CLIC Insurance

Life Insurance: About

If you have loved ones, you need life insurance. What kind and how much does it cost are two of the most often asked questions.

Here, we define the four major types of life insurance and examine what goes into getting an accurate insurance quote.

The Major Types of Life Insurance Defined

Following are the four major types of life insurance. While terms may differ from province to province or state to state, these basics apply across the board.

Types of Life Insurance: Term Life Insurance. Term insurance is the simplest kind of life insurance you can buy.

This is where you purchase a set policy for a set price for a set period of time. If you die during the time the policy covers, your beneficiary receives the amount of the policy.

Types of Life Insurance: Whole Life Insurance. This is very similar to term life, with the major difference being you purchase a policy to cover the entire time you are living (e.g. your whole life), instead of a set period of time.

Whole life insurance comes with an investment portion. E.g., your premiums remain the same throughout the term of the policy, but the company invests a portion of those premiums. Of these invested portions, the policy holder receives a share of the proceeds.

Types of Life Insurance: Universal Life Insurance. Now, it starts to get a little bit more complicated.

With universal life insurance, the policy holder chooses to pay an amount that extends beyond the minimum (usually monthly) premium, with the excess being invested. They policy holder decides how much over the minimum premium they pay, but the company they buy the policy from decides how/where the money is invested.

Premiums paid and any returns earned as a result of the investment are deposited into a cash-value account, where it can grow as an investment, or be applied toward future premiums.

Usually, safe* investment instruments are chosen (i.e. bonds, mortgages).

Types of Life Insurance: Variable Life Insurance. A variable life insurance policy is similar to a universal policy, as it has an investment component that can be applied to future premiums, or left to accrue in an account.

The primary difference between a variable life insurance policy and a universal life insurance policy is that variable policies offer a wider range of investment vehicles from which to choose, including stocks.

Life Insurance Quotes: How Much Does It Cost?

To get an accurate life insurance quote, many variables have to be assessed. Following are a few:

Age: The older you are, the more expensive it gets to purchase life insurance.

Amount of Policy: You can buy practically as much life insurance as you can afford. But, a $250,000 policy is going to cost more than a $25,000 policy.

Health: Many health factors are taken into account when you purchase life insurance (e.g., do you smoke, are you overweight, do you have a family history of certain diseases, etc.).

*Safe: No investment is 100% risk free.