Perspective – Insurance Part 2 : What Type of Insurance Fits You?
Do you like word pictures? They are a unique way to help explain or understand a concept which seems more
difficult to define by simply using words. Apparently, our long-term memory is best stimulated and utilized with
pictures. Maybe that is why it is often said that ‘a picture is worth a thousand words’! Word pictures provide a basis
for a concept that may also need additional fine tuning with words.
Let’s use some word pictures to help understand the basic options for life insurance.
There are many life insurance companies who between them provide hundreds of policies, each with their own
benefits and characteristics that may appeal to your need and objective of providing for your loved ones when you
are unable to provide for them yourself. However, each of these policies are actually a variation of probably 3 root
types of life insurance products.
Let’s consider Term Insurance. This is a life insurance policy that has been calculated only to be required for an
anticipated period of time. It might be related to the repayment of a loan or mortgage and once the repayment is
complete it may no longer be required. The word picture…term insurance is like renting an apartment. If you pay
the rent, you can live there. If you choose not to pay the rent, your benefits are removed. There is no ownership and
there is no equity building in your favour. You do not have ultimate control of your living arrangements. In the short
term, the cost is very affordable. In the long term, the cost is prohibitive. Term Life Insurance is the right coverage
for certain life objectives.
Then there is Universal Life. This is a policy that combines term insurance with investment options and takes
advantage of some of the tax preferences inherent to life insurance. The word picture…universal life insurance is like
renting to own. A portion of your rent payment is actually being applied to building equity or ownership in the
property. For this reason, the cost is higher than basic rent. Over time and with the ever-increasing equity position, a
higher portion of the monthly rent is applied to property ownership. If you pay the rent, you can stay there. If you
don’t pay the rent, you have the amount of the property you own that can help! Universal Life Insurance is the right
coverage for certain life objectives.
Finally, there is Whole Life. This is a policy that will provide coverage throughout your entire life. You have control of
this policy. The word picture…whole life insurance is like owning the house. A portion of the mortgage payment is
attributed to interest costs. The more equity you have in your home the less interest you pay. You are on title for the
property and make the decisions concerning the property. The value of your property generally increases over time
and once you have repaid the mortgage you maintain full ownership of the property until you decide otherwise.
Whole Life Insurance is the right coverage for certain life objectives.
Please keep in mind that life insurance in all its various forms provides peace of mind. You and your family can be
assured that should something tragic happen, loved ones will at least have an opportunity to be supported financially
as they rebuild their lives. It is a very loving gift in a time of unanticipated need.
These word pictures will help to understand the simple basics of life insurance options. However, it is best for you to
contact our office and as a qualified Insurance Advisor, I will help you understand the best long-term and short-term
solutions to give you and your family confidence. No one is immortal! Don’t delay to make a decision that will
benefit your whole family. We will help you determine your best life insurance options.