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. 

Different types of life insurance

There are 4 different types of life insurance:

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

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

How does term life insurance work?

Term life insurance can be a 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. 

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

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. 

(*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.) 

How does participating life insurance work?

participating life insurance policy — which is a kind of permanent life insurance — gives you guaranteed lifetime protection and the opportunity for:

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

Your policy is 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. 

(*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.)

How does universal life insurance work? 

Universal life insurance offers greater flexibility than other types of permanent life insurance. In most cases, it provides lifetime (or at least long-term) protection. At the same time it can make possible 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. And others combine both.  

You can invest any payments made over and above the cost of the insurance. The investment will hold your savings on a tax-deferred basis.

(*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.) 

What’s 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.  

Most advisors now offer to meet Clients virtually by video chat. Find an advisor today.


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This article is meant to only provide general information. 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.