Is Permanent Insurance Worth the Higher Cost?

By Alexandra Macqueen, CFP® • Published December 15, 2022 • 5 min read
When you’re considering life insurance, you’ll notice that there are two categories to choose from: permanent insurance or term insurance. If you’ve gotten a quote for both of these types of policies you’ll probably realize something else; permanent insurance tends to cost more. But why is that? And what does the higher cost get you?
Here’s a review of the differences between term and permanent life insurance and some questions to help you select the best one for you.
At the most basic level, life insurance provides protection from the financial impact of your premature death, which could knock your family’s financial future off-track.
The cost of life insurance, whether term or permanent, is based on factors unique to you, such as your age, gender, health status and your habits like certain sports, smoking and drinking.
One thing to note about life insurance is that not everybody is insurable. There are instances where something like a pre-existing condition may affect your eligibility to buy life insurance. There are guaranteed acceptance policies, however, that may offer a lower death benefit to those individuals at a bit of a higher premium.
The amount that’s paid out by the life insurance company should you pass away – the death benefit – can help ensure your loved ones will be able to meet financial goals such as:
The two forms of insurance operate quite differently. Here’s a review of the differences.
How long does your policy last?
What do your premiums pay for?
How long do you pay premiums for?
Permanent life insurance premiums can be paid every month or year, just like term insurance.
With term life insurance, you pay premiums over the term of your policy.
While both permanent and term life insurance will provide a payout when the person insured by the policy passes away, depending on your financial situation, plans, and goals, you might want the additional benefits permanent life insurance offers.
Here are some questions to consider:
A licensed insurance advisor can help you develop a personalized plan that will ensure you make the right choice for you, that’s consistent with your overall goals.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value.
RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.
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