Life Insurance, Explained - Term Life Insurance vs Whole Life Insurance
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- เผยแพร่เมื่อ 2 ส.ค. 2024
- If you're reading this, you've probably heard of life insurance before, and, there's a lot of different types of, and words to describe, life insurance. We're talking 'term', 'whole life', ‘universal life’, ‘variable life’, ‘infinite banking’, ‘be your own bank’... the list goes on.
In this video, we want to make life insurance as simple as possible, explain who actually needs life insurance, what type of life insurance is actually useful, what type(s) to stay away from, and how to calculate how much life insurance you may need.
Do you currently have a life insurance policy? If yes, what type of life insurance policy do you have? Let us know in the comments!
0:00 What you need to know about life insurance
0:43 What is life insurance?
2:20 What is term life insurance?
5:40 What is whole life insurance?
9:24 The problem with whole life insurance
12:36 How much life insurance do you need?
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Do you have life insurance? What kind of policy do you have? Let us know! 👀
Bravo! I was looking into Life insurance having just received a payout and nothing was making any sense... I think I was biased because I just had received a lump sum, which does feel nice... Thanks for this video! Great job as always!
I've been thinking about LI all week and boom a video that describes it! Just what I needed. It's too bad we have all these industries that pretend to be a general good when their not.
We love the timing! 👏🏿👏🏻
It's so true - there are so many predatory industries and practices out there that we don't even know to question - this one included!
@@stephandden Life companies are a business. You pay 100 bucks a month we pay your beneficiary 1M. Could you bail out a family and send their kids to college like that?
Yes, they are a business - and term life insurance would suit that purpose if needed.
I've been thinking about this for days, weighing and all, and voila, a well explained video. thank you for this video
Amazing, we love that timing! 😊
Thankfully no life insurance as of now, thanks to both of you, you guys totally make 100 percent sense.
We're happy to hear that 😊
You are making financial topics sound interesting. Welldone 🎉🎉🎉
We love to hear that! Thank you so much 🙌🏿🙌🏻
Love all your videos. all life insurance agents in Canada focus on selling whole life insurance just to make a commission. You explained this very well.
Thank you so much! 🙏🏿🙌🏻
Yes most people sale whole life or Universal life
But we are selling only and only Term life. Insurance and invest the difference!!
I have term life 20 years paying $60/month for 2 adults at $500k each plus investing $500/month in low cost index ETFS in our TFSAs.
That sounds like a great set up 😊 thank you for sharing!
Thank you! You are both so articulate and explain things so clearly! 🤗🥰 I do have a Manulife Permanent Life Insurance Policy: with the kind I have, my kids will get both the policy amount AND the money I have been putting into it since they were little. BOTH.
You’re welcome - and that sounds like an interesting policy! 😊 how long have you had it for?
@@stephanddensince 2002 or 2003
Wow! Great video. I recently became a licensed financial professional that deals with all this, and I can say that you guys explained this very well!
Thank you so much! 😊
This was so helpful! Thanks!!
Yay! Of course 😊
You made this so easy to understand! I have term life insurance through my financial advisors. I had no idea what the heck it was for/how it worked haha I just blindly trusted them. I also have coverage for extended health care that isn’t covered by my work policy. It’s less than $60/month. Well worth it in my opinion.
That’s great - we’re glad to hear that. So did your financial advisor sell you the insurance themselves? 😊
@@stephandden it’s through sunlife, which I also have investments with! Didn’t try to upsell me or anything. They’re a small women owned financial planning business :)
Great video!! Thank you so much!
Thank you for watching! 😊
Wow, this made insurance make so much sense (for once)! Is a car insurance video on your radar?
We're so happy to hear that! 🥳 That's a good suggestion - we'll add it to our list!
So well explained,marvellous
We're happy to hear that! 😊
Well explained 👏🏾
Thanks, Reni! 🙏🏿🙏🏻
Great video. QUite informative and helpful.
We’re happy to hear that 😊 thanks for watching!
Hi Steph & Den, Thanks for the info. Do you have a life insurance in canada?
Thanks for watching! Yes, there's life insurance in Canada 😊
Thanks for clarifying it. Can we convert whole life to term insurance by any chance?
What about universal life? Thats has a component of investments too and also the premium is to be paid for a certain term.
Great information as always!
In simple word you pay for 2 things and getting only one,
Either life insurance or Investment,
Why would some one pay for 2 and get only one thing?
Instead of that buy term insurance and investment separately,
Make sense?
Thank you!
Universal life insurance is another type of 'permanent' life insurance - it functions very similarly to whole life insurance, where you have the death benefit portion, and the cash value portion. They key difference with universal life insurance is that you have the ability to potentially lower / change the cost of your premiums over time, but the same problems that exist with whole life are there with universal life, as well.
Like the other commenter said - you're essentially paying for two things, and will only receive one. For *most people, it's more advantageous to purchase a term life insurance policy (if you even need life insurance at all), and then invest for the long-term on your on, separately.
We hope that makes sense! 😊
Can you guys do an episode on the home buyers rrsp plan and how the repayments work. I want to buy a home soon and am interested in contributing to my rrsp to help with that but it seems complicated
Hey! We actually touched on this in our ‘TFSA vs RRSP vs FHSA’ video. You should check that one out, but in the meantime we’ll add a dedicated video on the topic to our list of future vids. 😊
So what do we ask to the L.I. company if we want something that Steph suggested at the end? Renewable and more of what we need vs what they have as a standard to pay?
Hey! Once you’ve answered the question, ‘does it make sense for me to get life insurance?’ - then you should explore the different term life insurance options that suit your needs.
Many term policies are renewable, so you’d want to confirm that the one you’re being offered meets that criteria.
In the event that you still require life insurance after your term ends, it’s typically more cost effective to renew a policy as opposed to applying for new policy (given that you’ll be older at this point).
We hope that helps! 😊
I was considering buying one. But looks like investing this money in an ETF is much better
Yes to this 👏🏿👏🏻 we're happy tot hear that!
Most people don't have the financial knowledge and discipline to invest on their own!
That's what our channel is for - we believe in teaching people how to manage their own investments, and pick investments that they're comfortable holding for the long-term, as opposed to having them pay high fees for predatory products.
The other thing to note with whole life insurance is that you don't even receive the invested portion and the death benefit - you get one or the other.
This makes sense
We’re happy to hear that 😊
Wish you guys talked a little more about risk/dividends and how to that is factored into the cost.
We’ll share our thoughts on this here!
You get ‘dividends’ if you have a participating policy with a mutual life insurance company.
The problem with dividends is that they’re issued when the insurance company makes more money than what’s needed to cover costs - so, when they’re earning a lot from their whole life policies. They’ll also (typically) get you to put that money back into your policy, and the likelihood of you seeing it becomes next to none.
Hi Steph does closing an account and opening new one affect credit score?
Closing a bank account does not affect your credit in anyway. However, closing a credit card will affect your credit score. Hope that makes sense. 😊
yes it does. Thank you so much for your response
This make lot of sense I have a term which will end when I’m 70 and I was thinking about life now I’m not going to do life
We're happy to hear that! 👏🏿👏🏻
Im 2022 when I was 27 I had twin boys and got 20 year term (till im 47 and kids are 20 and ill be rich by then so we won't need the insurance 😅) It is $590/ year for 1M with Desjardins.
Hahaha, we like that way of thinking! The good news with term insurance is that you can put more of your money into investments on the side to make that happen 👏🏿👏🏻
Wow! i just cancelled my Whole Life Insurance after wait for it 32 years at $49 dollars a Month i did borrow on it one year was $100,000 but each year it kept going down and down so at 63 know was only $30,000 so know in the process of cancelling at getting my cash value finger crossed at the time it was good know time to end it
Thank you for sharing that! 😊
i have term insurance $18 a month. i have life insurance $70 a month and crirical illness $50 a month.
Interesting - thank you for sharing! To confirm, you have term, whole life and critical illness (aka living benefit) insurance policies?
We have a few questions - do you know why you have all three? Also, do you currently have any dependants (kids, parents, or anyone who relies on your income)?
The person who sold me the life insurance said that I should get the term insurance of $200k and critical illness of $50k ajd the life insurance of $100k for.my dependents. I am now divorced and no kids.
Whole life insurance has conservative returns but it is not an investment and to compare it to an investment is doing the product a disservice. It's more of a savings vehicle because it provides guarantees that investments can't provide. The cash is guaranteed to grow with no negative/ down years just like a savings account. The cash value is liquid unlike some investments that are locked up.
The cash value is not a separate investment, it is an advance from death benefit hence why when you pass away your beneficiary only gets the death benefit.
My little break down of whole life is hardly doing it justice.
Banks and big Cooperations have whole like policies on their balance sheet.
Term is great and cheap but if you out live that term you just lost all your premiums.
We don’t see value in insurance companies ’guaranteed savings’ vehicles. There’s far better places that you can put your money if saving or investing is your goal.
Thanks for commenting!
@stephandden I know there are way better places to put your money when it comes to investing.
Could you kindly share better places to save your money, having compound growth while being available without a lock-up period?
I hope I'm not coming off as annoying or defensive, I genuinely want to know.
Whole life insurance is a ways to avoid income taxe for a small portion of the population. ( the ultra rich people)
The cash value that grow inside the insurance policy is usually low return but tax free.
And after you borrow against the cash value (without paying income taxe but you pay interest to the bank) and invest somewhere else and deduct those interest with thr other investment.
If you didnt have paid your mortgage and maxed tfsa and other program. The infinite banking concept doesnt make sens
Yes, like you said, it's a very small portion of the population that this 'might' make sense for (key word being might). Our goal is to share information that benefits the vast majority of people 😊
Why do I continue to become more and more broke while others continue to get rich
Are you referencing a life insurance policy that you have?
Whole life is massive tax consequences. Bummer you missed that.
What do you mean by it’s a massive tax consequence?
@stephandden withdrawals from whole life are tax free. Withdrawals from invested money is not. This can have major consequences during retirement.
If you surrender your policy and opt to receive your cash value, you have to pay tax on the increased amount.
If you’re referring to borrowing against your policy, and not having to pay tax on the debt, that’s a different scenario - we also don’t see value in that for the vast majority of people (which is who we’re speaking to in this video).
@@stephandden correct, as retirement income borrowing against whole life is tax free, then the death benefit is reduced. A great way to protect some of your money in a conservative account, in case of market crash while you are retired.