Life insurance in Ontario can be complicated but it doesn’t have to be. Life Insurance in Ontario is a contract with the insurance policy holder (you) and the insurer (an insurance company). In the event that the insurance policy holder passes away, the insurance company then has to pay an agreed sum of money to the beneficiary. The beneficiary is designated by the insurance policy holder at the time the insurance policy is arranged.
This can be dicey where a bank is arranging a mortgage protection policy or life insurance coverage to protect a mortgage in the event of the death of the mortgagee because in most cases the bank will want to name themselves’ as the beneficiary. For this reason you are better off to arrange your own mortgage life insurance coverage through an Insurance Broker if you are taking out a mortgage, because you will have more authority as it relates to naming a beneficiary.
Life insurance is typically arranged for 2 reasons; protection or investment. Life insurance contracts tend to fall into two major categories:
1. Protection policies – designed to protect loved ones in the event of a death.
2. Investment policies – designed facilitate the growth of capital.
The two most common types of life insurance are: term life insurance and whole life insurance. What is term life insurance and whole life insurance in Ontario and what are the differences between the two?
Term life insurance coverage in Ontario carries a specified term. The policy does not accumulate cash value. The term life insurance premium will buy life insurance protection in the event of death and nothing else. Another common type of term life insurance is mortgage life insurance, which if arranged by the mortgage holder (bank) will generally only cover the amount of the mortgage and names the bank as the beneficiary in the event of death. Individuals often purchase term life insurance to “protect” their loved ones in the event of death.
What is whole life insurance and how is it different from term life insurance? Whole life insurance provides lifetime life insurance coverage. When purchasing a whole life insurance policy there is no term. Part of the insurance contract mandates that the life insurance policy holder is entitled to a cash value reserve. This cash value can be accessed at any time through a loan against the life insurance policy and are issued income tax free.
There are many advantages of whole life insurance that include: guaranteed death benefits, guaranteed cash values, fixed, predictable annual premiums and mortality and expense charges that will not reduce the cash value of the policy.
Term life insurance and whole life insurance both carry their respective benefits but the right life insurance coverage for you will depend on your age, the size of your family (do you have dependants), the life stage of your family and your long term financial goals. Your best bet when trying to figure out what life insurance coverage is best for you is to deal with a local Insurance Broker who works with all of the different insurance companies because they cannot only help you determine which product is the best for your personal circumstances but also who is offering the best deal.
For more information about term life insurance coverage and/or whole life insurance coverage in Ontario, please visit www.wecoveryou.ca or contact Gary Mandel at l Independent Financial Concepts Group by calling 416-849-1653.
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