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Buying life insurance after the kids leave home: Pradeep's story Add to ...

At age 60, Pradeep is shopping for life insurance. He is a widower and the last of his children has just left home, so he now needs less coverage. He wants to cut back to a $250,000 policy to provide an inheritance to his children, and pay off any final costs such as his funeral. This chart shows you the cost of the policies he looked at. It also shows the benefits of each choice, as well as the drawbacks.

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Note: The costs you see here are true for Pradeep only. Your own age, gender, and state of health all affect the cost of your insurance. For example, your premiums will be higher if you are male, older, or smoke. You’ll also pay more for a larger death benefit. 

Type of insurance

Pros

Cons

Monthly costs

 

Term insurance

Your starting premiums are lower than permanent insurance

Your premiums go up if you buy or renew when you are older or convert later to permanent insurance

 

10-year term:

$82 to $90

 

20-year term:

$168 to $185

 

You can use it to cover short-term needs, such as mortgages

You cannot use it to build up savings, and it does not protect your family if you outlive the term

 

You may be able to convert to permanent insurance (up to a certain age)

You may be able to renew without a medical exam, but some policies require an exam to get a lower premium

 

You may be able to buy by phone, on the Internet, by mail, or through a group or association

You may not get what you think you are buying if you buy directly, without advice from an expert

 

Permanent  Whole Life insurance

Your premiums and death benefit don’t change in most cases. With some plans, you can pay higher premiums for a limited time

Your starting premiums are higher than you pay for term life insurance

$450 to $495 and up (premium stays the same)

 

You are covered for life

 

You may not need the same coverage as your personal or family situation changes

 

You may be able to get some of the death benefit in advance if you become terminally ill

The company may be able to cancel your policy if your health changes

 

If you opt to pay higher premiums and build cash value, you can grow your savings without paying tax on the growth until later. You may also use the cash value to pay your premiums

You don’t get to choose how your money is invested

 

You can use the cash value for investment, retirement, and estate planning, and you have some choices about how you invest your money

You could save your money in some other investment, without having to buy insurance

 

Universal Life insurance

You can change the amount of the premiums if you want a bigger or smaller death benefit. You can even pay for some years and then stop, if you have enough cash value

Your starting premiums are higher than you pay for term life insurance

$450 to $495 (with no cash savings)

 

You are covered for life

 

As your personal and family situation changes, you may not need the same coverage

 

You may be able to get some of the death benefit in advance if you become terminally ill

The company can cancel your policy if your health changes

 

If you opt to pay higher premiums and build cash value, you can grow your savings without paying tax on the growth until later. You may also use the cash value to pay your premiums

There is no guarantee on how fast your money will grow. You can lose some of the cash value if your investments lose money

 

You can use the cash value for investment, retirement, and estate planning, and you have some choices about how you invest your money

 

You could save your money in some other investment, without having to buy insurance

 

 


 

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

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