premiums reduces your overall income taxes while maintaining the tax-free status of the life insurance proceeds for the company and its shareholders.
It is a wise idea to consult with your financial advisor for more details about life insurance. If you do not have a financial advisor, we would be happy to recommend one to you.