Q – How do I figure out how much life insurance I need and what type of insurance to buy? – Ralph J., Ajax, Ontario
A – To estimate how much life insurance you need, consider the following: The amount needed to pay off your debts; any final expenses and taxes that will be owing on your death; the amount your family will need to maintain its lifestyle; and education costs for children.
There are two main types of life insurance, term and permanent insurance.
Term insurance provides protection for a specified number of years for a specific purpose, for example, to pay off your mortgage in the event of your death or pay for children’s education. It is the cheapest insurance you can buy.
Permanent insurance provides protection for your lifetime and will be paid to your beneficiary or estate upon death. There are three types of permanent insurance: whole life; universal life; and term to 100 insurance. The type of insurance you need will depend on what your objectives are and in most case will be a combination of both term insurance for short term obligations and permanent insurance which is ideal for longer-term insurance needs, such as estate planning.
Insurance policies are complex and each type carries different benefits and cost structures. Your best bet is to speak to a licensed insurance agent to ensure you get the right amount of insurance and the right type to suit your needs. – R.T.