Well we’ve got good news and bad news. People always want the bad news first so here it is. You’ve owned your business for many years and over that time you have aged. You aren’t as healthy as you were when you started and getting life insurance to cover estate tax burdens could be difficult based on this.
Here’s the good news though… You already own a term life insurance policy that has a conversion option that is available to you. Why is this good? This means that regardless of any health changes while you own your term policy, you can purchase permanent life insurance coverage based on premiums that mirror your health from when you applied originally. This is actually better than good news, it’s great news! When you originally purchased a term life insurance policy this wasn’t likely the reason you did, but you are sure glad its there now.
This should be something that everyone aspires to. I hope that I accumulate so many assets that when I die, the tax burden on my estate is enormous. This means that I was successful with my plans while I was alive and hopefully enjoyed a fun filled life with limited worries about cash flow. If this is the case though, I am more than likely going to need some permanent life insurance. Right now I am in a different situation though. I do have cash flow to consider so I am getting term life insurance to protect me today. How should conversions options play into which insurer that I choose?
Understand that there are two main types of permanent life insurance. There is universal life insurance and participating insurance. Although both carry level premiums, there are differences.
Universal life offers level coverage for life with an underlying investment option. You can put extra money into the policy and have it grow. This additional money can be added to the death benefit when it is paid out. Basically you are funding the growth in the death benefit with extra deposits into the plan. With participating life insurance, you are eligible for dividends each year (although not guaranteed). These dividends are used to purchase paid up insurance meaning that the death benefit amount increases from the original amount that was purchased.
Why is this important? Historically, not all insurers in Canada offer participating insurance. If this style of insurance is an important option for you to have, make sure that the life insurance company that you purchase your term life insurance policy from is one that offers it. Some companies have offered participating insurance in the past and then discontinued it. A companies track record with offering the coverage style you want can offer insight about if the option will be there in the future for you.
Whether you are purchasing life insurance for the first time or if you have an existing policy which you are thinking about converting to a permanent life insurance policy, you should contact us to discuss your situation in more detail.