Obtaining permanent life insurance does not need to be a complicated affair. Various permanent life insurance advisors are available in all major Canadian and US cities, as well as online. Do not hesitate to contact one today.
What is Permanent Life Insurance?
Permanent life insurance involves providing life insurance for one’s entire life. It is recommended for those considering early retirement and estate planning.
It can be used to generate additional retirement income, such as the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) in Canada, and provide extra cash for those who would like to plan their estates.
Permanent life insurance often combines a life insurance policy with death benefits and savings. In addition, policies do not expire. They are guaranteed as long as insurance payments do not lapse.
Cash value can be withdrawn to pay for various things, such as a child’s education or unexpected medical bills. Often, one must wait for a pre-determined waiting period before being allowed to withdraw money. This is to allow money to accumulate. Waiting periods are also known as qualifying periods and elimination periods. This can be up to 2 years in some cases. However, some permanent life insurance policies do not have waiting periods.
At times, term life insurance policies may offer the option of converting into permanent life insurance policies. Be advised that term life insurance only covers periods from 5 to 30 years. Beneficiaries do not receive a payout if the owner of the insurance lives longer than the term.
Types of Permanent Life Insurance
3 main types of permanent life insurance exist. These include Universal Life, Whole Life, and Term to 1
- Universal Life Insurance – This is guaranteed lifetime coverage. In addition, it includes an investment component, which will build tax-free savings. Savings structures and premiums vary and are often based on market performance.
Universal life insurance is recommended for those concerned about income replacement for their spouse and/or children, funeral expenses, paying for outstanding business or personal debts, loans, and credit cards, planning for retirement, leaving a charitable gift, or simply for business reasons.
- Whole Life Insurance – Similarly, to Universal Life Insurance, Whole Life Insurance provides guaranteed coverage. However, the fixed premium is set for the duration of the insurance. It can be used as collateral to take out loans. Unlike Universal Life Insurance, premiums grow at a guaranteed set rate.
- Term to 100 Life Insurance – Despite the name, for those who live past 100, coverage continues without having to pay the premium. It is the lowest cost of all three life insurances, and has no cash component. Often coverage starts at $25,000 CAD and up to 75 years of age. Rates are similar in the United States as well.
In addition, Term to 100 Life insurance can be supplemented with accident coverage for fractures, dismemberment, loss of limbs or sight, or accidental death.
Cost of Permanent Life Insurance
Although permanent life insurance is often much more expensive than term life insurance, particularly in the beginning, in the long-run it is quite affordable and beneficial.
Various factors will influence the cost of the life insurance, including age, with younger candidates paying less; gender, with cheaper rates for women; state of one’s health; whether one is a smoker or not; lifestyle, with those leading healthy lifestyles paying less; family medical history, with those with cancer and heart disease in their family paying more; one’s occupation and hobbies, with those in high risk occupations and dangerous sports pursuits paying more; size of the policy; and medical exam results.
During the medical exam, a doctor will evaluate one’s body mass index, blood pressure, and also take blood and urine samples.
For example, a 55-year old male non-smoker in the central United States should expect to pay about $2,900 USD per year, while a female will pay approximately $2,400 USD.
A 25-year old male non-smoker should prepare to pay approximately $785 USD per year, while a 25-year old female should pay $665 USD.
In Canada, average costs of permanent life insurance range from $2,058 per year or $185.22 per month for a $400,000 CAD policy for a Whole Life Insurance for a 30-year old non-smoking female.
Universal Life Insurance for the same 30-year old non-smoking female is approximately $170.33 per month and $2,044 per year for a $400,000 CAD policy.
For a 30-year old male non-smoker, a similar $400,000 CAD Whole Life Insurance policy is $207.54 per month and $2,306 per year, while a Universal Life Insurance policy is $191.33 per month and $2,296 per year.
On average, men pay more than women do because the medical community and actuaries have determined that women, in fact, statistically live much longer than men do.
Permanent life insurance is now more affordable and simpler than ever.