Mandy: Everyone knows that life insurance is very necessary but did you know there are different types of it? I have Zeynel from Life Insurance Expert here with me to give us some ins and outs on it. What are the two big different types?
Zeynel Azimullah: Well, the main two types in Canada are term and permanent. Both are beneficial depending on where you are in your life and your affordability, providing protection for a certain amount of time as the name suggests. So it could be five years, 10 years, 25 years, or 30 years. Typically, this is protection that’s for a specific time-sensitive need. For example, a mortgage or covering off a child’s college education plan or maybe even a loan. The beauty about permanent insurance is that coverage is in place for life and it never expires. This type of policy in Canada is very sophisticated because it allows you to build cash value. So the tax savings are enormous because there are only so many tax havens in Canada. For example, your personal residence, a TFSA, if you win the lottery, and of course permanent insurance. So, with permanent insurance, as you put money into the plan it grows at a predetermined rate and when you siphon the money out you can use it while you’re alive. So, with temporary insurance, it says when it expires, it’s over with, and if you don’t pass away there’s no benefit. With permanent insurance, if you’re alive you can use the money inside and if you pass away the beneficiary gets the benefit. So, it not only benefits your family should you pass it can also be used while you’re still living.
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