Life insurance is, first of all, investments, and secondly, insurance, according to financial consultant Stu Tunheim of IG Wealth Management.
Like the rest of the financial plan, life insurance always guarantees a stable financial future. “Perhaps you do not want to leave your family in debt or you want to save up for your children’s education at the university. Besides, endowment insurance can help save extra money for a comfortable old age,” says Tunheim.
For others, life insurance is inheritance for family members. “The main pro is that a beneficiary receives money free of taxes,” the source reminded.
Tunheim equates life insurance with house insurance: “You cannot insure a burning building. You should insure the house when it is in good condition. It is the same with life insurance. The policy will cost you much less when you are young, healthy and full of energy."
There are two main types of life insurance in Canada
The first and simplest is called TERM. Essentially, these are non-refundable death insurance payments made on a monthly basis. The amount of payments depends on the insurance amount and age of the insured. Within 10 years from the start of insurance, the payment amount is the same, and in each subsequent decade the payment increases by a certain amount.
When a person reaches 75 years of age, this insurance automatically terminates. If a person has not died before this age, the money paid by him will irrevocably become the property of the insurance company. Thus, if a person dies before reaching this age, then the insurance premium in the assigned amount is paid to his heirs.
The second type of insurance is accumulative. The main point is that money paid by a person goes to his policy account, accumulates there, and in case of death, heirs receive it along with the interest. The particularity of this type of insurance is that the monthly payment amount is determined once at the conclusion of the contract depending on the insurance amount and age of the person, and subsequently does not change. Upon reaching the age of 65, a person can either withdraw the entire accumulated amount or receive an additional pension at the expense of it.
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