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What is Life Insurance?

Life insurance helps your loved ones financially when you die. A life insurance policy from a Western Financial Group broker will pay a tax-free death benefit that your beneficiary can use to pay off debts, pay for your funeral, provide for your family or be donated to a charity.

Do you need life insurance?

You should have life insurance if your children, spouse, siblings or someone else depends on your income and would not be OK financially without you. It is also a good idea if you have a mortgage or other debts or loans. If you do not have any financial obligations to your family or the bank, a small life insurance policy can pay for funeral expenses and to settle your estate.

Types of life insurance

Term life insurance

Term life insurance is the most common kind of life insurance. You pay the same amount every year for a set number of years or until you reach a certain age. In the event of your death, a set amount of money is paid to your beneficiary. After the term is up, the coverage ends or renews at a higher premium or you can apply for a new policy if you are still in good health.

Term insurance does not have cash value, which means you cannot borrow against your policy and you will not get any money back if you cancel. You may be able to renew your policy when the term is up, but your premiums will increase.

Term life insurance for couples

You may want to consider buying term life insurance as a couple. Make sure you read through any existing policies you have through your employer or that you each got on your own in the past.

Single term life insurance

Single term insurance gives each partner their own policy and coverage amount. It is easy to change the beneficiary in case of divorce or separation.

Permanent life insurance

The other common form of life insurance is permanent life insurance. It will remain in effect as long as you keep paying the premiums. Permanent life insurance is much more expensive than term insurance and your beneficiary can get a large payout. Permanent insurance accumulates cash value and is tax deferred. You can also withdraw from or borrow against many permanent life insurance policies and can get money back if you cancel (minus the premiums you paid).

Universal life insurance

Universal life insurance is a type of permanent life insurance that combines an investment account with a life insurance policy. It has cash value and loans and withdrawals may be allowed.

Whole life insurance

Whole life insurance provides coverage for your lifetime and the premiums will not increase. It may guarantee a cash value.

What is a beneficiary?

A beneficiary is the person who receives the death benefit when you die. It can be a family member, friend or charity. You can have more than one beneficiary.

Revocable beneficiaries can be changed without their knowledge and irrevocable beneficiaries must give their written permission before you can make changes about who your beneficiary is.

If your beneficiary is younger than legal age, a trustee for the minor is named on the policy as well.

Your estate can also be the beneficiary and the death benefit will be distributed according to your will.

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