March 10, 2022
By Sun Life Staff
Read time: 3 minutes 

Thinking about getting life insurance? It’s a great way to help financially protect your family. 

Quite simply, life insurance pays your family or beneficiaries when you die. They can then use the money to pay for:

  • debt, 
  • childcare,  
  • a mortgage or 
  • any other living expenses. 

To help decide what’s right for you, start by understanding the types of insurance available. And what each type of insurance offers. 

What are the different life insurance types?

There are 4 different types of life insurance:

  1. Term life insurance
  2. Permanent life insurance
  3. Participating life insurance
  4. Universal life insurance  

How can an advisor help with life insurance?

The right life insurance product for you depends on your personal situation, needs, and goals. There might not even be one type for you. You may find you need a combination of different life insurance products. 

This is where it helps to talk to a professional, like an advisor, for guidance.

How does term life insurance work?

Term life insurance can be relatively inexpensive. It provides protection over a pre-defined period. But it’s important to note that it can get more expensive as you get older.  

Typically, people buy term life insurance to protect their family during times when they have big financial obligations. This may be when you have young children, or a mortgage, for example. 

Let’s say you owe $400,000 on your mortgage. Holding half-a-million dollars’ worth of  term life insurance would help prevent your family struggling financially if you died. They can use the money from the death benefit* to help cover some or the entire mortgage. 

Ready to buy life insurance?

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How does permanent life insurance work?

Permanent life insurance provides guaranteed lifetime protection. It’s more expensive than term, but your premiums remain constant.* So at some point it may be cheaper to pay for your permanent life insurance than it would be to buy more term insurance. 

How does participating life insurance work?

A participating life insurance policy is a combination of permanent life insurance and the opportunity for:

  • tax-preferred cash value and
  • death benefit growth.

Your policy may be eligible to receive dividends,* which you can use to:

  • buy more coverage,
  • take a cash payment,
  • decrease your annual premium, or
  • save the money with your insurer and earn interest. 

How does universal life insurance work? 

Universal life insurance offers greater flexibility than other types of permanent life insurance. It provides lifetime protection. At the same time, it can help you grow your tax-preferred* savings. 

Some universal life insurance products have premium payments that stay the same over time. Some have payments that go up over time. Some have payments that you make for a limited time (i.e. 10, 15 or 20 years) and then your policy is paid up.

Additional payments over and above the cost of insurance can earn interest based on investment account options that you choose. This gives you the opportunity for tax-preferred investment growth. 

How do you know which life insurance is right for you?

The right life insurance product for you depends on your unique situation. So it helps to talk to a professional, like an advisor, for guidance. 

An advisor can look at your financial and lifestyle habits to help you decide which type meets your needs. They can also:

  • explain the products in further detail,
  • help build protection into your overall plan,
  • answer questions you may have and  
  • address your financial concerns.  

Not sure where to start? 

A Sun Life advisor can help. Don’t have an advisor? Find one now.

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An advisor can help put together a solid plan that suits your goals.

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*Definition of terms:

A death benefit is the money an insurance company pays your beneficiaries when you die. 

Premiums are the annual or monthly fees you pay for having insurance. Most permanent products come with premiums that stay the same, guaranteed. But please note that some permanent products are adjustable. That means their premiums may change over time. 

Dividends aren’t guaranteed. They may be credited to policies when the experience in the Sun Life Participating Account is better than the assumptions we made for factors like: investment returns, death benefits and expenses to support the guaranteed values in policies. If the Board of Directors determines there’s a surplus, a portion of this may be credited to policies in the form of policy owner dividends.

Tax-preferred means that any growth within the policy is tax-free. You may be taxed if you cancel your policy, borrow from your policy over a certain amount, or cancel part of your coverage. 

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.