Life insurance can be an important tool in a sound financial plan. Whether you're raising a family, paying down a mortgage, or thinking about the legacy you'd like to leave, having the right coverage in place means the people who count on you are protected. But with several types of life insurance available, knowing where to start can feel overwhelming.

An Edward Jones financial advisor can help you understand your options and build a strategy tailored to your needs.

Types of life insurance

Not all life insurance works the same way. The right type for you depends on your goals, how long you'll need coverage, and what you want to spend. Here's a look at the main types of life insurance in Canada are term and permanent.

Term life insurance

Term life insurance provides coverage for a specific period, typically 10, 20 or 30 years. If you pass away during that term, the death benefit passes to your beneficiaries free of federal income taxes. If the term expires and you're still living, the policy ends (though many policies can be renewed).

Term insurance is generally the most affordable type of life insurance, which makes it a popular choice for people who need significant coverage during a specific life stage: while children are still at home, for example, or while you're carrying a mortgage. One thing to keep in mind is that if you renew after the initial term expires, your premiums will likely rise.

Term life insurance may be a good fit if you:

• Need coverage for a defined period (such as until your children are financially independent)
• Are looking for the most cost-effective option
• Want to ensure a debt like a mortgage is covered

Permanent life insurance

Permanent life insurance provides lifelong coverage as long as the required premiums are paid. If the insured passes away, the death benefit is generally paid to the beneficiaries free of income tax. Unlike term insurance, permanent insurance does not expire after a set number of years, making it a long-term solution for those who want lasting financial protection.

Some types of permanent life insurance, such as whole life and universal life, can also build cash value over time. Depending on the policy, this cash value may be accessed during the insured's lifetime or used to help meet long-term financial objectives. Permanent life insurance generally has higher premiums than term insurance because it provides lifelong coverage and may include a savings or investment component.

Permanent life insurance may be a good fit if you:

• Need lifelong insurance coverage
• Want to leave a tax-efficient legacy to beneficiaries or help cover estate expenses
• Are interested in building cash value within the policy for future financial flexibility
• Prefer the certainty of coverage that does not expire as long as the policy remains in force

There are three main types of permanent life insurance:

• Whole life insurance
• Universal life insurance
• Term to 100

Whole life insurance

Whole life insurance is a type of permanent coverage that provides protection for your entire lifetime, as long as premiums are paid. Premiums typically don't increase with age, which can offer long-term predictability. Many whole life policies also build cash value over time on a tax-deferred basis. That said, whole life premiums are generally higher than those for term life insurance, so it's worth weighing whether this type of coverage aligns with your overall financial situation and goals.

The cash value that accumulates over time can be a meaningful planning tool. It can be borrowed against or used to help fund other financial goals. However, there are important considerations to keep in mind. Loans taken against the cash value accrue interest, and any unpaid loan balance reduces the death benefit paid to your beneficiaries. If a policy lapses with an outstanding loan, it may also trigger a taxable event. Additionally, cash value growth tends to be slow in the early years of the policy, which means whole life insurance may not be the right fit for everyone. An Edward Jones financial advisor can help you evaluate whether this approach makes sense for your specific needs and walk you through how it works in practice.

Universal life insurance

Universal life insurance is another form of permanent coverage, but with more flexibility built in. You can adjust your premium payments and death benefit within certain limits, which can be helpful as your financial situation changes over time. However, that flexibility also comes with responsibility: if premiums are reduced too much or paid inconsistently, the policy's cash value may be insufficient to cover the ongoing cost of insurance, which could cause the policy to lapse. Premiums also tend to be higher than those for term life coverage.

Like whole life insurance, universal life policies can accumulate cash value and offer potential tax advantages for growth within the policy. Keep in mind that cash value growth is often tied to current interest rates or market performance, depending on the type of universal life policy, which means returns are not guaranteed. Internal fees and insurance charges also apply and will reduce the cash value over time. For those who want permanent protection with the ability to adapt their coverage as life evolves, universal life insurance may be worth exploring, but it's important to review policy projections carefully and revisit them regularly. An Edward Jones financial advisor can help you evaluate whether this approach fits your needs and explain the trade-offs in practice.

Term to 100

Term to 100 (T100) life insurance is a type of permanent coverage that provides lifelong protection with guaranteed premiums that are typically payable until age 100. Unlike whole life or universal life insurance, T100 policies focus on providing a guaranteed death benefit without a cash value or investment component.

Because the policy does not accumulate cash value, T100 insurance generally has lower premiums than other forms of permanent insurance while still providing lifetime coverage. This makes it an attractive option for those whose primary goal is to ensure a tax-free death benefit for their beneficiaries or to help cover estate costs, and do not need the savings or investment features offered by whole life or universal life insurance.

How to choose the right type of life insurance

Choosing between term and permanent life insurance and between whole and universal comes down to a few key questions:

• How long do you need coverage? If you need protection for a specific period, term insurance is often the most straightforward and affordable answer. If your need is lifelong (for example, to ensure you can leave a specific amount to heirs or a charity regardless of when you pass away), permanent insurance may be the better fit.
• What is your budget? Term insurance generally carries lower premiums, while permanent insurance generally costs more but provides lifetime protection and the potential to build cash value.
• Are you interested in the cash value component? Some permanent policies offer this feature; term policies do not.
• Do you have longer-term estate or legacy goals? Permanent insurance can play a role in funding your legacy, helping you leave a meaningful gift to loved ones or a charitable cause.

Not sure which direction makes sense? Talk to an Edward Jones financial advisor who can help you weigh your options against your specific goals and circumstances.

Term vs. permanent life insurance: a quick comparison

If you're considering long-term care coverage as part of your broader plan, an Edward Jones financial advisor can help you understand how life insurance policies with long-term care provisions might complement a dedicated long-term care insurance strategy.

How much life insurance do you need?

Choosing the right type of coverage is only part of the picture. The other key question is: how much insurance is actually enough? A simple way to take stock of what your coverage needs to address is the L-I-F-E framework, which outlines four categories that capture what most people rely on life insurance to protect: 

Adding up these four categories gives you a strong starting point for estimating the coverage you need. From there, a useful way to think through the full picture is with three steps.

Step 1: Identify your financial obligations and goals

Start by taking stock of everything your income currently supports and everything you'd want to protect. This might include:

• Day-to-day living expenses for your family
• Mortgage or rent payments
• Education costs for children
• Outstanding debts
• Long-term goals like retirement savings or a charitable bequest

It's also worth thinking about how much you have set aside for emergencies, since that factors into your overall financial resilience.

Step 2: Assess what resources can meet those needs

Next, consider what financial resources would already be available to your loved ones if you passed away unexpectedly. This could include:

• Savings and investments
• Employer-provided life insurance
• Government survivor benefits
• Your partner's income

The goal here is to get a realistic picture of what's already in place and where the gaps are.

Step 3: Have enough insurance to cover any gap

Once you've identified your obligations and your existing resources, the difference between the two is typically the coverage gap your life insurance needs to fill. The larger the gap, the more coverage you'll likely need.

This is where a life insurance calculator can be a helpful starting point. It gives you a rough estimate of your coverage needs based on your personal situation. From there, an Edward Jones financial advisor can help you refine that number and identify a policy to help fill the gap.

An Edward Jones financial advisor can help discuss your coverage needs today.

We can help

Life insurance decisions are deeply personal, and they're rarely made in isolation. They touch on your retirement strategy, your estate plan, your family's financial security and your broader goals for the future. An Edward Jones financial advisor takes the time to understand the full picture before making any recommendations.