Protecting the Life You’ve Built
Top 5 Questions About Life Insurance
With Answers
There are two primary types of life insurance: term insurance and permanent insurance (which includes whole life and universal life). Each serves a different purpose.
› Term life insurance is affordable and designed to provide coverage for a set period (e.g., 10, 20, or 30 years). It’s ideal for covering temporary needs like a mortgage, children’s education, or income replacement during your prime earning years.
› Permanent life insurance lasts your entire life and includes a cash value component. It’s often used for estate planning, tax-sheltered growth, or leaving a legacy.
Your need depends on your goals. Do you want pure protection? Choose term. Are you looking for long-term financial strategy with tax-advantaged growth? Consider permanent insurance.
The right amount of coverage varies based on your individual responsibilities and goals.
› A common rule of thumb is 10 to 15 times your annual income, but that’s just a starting point.
› Consider your family’s total financial needs: mortgage balance, debts, child care, tuition, final expenses, and future income replacement.
› Include your existing savings and group insurance from work when calculating the gap.
An advisor can run a personalized needs analysis to help ensure your coverage is neither too low nor excessive, just right for your life and financial picture.
That’s a common misconception. Life insurance can be a smart financial move for many people, even young professionals, singles, or business owners.
› Young adults can lock in low rates while healthy, and permanent policies can grow tax-deferred savings for the future.
› Couples without children often use life insurance to protect a mortgage or support a surviving partner’s lifestyle.
› Business owners may need insurance to fund a buy-sell agreement or protect against the loss of a key person.
› Single individuals might consider coverage to avoid passing final expenses or debts to loved ones.
Bottom line: If someone depends on your income, or if you have long-term financial goals, life insurance can be a strategic asset, not just a safety net.
Life insurance offers several unique tax benefits that make it a powerful planning tool.
› Tax-free death benefit: Beneficiaries typically receive the life insurance payout free from income tax, which can be used to pay debts, fund education, or preserve a family lifestyle.
› Tax-deferred growth: With permanent policies, the cash value grows tax-deferred, similar to RRSPs or TFSAs.
› Tax-efficient estate planning: Permanent insurance can fund estate taxes or equalize inheritances, especially important if you own a business, cottage, or other illiquid assets.
› Business owners can use corporately owned life insurance to extract money more tax-efficiently from their companies.
These benefits make life insurance not just a protection tool, but also a smart financial and legacy planning strategy.
With so many providers and products, it can be difficult to compare policies, and the lowest premium isn’t always the best value. Here’s what a trusted advisor will help you evaluate:
› Financial strength of the insurer: You want a company that will still be there in 30+ years.
› Conversion options: Does your term policy allow you to convert to permanent coverage later without medical exams?
› Riders and custom features: Such as critical illness protection, child coverage, or return-of-premium riders.
› Underwriting requirements: Your health, lifestyle, and occupation may affect approval and pricing.
› Cost transparency: We’ll help you compare quotes and explain the why behind the pricing, so there are no surprises.
Partnering with a licensed, independent advisor ensures you’re not being steered into a one-size-fits-all product, but into a solution that truly fits your needs and your budget.
What the Wealthy Know About Life Insurance
Life insurance is often part of sophisticated wealth and tax strategies. Here’s how high-net-worth individuals use it:
To transfer wealth tax-efficiently to the next generation
To preserve capital gains on a family cottage or business
To fund charitable donations through gift planning
To create tax-free cash flow in retirement via policy loans or withdrawals
You don’t need to be ultra-wealthy to benefit, just informed. Many of these same strategies can be applied to your situation.
Still Have Questions?
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Disclosure: The information in this page is for general information purposes only and is not intended to provide legal, tax, financial or professional advice. Eau Claire Partners Inc. and its affiliates assumes no responsibility for any reliance made on or misuse or omissions of the information contained in this page. Seek professional advice before making any decision.
