Term, Permanent, Whole and Universal Life Insurance — What Are The Differences?

Making sense of the different types of life insurance is the first step in getting the coverage you and your family need.

Do you have life insurance? If not, you’re not alone. Many people are confused about the different types of life insurance, which can often stop them from buying a policy. A recent survey from the Financial Services Commission of Ontario (FSCO) found that only 47% of 25- to 34-year-olds in Ontario have life insurance, and almost half of those (48.6%) say they don’t fully understand their policy.¹

If your loved ones depend on you financially, you need life insurance. It can give them the financial security they need by providing them with a tax-free payment in the event of your death that they can use for things like:

Covering your funeral expenses
Helping them stay in the family home
Taking care of childcare expenses or household bills

Which type of coverage is right for me?

Life insurance coverage falls into two broad categories: term and permanent.

Term life insurance provides coverage for a specific period of time and is renewable after the term is up.

Permanent life insurance is designed to provide lifelong coverage. It can be either whole life or universal life insurance.

This may sound confusing, but understanding life insurance doesn’t have to be. Regardless of the different types, all forms of life insurance provide protection against financial loss resulting from death. The chart below explains the different types of life insurance to help you make an educated purchasing decision.

	Term Life	Permanent Whole Life	Permanent Universal Life
What’s the age of eligibility?	18-70²	0-85³	0-85³
What’s this coverage ideal for?	Offers an easy and convenient way to help protect your family’s financial future for the short term	Great if you want lifetime coverage to help protect your family’s financial future for the long term	Ideal if you have an interest in investments and want the security of lifetime coverage with the opportunity to save money in a tax-advantaged policy
How long will I be covered for?	A set number of years (referred to as a term) – usually 10 to 40 years – with the option to renew at the end of the term	Your entire life	You’ll have a unique combination of life insurance and investment options to choose from for your entire life
Will the payment to my beneficiary(ies) be tax-free?	Yes⁴	Yes⁴	Yes⁴
Will I need a medical exam?	May not be required	Typically required	Typically required
Will my payments increase?	Your payments are guaranteed not to change for the entire term; payments will increase at renewal but will then be guaranteed for the entire renewal period	No, your payments are guaranteed not to change for life	You can choose from various terms and payment options
Is the policy cancellable at any time?	Yes	Yes (you may receive the savings component of your policy if you cancel it before it’s matured)	Yes (you may receive the savings component of your policy if you cancel it before it’s matured)
Is there a money-back cancellation period?	No; however if you cancel, you will only pay for the time when you were covered	No; however if you cancel, you will only pay for the time when you were covered	No

It’s always important to compare life insurance before you buy it. The more you know about the different types of life insurance, the easier it will be to find the policy that best fits your needs.

Still have questions? Talk to an RBC Insurance advisor today.

1) https://www.investmentexecutive.com/news/products/millennials-struggling-to-grasp-insurance/
2) You may apply for term life insurance if you are age 18 to age 70 for terms from 10 to 15 years. For terms over 15 years, the maximum issue age is 85 less the selected term. For example, for a Term 25 policy, the maximum issue age is 60 (85 – 25).
3) There are different options available to you. Please contact us for more information.
4) Note that probate fees are applicable if you have not designated a beneficiary and the proceeds of your policy become part of your estate.

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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