A Canadian personal-finance presentation explaining why life insurance matters and how to choose among broad product categories. The presenter frames insurance as a tool to protect family income, pay debts, and provide liquidity at death, emphasizes matching product design to life stages and objectives, and contrasts term insurance (time-limited, single-purpose) with permanent products—primarily whole life and universal life—that build cash value and can include riders (e.g., term riders) to expand death benefit during high-need periods.
Chapters
Everyone in the country has got a different financial junk drawer. Okay. We're all dealing with different things and different bills to pay. We have different incomes, our incomes fluctuate over time and there's all these challenges that we're faced with. So you need to make sure that you're matching your insurance objectives, the insurance products and things that you're looking to work with, with a combination of what's going on in your life at the present, with an eye towards the future.
So what are all the different types of life insurance available in Canada and what are some things you should know not only for your own planning, but just in general broad stroke terms about the power of life insurance and why you should consider having some, or maybe why you shouldn't. So for what we're going to be doing today, I'm going to be bringing up my screen. I'm just going to be kind of sketching out and writing down a couple things as we go. And, and the key thing is understanding the foundation or the premise of life insurance. I mean, ultimately it's pretty simple. Most people understand that as you go through life, we go through different stages of life. And so many of those stages will include getting your first mortgage or your first home, having a large debt that goes with that, starting a family. And not everyone starts a family, but for a lot of people it's pretty common. And then how do you protect that family if something were to happen to you? How does a death benefit show up with tax free money to solve a lot of the pretty crazy problems that we leave behind when we leave planet Earth? So that's one of the number one things. And so, you know, as a parent, you're thinking about how do you protect, you know, your spouse, protect your children, to make sure that there's capital available, a liquidity event that happens so that, you know, debts can be paid, there's income there to help support the rest of the family for a number of years while they go through a transition period? There's a huge transition period when we lose a critical member of the family, especially an income producing member of the family. Now in a lot of households, and again, it really varies across the board. Everyone in the country has got a different financial junk drawer. Okay. We're all dealing with different things and different bills to pay. We have different incomes, our incomes fluctuate over time and there's all these challenges that we're faced with. So you need to make sure that you're matching your insurance objectives, the insurance products and things that you're looking to work with, with a combination of what's going on in your life at the present with an eye towards the future. So what's coming up, what's on the horizon that you need to be planning for. So things on the horizon would be, you know, your, your mortgage is reducing over time potentially or you need to upgrade the house cause you're gonna be getting a bigger house cause the one you have just isn't big enough. You're expecting another child or your kids are outgrowing it. As an example, you wann that's there's going to be capital investment that happens there or perhaps you are looking at towards retirement and you want to make sure that there's additional capital available for that purpose. So that may all play a role into the decisions that you make today and how you want to have capital available and deploying it for your future. Okay. More importantly, it's going to have a huge impact in the, the situation that presents itself. If you're not around, you know, if you kick the bucket early, what happens like how is everyone taken care of? What problems are going to show up that are left behind? Because we did poor planning essentially. And so that helps dictate, you know, what type of insurance should you make sure is in place, how much of it should you make sure is in place and then how do you want to see that that's provided to the family in a certain way? Because even beyond just the insurance contract, you can also set things in place to ensure that capital actually produces an income for the family. Because maybe what they need isn't just paying off debts. Maybe what they need is stability of income. And where we see that is the most prevalent, it's the most concerning is in a household situation where we have one primary working spouse and we have a non working spouse. Because they're taking on the charge and the role of looking after, you know, the kids, they're, they're in, you know, child rearing years. They're, they've taken on that most important job of looking after the growth and development of the next generation of the children. And so there's a decision that's made where it doesn't make sense for that partner to maybe to go back to active work. If that's the case, the longer that individual is away from active work, well, the harder it can be for them to get back into the working industry. So if we lose the primary breadwinning partner, that person's gone, they've, they've died prematurely. Which by the way that's how it happens for most people. And there's not an influx of capital. This, this other individual that's left behind. Not only do they have to do all the things they were already doing, they now also have to go and find work, find a job, create an income to continue to support their life. And it can be extremely difficult to do that. Now everyone watching this, you've probably experienced or saw on your Facebook feed or some of something through social media where people are actively trying to raise capital. They're doing little fundraising events because a friend or a family member or someone passed away. And we need to help that family out with basic necessities because they didn't have anything in planned or the insurance that they had, you know, they, they let it lapse because they weren't watching their budget or whatever. These kind of things happen. So it's really important to make sure that, that you're considering insurance planning in your life because it's not about.
Let'S put it this way, your life is going to go on and then when you're gone, the people that you leave behind, their life is going to go on. So how we think about what we do today and how it impacts people in the future is really important. So we try to match those things together. That's where having a conversation, working with an advisor, having good Q and A and good feedback on questions to talk through what you think is going to take place in your life is very, very helpful, very impactful. So we encourage everyone to, if you haven't yet had a good assessment or you know, you're not really thinking about how insurance planning comes into the role of your life, make sure you have that conversation. Book a conversation with someone so you can talk it through. Start thinking about what's going on in your life and how circumstances can change and what do you want to see take place in the event that they change outside of your control. Alright, so let's bring up my screen here and I'm just going to jot down a couple things. So basically, I mean, there's three, you know, primary ways that people get insurance in Canada. There's term insurance and then there's a form of permanent insurance. And the two primary categories for that are something referred to as Universal life and Whole Life. Now, underneath each of these banners, what you have is you have a whole bunch of companies and then you have a whole bunch of different types of product designs that are available. So you have all these options. Okay? In other words, there's a ton of options, a Sea of options that are available for how you can go and get these policies. Same thing over here. Not to single out, my friend, term insurance over here. There's options available there as well. Typically these options are simply based on the time frame. All right, so in other words, you're going to get a policy with an insurance company. What is the time frame that you're going to be able to get coverage? For an example, you know, you're going to get coverage for.
A term basically for 10 years. T10 a term for 20 years. These are the most common. Sometimes you see a term for 25, for 30, but you know, far and wide, across the board, a term 10 or a term 20 are the most common term products available in Canada today that are most widely sold. At least these are the ones I see most frequently. There's nothing right, wrong or indifferent about any one of these things on the screen. They're just tools. How that tool interacts with your life and how does it match or meet an objective that you have that you're looking to solve? That's what matters. Now, a lot of people don't realize that within, within these buckets here, these different types of products, we can also add on something that's referred to as a rider or riders. Okay, Riders are options. They're flexible options. They all come at some kind of a premium allotment. It's all actuarially calculated by the insurance company. But these riders can allow you to do a variety of things. Now, for me, what I find for myself, my own practice and what's very common is, you know, we, we spend a lot of our time and effort speaking to people, teaching and training them about the advantages of using an insurance contract for its living benefits. Okay. In other words, you know, when we understand how a contract works over time, it's for living, not for dying.
Okay?
One of our mentors used to say that. So we will have participating whole life insurance contracts we put in place quite frequently. Myself, I have a number of them. And on those contracts, what we'll often do is we'll add a rider and that rider may be a term insurance rider. Now the reason we do that isn't because, you know, there's some kind of magic pill or that it helps make the policy better. It doesn't do any of those things. The reason that we put it in place is because people have insurability needs. So sometimes we might start them with a smaller whole life policy to get them going, start building an asset value, build building cash values, creating protection against the long term objectives of their life. And they have a young family, they have a large mortgage, they have other debts they need to pay. So there's a large amount of extra coverage that they need that it doesn't make sense today at present for them maybe to get it in a whole life format. So what we do is we add a rider on there. So let's, as an example, let's say we have a, you know, $250,000 whole life contract and then on top of that, we're stacking a million dollars of term insurance for 20 years, you know, 30 year old, 35 year old. That allows them to now have a much larger amount of death benefit, protect their family over that time frame. Meanwhile, the whole life policy, it keeps trucking along and it grows and it.
Grows and it grows. So what you kind of see it would look something like this if I were just to draw it out here. Roughly speaking. So we have a whole life contract and again, just trying to keep it very high level, very simple. And then what we're doing is we're adding, I'll use a hot pink here, I guess we're adding a term insurance on top for a million bucks.
But it's only good for, let's say, 20 years. And then at that point in time, if the person wants to keep it, they can carry it on. But because we're 20 years older, what happens is the premium cost of the term portion is going to rise substantially.
In order to still allow the insurance company to guarantee that premium payment. So for a lot of people, they'll get to this stage and they might say, you know, maybe I don't need that anymore because of the solid foundation I have now built of the whole life policy. Well, that whole life contract has continued to rise and accumulate over that 20 year period and it will continue to do so beyond. And so the end result is you have a death benefit that's rising like this. And we're also accumulating a cash value asset inside of that contract as well that we can use as working capital. Okay. It's building basically equity inside of the insurance. So this is a multi pronged kind of approach to meeting the objective of making sure the family's taken care of up front. You know, it would be important with an insurance professional to do what's called a needs assessment. You actually look at who's making income, you know, what are the obligations that we have, you know, are we planning for a kid's education account? Is that really important to you? Do we Want to make sure there's money left, you know, to the parents because of something they did for you guys. Is there any third party person we owe? Do we want to make a special contribution to our church or to, you know, the Counselor foundation or the Ms. Society, like some cause that you value deeply? Is there some other thing that we need to make sure is looked after in there that all gets buttoned up into a needs assessment and then that says, hey, look, this is how much coverage we actually need for most people in the country, what we find is that the amount of coverage they actually need to have, that they should have in order to meet the obligations and to solve the problems that they're going to leave behind and what they actually should have in place, it's a much higher number than what people anticipate. And, and the biggest factor that comes in that people don't, don't really recognize they're not aware of. It's an income solve. All right, we have one spouse who, you know, makes a larger amount of the money and the other spouse makes less. Well, if we were to lose this individual, boy, oh boy, we've created a real problem there. There's a huge gap because now there's a lifespan, a lifespan of income that's just gone. It can never be earned. So insurance is this magical tool that's been created to solve this social problem that exists where rather than being dependent on, you know, government handouts and all these other things to support that individual. We have a private contract that's mutually pooled risk with other free people who voluntarily enter these contracts. That a large chunk of tax free money that the CRA doesn't get their hands on, any of it shows up when it's needed the most to solve the most amount of problems so that the family can keep on living and they get the time, more importantly, they get the time to grieve and to move on and move through that experience to continue on their life. So again, insurance, very powerful tool. There's many options. There's a sea of options available. It's not that one insurance is better than another. It's that insurance is a tool. And the tool, you're hiring that tool to do a job for you. What is the job you're hiring it to do? Or are you hiring it to do multiple jobs? If you want someone to do multiple jobs, well, then you need either a multiple tool or you need a toolbox. So one thing I would say is that term insurance in general, it's a singular tool. It only does the job of one thing, and it only does the job of one thing for a period of time. And if you're at the end of the clock in that period of time and your life hasn't gone the way you anticipated, you didn't get your mortgage paid for, or something came up along the way, what a lot of people find is when they get to the end, they're not situated the way they wanted to be, and they still need that insurance coverage. But now the premium is going to go up. Whereas in these other categories, depending on how they're structured, at least, you know, specifically with whole life, you're locking in a premium, it's guaranteed, it never goes up, but the cash that accumulates does go up and the death benefit goes up if it's designed well. And they can be built in such a way where they're very, very flexible.
Not to speak too much on uls. These ones are probably the contracts that have the most amount of options available, but they're almost far too many options for most people because they're very difficult to understand. The contracts quite frequently and to this date, being in this industry now for well over a decade, I have yet to have a client show up with a universal life policy statement and a contract and have them be able to explain to me what they own. It's never happened. Now, that doesn't mean that people don't know them or don't understand them, but on a consistent basis, I can speak from my own experience at least. They can often be very confusing. And because they're confusing, when we lack understanding about something, then we don't know how to even use the tool that we have. What's the point? So you need to look at taking more time to get some education as a consumer, as whether you're in business for yourself or you're just thinking about your family. The real key piece here is an education. So take some time, continue watching, gobbling some through, go through some more of our videos that we have, check out our podcast, listen to some of the education we have, check out the resources we have on our website, and continue diving deeper into how are you making sure that your family is protected? And more importantly, how are you growing wealth? How are you growing it stably? How are you growing it with confidence? And then how are you creating an environment where you can put capital that's accumulating in your life to work in multiple locations so that you can maximize some of your opportunity? That's a lot of what we teach and we encourage you to keep gobbling some of that information up and having a good time doing so. I hope this was helpful. A little bit of a crash course on insurance in general in Canada and make sure to check out our next videos. Thanks for watching.
