This article will help you understand what Whole Life Insurance is and how important it is to business owners.
What Is Whole Life Insurance?
Whole Life insurance is a life insurance policy that covers the insured person for their entire life. It provides coverage for death, disability, and other risks. Whole Life policies also include cash value accumulation.
Whole Life versus Term Life
Whole Life insurance lasts for a lifetime, while term insurance only covers you for a set period. Whole Life insurance premiums are typically higher than Term Life because of the more comprehensive coverage, but they can also be more beneficial in certain situations. With Whole Life insurance, the cost of your payments never changes, unlike Term Life insurance, where the cost of premiums keeps changing throughout all terms.
Who needs a Whole Life insurance policy?
Whole life insurance is a fantastic option for consumers who desire permanent coverage, fixed rates, and cash value. If you pay the required premiums to maintain the policy in force, your beneficiary will get an insurance payout whenever you die.
How much does a Whole Life insurance policy cost in Canada?
The cost of a Whole Life insurance policy depends on several factors, as discussed below.
- How much coverage do you need? – Are you looking for a plan that will cover your mortgage? Or are you looking for one that will provide a lump sum of money to your loved ones after you die?
- The second thing is what kind of premiums you’re willing to pay. If you’re on a tight budget, it might be best to look at plans with lower premiums.
- You should also consider the length of time you want the coverage to last. If, for example, it’s just something temporary, then there are policies out there with shorter terms and lower premiums.
Calculating how much you’ll pay for insurance can be difficult. However, with our hypothetical estimate, you’ll have a vague idea of what you could be spending. If you are a male in your mid-30s, you could purchase a $250,000 life insurance plan for $161 per month. For females of the same age, it will cost approximately $139 each month. However, the monthly cost is much higher in your 80s.
Is Whole Life insurance worth it?
This is mostly determined by you and what you desire. Whole Life insurance, for instance, is much more expensive and can cost eight to ten times more than Term Life insurance, depending on your age.
Saving money is especially difficult for families with children, and the cost of Whole Life insurance makes it almost out of reach for them. With the average family unable to benefit from most life insurance policies, this issue needs solving.
What are the Benefits of Whole Life Insurance for Business Owners?
Business owners face unique challenges and needs. Buying a Whole Life insurance policy is an excellent way to cater to these needs. The benefits of Whole Life insurance for business owners are manifold:
- When you die, your whole life insurance provider pays death benefit to a designated beneficiary. However, there are benefits beyond just the death benefit. A business owner can use Whole Life insurance to provide liquidity and retirement income.
- It can be used as an asset protection tool for business owners. Whole Life insurance can shelter assets from liability lawsuits, creditor claims, and divorce settlements.
- Whole Life insurance can also be used as an efficient retirement vehicle because it provides guaranteed interest rates to accumulate funds for retirement.
Pros of Whole Life insurance policy
- Whole Life insurance is the only type of life insurance that lasts your entire lifetime. It will stay in force until you die, and it doesn’t matter how old you are when you get it.
- Another merit of Whole Life insurance is that you can maintain your policy without ever having to re-qualify. For instance, even if you develop a condition like diabetes or high blood pressure, the cost of your premiums won’t increase.
- It helps with building cash value, which you can use later.
- A Whole Life insurance policy can be a good investment vehicle for high-net-worth individuals who have maxed out other savings vehicles. You can combine the tax advantage of savings accounts like Tax-Free Savings Account [TFSAs] and Registered Retirement Savings Plan [RRSP] with the growth potential of investing in a Whole Life insurance policy.
Cons of Whole Life insurance in Canada
Whole Life insurance may benefit some who can afford it, especially high-income earners. But what about Canadians who cannot afford it?
- Cost: Compared to other insurance policies like Term Life insurance and Universal Life insurance, Whole Life insurance is more expensive. For example, Whole Life insurance is more costly than Term Life insurance.
- Necessity: There are several other alternatives to Whole Life insurance. You may be disappointed to find out that you have been paying for what you don’t need.
- Duration: Whole Life insurance lasts till you die or cancel it. You may have to wait a couple of years to reap the benefits of the policy’s cash savings component.
Can you be denied a Whole Life insurance policy?
Yes, especially if you have a pre-existing illness or injury when applying for the policy. These conditions include cardiovascular diseases, cancers, diabetes, and asthma. Some states still require insurers to offer guaranteed issue policies that cover anyone who applies regardless of pre-existing conditions.
Whole life insurance is a fantastic option for consumers who desire permanent coverage, fixed rates, and cash value. To get the best insurance guidance you can always rely on the agents at Insurance Direct Online, an established insurance broker in Canada.
Our reviews for insurance companies in Canada for your reference: iA Financial Group review, CPP CA review, Desjardins Insurance review, RBC Insurance review.