Should You Buy Term Or Whole Life Insurance In Manitoba?

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October 14, 2022

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You are probably already aware of the long list of benefits of getting life insurance but still aren’t sure exactly what policy to get. When choosing a plan, one of the biggest questions people face is, should I buy term or whole life insurance?

This question is easier to ask than answer; however, if you want a quick-and-easy response, we recommend both. A layered approach is your best option to maximize your coverage over short and long periods of time. It provides you with the safety blanket you need in the short term to cover your larger debts while still ensuring you will have the guaranteed protection you need later on. Essentially it gives you the best of both worlds.

In this article, we’ll explore in more detail the biggest differences between term and whole life insurance, what pros and cons you’ll see with both of these policies, and answer some of the common questions we get asked.

More of a talker than a reader? Contact us today, where we can discuss which life insurance policy makes the most sense for you, your family, your budget, and your goals.

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What Is The Difference Between Term And Whole Life Insurance?

Both term and whole life insurance would offer your family financial protection if something were to happen to you. This benefit can help cover loss of income and grievance time or help pay for your final resting costs. We break down both policy options below so you can feel more confident in choosing a plan that makes sense for you and your needs.

Term Life Insurance Explained

Term life insurance is a temporary life insurance policy. You can purchase different term options for a set period of 10 to 100 years. If you were to pass while your policy term was active, the plan would help cover your debts and take care of our family and their financial loss.

Once your term is up, you can choose to renew your policy to another term option, move to a whole life plan, or stop getting life insurance altogether– although we don’t usually suggest this route.

Term life insurance provides an affordable and customizable option for people who want protection but don’t have a large budget.

Whole Life Insurance Explained

Whole life insurance is a permanent life insurance plan offering guaranteed lifelong coverage. It is there to ensure there is always money for final expenses or to leave a legacy for your family.

Unlike term policies, where your premiums will most likely change once your chosen term is up, a whole life insurance policy provides you with the benefit of having your monthly life premiums locked in from the age you put your policy in place.

There are different types of life permanent life insurance policies that can include investment options, growing death benefits, and growing cash values. It’s best to speak with an Insurance Advisor to know what option is best for you.

Pros And Cons Of Term And Whole Life Insurance

Both term and whole life insurance policies offer many advantages. Choosing the right one for you, your needs, and your budget can be challenging. To help you decide, we wanted to break it down for you.

Term Life insurance

Pros:

  • Offers financial protection to your family if you pass
  • More affordable premiums than a whole-life plan
  • Flexible – Can move into a whole life plan down the round
  • Guarantees insurability if you continue to renew

Cons:

  • Doesn’t offer whole-life protection
  • Premium fees can increase when the term renews
  • Increased monthly premium if you move to a whole life plan
Whole Life insurance

Pros:

  • Offers financial protection to your family if you pass
  • Guaranteed insurability (FOREVER, foreva, eva)
  • Your premiums say the same (even if you get a medical diagnosis!)
  • Can invest $
  • With you until you die

Cons:

  • More expensive monthly premiums
What we recommend:

Everyone’s situation is a bit different. What’s right for person A may not be right for person B. The plan we recommend will depend on many factors, such as what debts you currently have, your financial position, if you have children, and so on. However, If you can afford it, one of the best options we recommend is a layered approach, as both life insurance policies satisfy different needs.

The sad reality is that we will all pass away at some point. The challenging part is that we don’t know when it will occur. Having a layered approach ensures your debts are covered in the short term, and once they are paid off, the permanent coverage will ensure there is never a financial burden to your family for final expenses.

Regardless of what life insurance plan you choose, the best thing you can do for yourself and your family is to buy a policy while you are young. Buying now will help you ensure insurability in the future and, in some cases, allow you to lock in cheaper monthly premiums. If you’re in your 20s and 30s and aren’t sure what insurance policies you may benefit from that you don’t already have, check our Guide to Insurance for Manitobans in their 20s and 30s.

Cost & Coverage Breakdown

Reading insurance fine print is great (and something we recommend!), but it doesn’t usually paint the complete picture of what each insurance policy will look like in a real-life setting. This is why we’ve outlined a few different scenarios for you below. These should help demonstrate how each situation will change depending on what plan you decide to buy. If you have more questions, give us a call! We’d love to chat through more scenarios with you.

Your premium will depend on many things, including your gender, age, lifestyle, etc. For these scenarios, we’ve used the example of a 30-year-old male who is healthy & does not smoke so we can illustrate the comparison across the different types of policies & scenarios.*

*Note: These premiums are based solely on illustration purposes and are not universal. To get an accurate breakdown for you, talk to an insurance advisor.

Scenario 1 - Whole Life Insurance Policy

You are a healthy, non-smoking male who decides to purchase whole life insurance at 30

Your monthly premium fee at 30 would be roughly $120/ month.

Now you’re 50 and still are a healthy, non-smoking male. You’ve continued to pay your premium since getting your plan.

Your monthly premium fee at 50 would remain unchanged at $120/ month.

But what if at 50, instead of being healthy, you’ve been diagnosed with diabetes?

Your monthly premium fee at 50 would remain unchanged at $120/ month.

If you were to pass away early at 65, what would happen, assuming you have an active plan and have made all your payments?

If the policy is active, a claim can be made. Your beneficiary– the person you chose to receive the benefit– would receive the tax-free payment.

Now, what If you were to pass away at 82– The average life expectancy in Canada?

As long as you have an active policy, you are covered. Whole life insurance is with you until you die, regardless of your age.

Scenario 2 - Term Life Insurance Policy

You are a healthy, non-smoking male who decides to purchase a 20-year term life insurance policy at the age of 30.

Your monthly premium fee at 30 would be roughly $11.00/ month.

Now you’re 50 and still are a healthy, non-smoking male. You’ve continued to pay your premium since getting your plan.

Your monthly premium fee at 50 would increase to $350/month. However, if you are in good health, we would recommend you obtain a new policy. Getting a new policy would bring the monthly life insurance premium cost closer to $130/ month.

Term life insurance guarantees your insurability if you continue to renew. This means that no new health assessment is taken. So, life insurance companies need to find a premium fee that reflects the average person’s health at that age.

Guaranteed insurability comes with a price tag. For some, this monthly fee is a great deal if it means they can continue to capitalize on all the benefits life insurance can offer. If you are healthy, though, it may not be the best deal you can get.

If you wanted to use this renewal to convert your plan to a whole life insurance plan, it would cost about $460 (based on current rates). This fee assumes you are rolling over your current policy and not doing a new one.

Now, at the age of 50, instead of being healthy, you’ve been diagnosed with diabetes.

Your monthly premium fee at 50 would still increase to $350/month. As your health has decreased, you wouldn’t want to take out a new policy. By extending your current plan, you’d be guaranteed insurability.

If you wanted to use this renewal to change your plan to a whole life insurance plan, it would cost about $460 (based on current rates), as you can convert with no medical evidence.

If you were to pass away early at 65, what would happen, assuming you have an active plan and have made all your payments?

If the policy is active, a claim can be made. Your beneficiary– the person you chose to receive the benefit– would receive the tax-free payment.

Now, what If you were to pass away at 82– The average life expectancy in Canada?

As long as you have an active policy, you are covered. You can get term insurance to age 100 (it is permanent but is paid up at age 100).

When To Buy Whole Vs. When To Buy Term Life Insurance

As with most insurance policies, there really isn’t a one size fits all option. Every person’s policy is uniquely designed to fit their needs. One of the biggest factors someone should consider when choosing a life insurance policy is their current financial situation. This includes what premiums they can afford, what kind of debts they have, and just how affected their fam would be without their income stream.

At Winnipeg Insurance Brokers Ltd., our job is to be your personal insurance team. We know how stressful and intimidating insurance can be, which is why we are on your team to make this process as easy and stress-free as possible.

Questions To Ask Yourself When Choosing Which Plan Is Better For You

When determining what plan to get, there is a lot to consider. We’ve outlined a few big questions you should ask yourself before deciding what plan is right for you.

  • Is there a world where my family could live off of just my partner’s income?
  • Do I see my family taking out new debts in the next 20-30 years (vehicle debt, housing debt– bigger house, vacation property, rental unit, student debt)?
  • How much in monthly premiums can I/ my family afford now?
  • Do I have any coverage currently through work or another provider?
  • Am I looking for somewhere to hold/grow wealth?

Term And Whole Life Insurance FAQs

Yes, one of the most significant features of term insurance is that you can convert (in most cases before the age of 70) with no evidence of insurability. Term insurance guarantees your insurability as long as you don’t outright cancel it.

This is not a straightforward question: depending on how long the policy has been in force and how much the dividend is, you can typically offset your premium with your dividend. You also may be able to borrow from your cash value to pay for the premiums until you get back on your feet.

 

There really is so much flexibility within these policies that there are probably some other options to help you pay these temporarily as well. If you’re facing this situation and worried about making your payment, we recommend talking to an insurance advisor before cancelling your policy.

 

Cancelling your policy outright may result in your inability to secure another insurance policy or cause your premiums to increase down the road.

The good news is that if you opted in for a permanent policy, nothing changes. If you have a term policy, though, this will impact your premium when you renew.

Yes! Purchasing life insurance for your children is one of the best things you can do. Depending on the type of policy you get for them, it can ensure that they will have coverage for the rest of their lives, plus they’ll have time to accumulate a death benefit.

 

Related: Life Insurance For Children And Babies

Yes, you can get Life Insurance even if you have a pre-existing medical condition. Unfortunately, having a pre-existing condition can sometimes deem you a “higher risk” in the eyes of the insurer from an underwriting standpoint, which may make it harder to secure a standard insurance policy. But it doesn’t mean you can’t get the coverage you need.

 

As a “higher risk” individual, you could end up with what’s called a “rating” on your policy, which means you can still get coverage, but you’ll have to pay a higher premium than someone without a rating would. In some cases, your rating may be reconsidered if your health improves.

 

Related: Life Insurance for Canadians with Pre-Existing Medical Conditions

We’re On Your Team And Want To Help!

When it comes to deciding between term and life insurance, there isn’t one that we recommend over the other. It really boils down to your needs and what you can afford.

At Winnipeg Insurance Brokers Ltd., we are a team of Insurance Consultants and Advisors, not agents or salespeople. We are on your team and are rooting for you to get the best policy for your life and needs. We are here to be your support systems and your cheerleaders.

Finding the right life insurance policy starts with a quote. Our team will discuss your policy options and determine what makes sense, given your situation. There is no obligation to purchase. Ready to plan for the future?