Would you rather rent or own your Life Insurance

I often explain the differences between term life insurance and permanent insurance with a well understood analogy. Term insurance is like renting an apartment, as long as you pay a monthly rent which increase over time, you can stay in the apartment or keep the life insurance in force. As one gets older, the cost of tem insurance gets prohibitive and often expires or is cancelled before the life insured dies. It is interesting to note that approximately only 3% of all term insurance policies are paid out as a death claim.

Permanent insurance is ownership, similar to owning a home. Overtime, you own more of your home as you make monthly payments to a mortgage. The equity in our home increase over time as the debt is reduced. Buying permanent life insurance is like purchasing a piece of property that never declines in value as long as premiums are paid regularly.

Advisors are often asked which type of life insurance is better. To answer this question it is important to be clear about the purpose or job the life insurance is to d and when. Short term problems can be solved with short term solutions such as term insurance. Long term planning needs such as funeral expenses, income tax planning needs such as funeral expenses, income tax liabilities from RRSP/RRIF, capital gains, succession planning for business, shareholder buy-sell agreements and charitable giving most often require solutions using permanent life insurance.

Seek the help of a qualified life insurance advisor to match your needs to the appropriate insurance solution. Protecting you loved ones in the event of unforeseen circumstances in critical. Most individuals don’t plan to fail, but rather they fail to plan!