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With the availability of different insurance policies, it can be difficult and overwhelming to understand which policy is right for you.
Below is an introduction to some of the most common insurance policies.
Life Insurance
Life insurance allows you to take care of your loved ones when you are no longer around. When you buy a life insurance policy, you name a beneficiary—the person (or people) who will receive the payment. The insurance company pays the amount of your insurance to the beneficiary after your death.
There are two primary types of life insurance in Canada: Term Life Insurance and Permanent Life Insurance.
Term Life Insurance
Term life insurance is an insurance product that covers you for a set amount of time—typically 10-20 years. If you pass away during that term, the policy will make a payment to your beneficiary, also called a death benefit. During the period of your term, your payment rate remains the same. When the term expires, you need to renew for another term, at which point your rate and coverage can, and likely will, change.
Term insurance is great if you’re raising small children or your mortgage is almost paid off. Once these shorter-term additions to your insurance needs are no longer an issue, permanent insurance might be the better choice.
Permanent Life Insurance
With permanent life insurance, your policy remains in effect in perpetuity, as long as you continue to pay your premiums. These policies tend to be more expensive but they come with big benefits, including tax-deferred payments. This means savings for you (think long-term, towards retirement) and a nice payout to your beneficiary, no matter when you pass away. Some permanent life insurance policies also provide cash value options—funds you can borrow if needed, while you’re alive.
Disability Insurance
Disability insurance covers you in the event you’re unable to work due to an accident or illness. The coverage ranges and you can get insurance for short-term and long-term disability.
Short-Term Disability
Short-term disability typically lasts up to six months and is sometimes covered through your employer.
Long-Term Disability
Long-term disability will be utilized when short-term disability, or your EI or sick leave benefits from your employer have been used up.
Critical Illness Insurance
If you get sick and are unable to work, you will need financial support to cover loss in income, as well as medical and other costs associated with your illness. Critical illness insurance helps to cover these costs and is paid out in a lump sum to be used as needed.
Mortgage Insurance
Buying a property is one of the largest, most significant purchases you will make in your life, so it’s important to get the right mortgage insurance for your specific needs.
Most people who purchase mortgage insurance do so with their lending institution, but you may be better off comparing coverage offered by other providers. I’ve laid out below the different types of mortgage insurance.
Complete coverage
This mortgage insurance lets you cover your mortgage amount, plus any other loans you may have (car, line of credit, etc.). You can also add complementary coverage for income replacement in the event of disability or critical illness. There are a variety of different options to complete your coverage.
Flexible coverage
This coverage offers you the freedom to choose, based on your needs. Coverage can be for the term of your mortgage or for life. This coverage can be converted into permanent life insurance without having to submit new evidence of good health.
Affordable coverage
This coverage allows you to save and carry out life projects that are important to you. There is one fixed, guaranteed premium for the entire team. You can choose decreasing coverage to save even more.
Travel Insurance / Super Visa
Many medical costs are not covered when you travel, particularly when you travel abroad. Avoid any worries while you’re on vacation by getting travel insurance that will provide you with the coverage you need.
Many credit card companies also include travel insurance. Be sure to check what kind of coverage you have before going on your trip, in case you require additional coverage.
Segregated Funds / RRSP / RRSP Loans
A registered retirement savings plan (RRSP) is a government-approved account that allows Canadians to plan for retirement. Annual contributions to an RRSP can be used as a tax deduction, which reduces the amount of tax a person will pay on their income. In addition, all capital gains and dividends aren’t taxed as long as the money remains in your RRSP.
If you are temporarily short on cash and can't contribute to your RRSP, an RRSP loan may be for you. The money you receive from your tax return and investments might even cover the cost of the loan.
Book a Consultation
Do you have questions about any of the insurance policies outlined on this page? I’d be happy to answer your questions and discuss the right policy for you.