how does life insurance work

What is Life Insurance and How Does It Work in Saskatchewan

If you’ve ever found yourself asking questions like “What exactly is life insurance?” or “How does it work?” then this is the article for you! We’ll break down the key concepts, policy types, benefits, and considerations associated with life insurance. If you reside in Saskatchewan, this guide will equip you with the knowledge you need to make informed decisions about your life insurance needs.


1. What is Life Insurance?

Life insurance is a contractual agreement between an individual (the insured) and an insurance company (the insurer). In exchange for regular premium payments, the insurer agrees to provide a specified amount of money, known as the death benefit, to the designated beneficiaries upon the insured person’s death. The beneficiaries can use this lump-sum payment for various purposes, including covering living expenses, paying off debts, funding education, or even covering funeral expenses.

The premium amount is determined based on factors such as age, health, lifestyle, and the type and coverage you choose. 

life insurance quote

2. Types of Life Insurance

There are two primary types of life insurance: term life insurance and permanent life insurance.

Term Life Insurance

Term life insurance provides coverage for a specified period, typically 10, 20, or 30 years. It offers a straightforward and affordable way to protect your loved ones during the years when they may be most financially vulnerable. If you pass away during the term of the policy, the death benefit is paid out to your beneficiaries. 

Permanent Life Insurance

On the other hand, permanent life insurance provides coverage for your entire lifetime. This type of insurance includes a cash value component, which allows you to accumulate savings over time. The cash value can be accessed while you’re still alive through policy loans or withdrawals. Permanent life insurance offers lifelong protection and can be a valuable asset for estate planning or leaving a legacy for your loved ones. 

Chart provided by Forbes Advisor

Attributes Term life insurance Permanent life insurance
Cost Least expensive More expensive
Policy length A specific number of years  Usually for life
Cash value No Usually, yes


3. Determining Your Life Insurance Needs

Before purchasing a life insurance policy, assessing your dependents’ financial situation and needs is essential. Consider factors such as outstanding debts, mortgage payments, education expenses, and future income replacement. 


4. Planning for Funeral Expenses

Protecting Your Family’s Future:

When it comes to safeguarding your family’s future, life insurance offers peace of mind like no other. In the unfortunate event of your passing, life insurance provides a financial cushion to help your family navigate through difficult times. It ensures that your loved ones can maintain their standard of living, pay off outstanding debts, cover daily expenses, and even secure their long-term goals, such as education or homeownership.

Supporting Your Children’s Needs:

Life insurance not only protects your spouse or partner but also ensures that your children’s financial needs are taken care of. It can help cover their education expenses, childcare costs, or any other financial obligations you may have towards them. By providing this support, life insurance gives you the confidence that your children will have the resources they need to thrive, even if you’re no longer there to provide for them.

Easing the Burden of Funeral Costs:

In Saskatchewan, the average funeral cost is estimated to be between $7,000 and $11,000. Expenses can include death certificates, funeral home services, church ceremonies, flowers, receptions, and cemetery costs. Planning ahead and setting aside funds for funeral expenses can provide peace of mind for you and your family.

Chart provided by: MyChoice blog

Item: Cost
Registration $5,000 – $15,000
Transfer service $5,000 – $11,000
Funeral home $2,000 – $12,000
Church ceremony $4,000 – $12,000
Flowers $5,000 – $10,000
Reception $7,000 – $11,000
Cemetery costs $5,000 – $10,000

By understanding the benefits and considerations associated with life insurance, you can make informed decisions that align with your financial goals and priorities. Remember to regularly review your life insurance coverage to ensure it remains adequate and reflects any changes in your financial situation or life circumstances. 

Protecting your loved ones is a lifelong commitment; life insurance is a powerful tool to fulfill that commitment.


Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional financial advisor or insurance agent to determine the best course of action for your individual needs.

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