At Allan Bush Investment Team, we create an overall curated financial plan for every client that often includes insurance. Insurance can be a powerful wealth management tool to help meet retirement goals and in Canada, the choice between term and whole life insurance depends on various factors, including financial goals, life stage, and needs. Here's a breakdown of when each type of insurance might be appropriate:

When to Get Term Insurance

1. Temporary Needs:
   • Debt Repayment: If you have significant debts like a mortgage or student loans that you expect to pay off within a certain period.
   • Income Replacement: To provide financial support to your dependents in the event of your death during your earning years.
2. Affordability:
   • Lower Premiums: Term insurance is generally more affordable than whole life insurance, making it suitable for individuals who need significant coverage at a lower cost.
3. Specific Period:
   • Coverage for a Specific Time Frame: Ideal if you need coverage for a defined period, such as until your children are financially independent or your mortgage is paid off.
   • Temporary Protection: Provides a safety net during key life stages when financial obligations are highest.
4. Simple Coverage:
   • No Savings Component: Term insurance focuses purely on providing a death benefit without an investment or cash value component.

When to Get Whole Life Insurance

1. Lifetime Coverage:
   • Permanent Needs: If you want to ensure your beneficiaries receive a death benefit regardless of when you pass away.
   • Final Expenses: To cover end-of-life expenses, such as funeral costs, which will always be a need.
2. Wealth Accumulation:
   • Cash Value: Whole life insurance includes a cash value component that grows over time, offering a savings element alongside the death benefit.
   • Policy Loans: You can borrow against the policy's cash value, providing a source of funds for emergencies or opportunities.
3. Estate Planning:
   • Legacy Planning: Helps in passing wealth to your heirs in a tax-efficient manner.
   • Estate Taxes: Provides funds for estate taxes or other estate settlement costs.
4. Stable Premiums:
   • Fixed Premiums: Whole life insurance premiums remain level throughout the policyholder's life, providing predictability in long-term financial planning.
5. Long-Term Financial Strategy:
   • Supplementary Retirement Income: The cash value can be used as a supplementary source of retirement income.
   • Financial Security: Offers a lifelong financial tool that can contribute to overall financial security and stability.

Things to Consider

1. Health and Age:
   • Younger and Healthier: Generally, the younger and healthier you are, the lower the premiums for both term and whole life insurance.
2. Financial Situation:
   • Budget: Consider what you can afford now and in the long term. Term insurance is cheaper initially, while whole life insurance is more expensive but offers additional benefits.
   • Long-Term Financial Goals: Align your choice with your long-term financial planning and goals.
3. Future Needs:
   • Changing Needs: Consider how your insurance needs may change over time. Term insurance can often be converted to whole life insurance, providing flexibility.
4. Chatting With A Member of our Team:
   • Accessing Advice: Working with one of our team members will help you determine the best type of insurance for your specific situation and goals.

When working through a financial plan, insurance plays an important role. Term insurance is typically best for temporary needs and affordability, while whole life insurance is suitable for permanent coverage, wealth accumulation, and estate planning. When you partner with the Allan Bush Investment Team at CIBC Private Wealth in Waterloo, Ontario, we'll help you understand your personal needs and goals to create a strategy that will work best for you. Next month, we'll dive into more detail on how you can use whole life insurance as a wealth tool. Until then, we're always here to help.