Why Life Insurance Is Essential

November 8, 2017


What would your family do if you were to die suddenly? Would it be a burden for them to pay for your final expenses? Would they be responsible for repayment of any of your loans?  If you are the main breadwinner, would your family be able to manage without your income?

Life insurance protects the financial security of your family and helps them maintain their lifestyle. It can also help pay the taxes that will arise when you die, leaving more for your beneficiaries.

How life insurance can help you

Lifestyle protection

  • ensures a source of income for your family if you pass away
  • ensures funds are available to pay off outstanding debts, like a mortgage or line of credit

Tax-efficient estate planning

  • provides a tax-efficient method to invest non-registered money, as part of your financial plan
  • allows you to leave a lump sum to your beneficiaries or to charities that is not subject to taxation
  • provides funds for funeral expenses, estate administration expenses and any taxes that may result from the “deemed disposition” of your capital assets as well as any taxes that may result from balances in your RRSP or RRIF at death

Key facts about life insurance

Life insurance can address a range of needs. Deciding the type of life insurance that is appropriate for you can be a difficult decision to make on your own. Here’s what you need to know about the two main types of life insurance: term and permanent.

Term Life Insurance

Permanent Life Insurance

Provides a level amount of insurance coverage for a specific period (e.g., 5, 10 or 20 years)

Provides insurance coverage that can increase, for your lifetime

Is generally the most affordable type of life insurance as it only covers you for a specific period of time

Has a pure insurance component and an investment (cash value) component, which gives you the potential for tax-advantaged growth

Allows for the greatest amount of coverage for the lowest initial premium (the premium rises each time you renew your coverage for a new term)

Premiums are composed of the cost of insurance and the amount allocated towards the investment component;the cost of the insurance component can be “paid-up” in a relatively short period of time, but the insurance coverage continues during your lifetime

Provides your beneficiary with tax-free death benefit proceeds if you pass away during the period of coverage

With advice from your MD Advisor, you can choose between “whole life” and “universal life” or a combination of the two

Learn more about MD’s insurance offering or contact your MD Advisor

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