We do everything we can to care for our loved ones, and providing for their well-being propels us forward and brings us joy. While your family’s immediate needs are your priority, have you considered what might happen if you pass prematurely?
When you have a family, it is important to plan for their future, so they can maintain their quality of life and live comfortably after you pass. Life insurance is an affordable option that can give you peace of mind that your family will be protected in the event of a loss.
What Is Life Insurance?
A life insurance policy provides a tax-free death benefit that can help replace your income after you’re gone. This way, you can be sure that your dependents have financial stability. The benefit will also help to cover funeral expenses, pay off debts, taxes, and other expenses that may burden family members.
How Does Life Insurance Work?
When you take out a life insurance policy, you pay a monthly premium over a specified period of time. These payments ensure that your family will receive a lump sum payment upon your passing.
What Type of Life Insurance Do You Need?
There are multiple life insurance options to choose from. They include:
- Term life insurance
- Permanent life insurance
- Whole life insurance
- Universal life insurance
The type of insurance plan you choose will depend on your financial situation and the financial needs that your family will have should you pass.
Term Life Insurance
When you opt for term life insurance, you get a fixed coverage period of either ten or twenty years. During this period, you will pay a fixed life insurance premium for the length of the term, and your family will receive the benefit if you pass within your term. When the term ends, the coverage expires unless you renew or set up a new policy.
Permanent Life Insurance
Unlike term insurance, which provides coverage over ten or twenty years, permanent life insurance gives you the peace of mind of having coverage throughout your lifetime. An additional benefit of a permanent policy is that it builds up cash value over time, so if you decide to cancel your policy, the insurance company will return a portion of the premiums you paid. There are two types of permanent life insurance:
- Whole Life Insurance
- Universal Life Insurance
Whole Life Insurance
With a whole life policy, you have insurance coverage for a lifetime, with your premiums remaining the same over time. This type of policy is bundled with a savings component, where the insurance company manages the investment and provides a guaranteed minimum cash value should you cancel the policy after a specified time.
Universal Life Insurance
If you like flexibility with your investments, you might want to consider universal life insurance. This type of policy combines life insurance with an unbundled investment account. ‘Unbundled’ essentially means that you can decide on the type of investments your deposits are placed in. Like the whole life policy, universal life also has a cash value, but the amount of the death benefit and cash value of the investment fluctuates with the market.
How Much Life Insurance Do I Need?
To assess how much life insurance coverage you need, it is essential to consider your family’s needs and what they will need to live comfortably without you to support them.
Do You Have Young Children?
Many new parents opt for term life insurance as an affordable way to guard against loss. If you have a young family, your partner may need to take time off work to care for your children. In such cases, it is essential to consider how much money they will need to maintain a comfortable lifestyle until they can return to work.
Are Your Children Fully Grown?
If you have adult children, their financial needs may not be urgent, but you may want to leave a death benefit to pay off funeral expenses, taxes, and debts or leave them some money as a gift. You may also want to consider the needs of your grandchildren and help pay for their college education. In such cases, permanent life insurance may be a more suitable option.
Purchase Life Insurance In Alberta
At Red Willow Wealth Management, we offer life insurance products to suit your family’s needs and budget. We will conduct an insurance analysis to determine the appropriate level of financial protection your family needs.
Want to learn more about life insurance in Edmonton? Book a consultation with one of our financial advisors today.