The Importance of Life Insurance in a Financial Plan

Viner and Selig Wealth Management |

When creating a comprehensive financial plan, life insurance often stands as an essential pillar. Many Canadians overlook life insurance as just another expense, but in reality, it’s a strategic tool for ensuring financial security and long-term wealth protection. Whether you're safeguarding your loved ones or leaving a legacy, life insurance plays a vital role in securing your financial future.

Why Life Insurance Matters

Life insurance is about more than just covering funeral costs; it's a way to ensure that your family is financially protected in the event of an untimely death. It provides a tax-free lump sum to your beneficiaries, helping them manage debts, replace income, and maintain their standard of living. For Canadians with mortgages, dependants, or significant debts, life insurance becomes even more important as a protective measure.

Moreover, life insurance can be integrated into broader financial planning strategies. It can help with estate planning by covering tax liabilities and ensuring that more of your wealth is passed on to your heirs. For business owners, life insurance is often used to protect the business from financial fallout if a key person passes away unexpectedly.

Types of Life Insurance in Canada

When considering life insurance, Canadians typically encounter two main options: term life insurance and permanent life insurance. Both serve important purposes but cater to different financial needs.

Term Life Insurance

Term life insurance is designed to cover you for a specific period, such as 10, 20, or 30 years. It is the most affordable option and provides straightforward protection. You pay regular premiums, and if you pass away during the term, your beneficiaries receive the death benefit. This type of policy is ideal for covering specific financial obligations that are time-limited, such as:

  • Mortgage payments
  • Educational expenses for children
  • Income replacement during peak earning years

One of the key benefits of term life insurance is its affordability. For young families or those on a budget, term policies offer substantial coverage for a relatively low cost. However, term policies do not accumulate cash value, and once the term ends, coverage ceases unless renewed—often at a higher premium due to age and health changes.

Permanent Life Insurance

Permanent life insurance covers you for your entire life, as long as you continue to pay the premiums as the policy requires. While these policies come with higher premiums than term life insurance, they offer several key benefits, including:

  • Lifelong protection
  • Accumulation of cash value
  • Tax-deferred growth on the cash value component

The cash value portion of permanent life insurance can be used as an investment vehicle or can potentially be borrowed against, providing flexibility in your financial plan. For Canadians seeking a way to leave a legacy or build tax-efficient wealth, permanent life insurance is an attractive option.

How to Choose the Right Policy

The decision between term and permanent life insurance depends on your financial goals, budget, and the needs of your beneficiaries. We can help you assess the amount of coverage you need, the duration, and which type of policy aligns with your financial objectives.

For young families with tight budgets and growing expenses, term life insurance might be the best fit. On the other hand, individuals focused on estate planning, wealth accumulation, or lifelong coverage may benefit from the features of permanent life insurance.

Life Insurance as a Core Part of Financial Planning

In Canada, life insurance is a crucial part of a well-rounded financial plan. Whether you choose term life insurance for temporary coverage or permanent life insurance for long-term protection, having life insurance ensures that your loved ones are financially secure, even in the face of life’s uncertainties. We can help tailor a plan to your specific needs, giving you peace of mind and a solid foundation for your future.

By including life insurance in your financial strategy, you protect your family, your assets, and your legacy.

Reach out to us if you are looking for guidance around your insurance needs. 

This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities.  Shauna Selig is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Advisor. Insurance products and services distributed through I.G. Insurance Services Inc. Insurance license sponsored by The Canada Life Assurance Company.