5 types of personal insurance

There are 5 basic types of personal insurance, and each serves a different purpose.

Insurance product How it works Benefits to you
1. Life insuranceLife Insurance Insurance that pays cash to your family or other beneficiary after your death. This can give them income and help pay your funeral and other final costs.+ read full definition Pays a tax-freeTax-free Money that you do not pay tax on.+ read full definition, lump-sum amount to your named beneficiaries upon your death Ensures your named beneficiaries can pay off your debts and maintain their standard of living after you die
2. Disability insuranceDisability insurance Insurance that gives you income in case you get sick or hurt and can’t work.+ read full definition Provides a monthly payment that replaces part of your lost income if you’re unable to work because of illness or injury Allows you to maintain your standard of living if you are disabled and unable to work
3. Critical illness insurance Pays a lump-sum amount on the first diagnosis of a serious medical condition (e.g. cancer, heart attack) covered by your policy Allows you to cover additional costs associated with an illness, or use the payment for any other purpose during or after recovery
4. Long-termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition care insurance Provides cash payments if you require care in your home or in a private or government facility Allows you to cover some or all of the costs of long-term care instead of using your savings
5. Health insuranceHealth insurance Insurance that covers some or all of your medical bills if you get sick or hurt.+ read full definition Covers a portion of health care costs not covered by your provincial health insurance Gives you and your family affordable access to the health care you may need – at home or out-of-country

Fast facts

  • Disability insurance replaces lost income, so you need to be employed to buy it.
  • You need to survive your illness for a specified time (typically 15 to 30 days) to receive a payment from critical illness insurance.
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