Life Insurance: What You Need To Know

For many people, few things in life are as daunting as tackling the subject of life insurance.  Not only does it force us to acknowledge our own mortality, it can be difficult to understand the best type of life insurance for your particular situation and equally as tough to assess how much you actually need.

According to a 2010 TD Insurance Risky Business Poll, 31% of Canadians are without life insurance coverage, meaning that if they were to die unexpectedly tomorrow they would leave their families without sufficient financial protection.

The Purpose of Life Insurance

Think about it for a minute.  What would happen to your family if you and your income were completely wiped from their lives?  Apart from the obvious trauma that comes with losing a spouse or parent, what else would they suffer?  Would your spouse be able to maintain your lifestyle without your income or would they need to sell the family home?  Would your kids be able to continue on in roughly the same financial shape or would they be forced to adjust to a significantly lower standard of living?  Would your spouse be able to continue saving for their education?  Do you have money set aside to pay for your funeral? (Currently at a reported average of $6000-$10 000 in Canada)

The purpose of life insurance is to protect your family against financial devastation resulting from lost income and unexpected expenses in the (unthinkable) case of your untimely death.

Who Needs It?

Most people could benefit from a good life insurance policy.  Whether you’re a key financial contributor to a growing family or single with no dependents, your death would mean final expenses in the form of funeral costs, outstanding bills, estate and legal fees, income taxes and many others.  These expenses do not simply go away after you have passed on, and chances are your loved ones will be called upon to settle them.

How Much Insurance Do I Need?

The amount of insurance you need is based on your own unique situation and is calculated using a variety of variables ranging from your family’s immediate needs such as funeral costs and living expenses to your other income and investments and the amount needed for your children’s education fund.

Your need for life insurance also changes significantly throughout the different stages of your life, for example a young married couple who has a mortgage and a second child on the way will probably need more insurance than a middle-aged couple who have paid off their mortgage and whose children have left the nest.  Along with different amounts of coverage, there are also different types of life insurance that may be of more benefit to you in different stages of your life cycle.

 What Types Of Life Insurance Are There?

Term Insurance- Designed to cover short-term insurance needs, Term insurance is simple and straightforward in that it is geared toward providing the maximum benefit for the minimum amount of premium.  Term policies can range from 10 to 40 years, however premiums increase as you grow older.

Permanent Life Insurance- Permanent Life Insurance provides you with insurance until the maturation of your policy and can fall into three different categories:

Whole-Life Coverage

With Whole Life policies your premiums remain the same throughout the duration of the policy and the plan builds cash value.  One of the major benefits of a Whole Life policy is that it is possible to obtain a loan against this cash value.

Universal Life Coverage

Universal Life Policies have the advantage of flexibility, meaning that you can change the amount of insurance as your insurance requirements change.   Universal Life is also available with level or increasing death benefits and level or increasing cost of insurance.

Limited-Pay Coverage

A Limited-Pay policy allows for paying off the policy before the duration of the coverage is up.  For example, in the case of a 20-Pay policy, the insured may be covered for life but the policy will be fully paid for once premiums have been paid for 20 years.

At IFG we believe wholeheartedly that obtaining the proper insurance coverage is important for everyone. Call today at 1-705-740-9909 to discuss your insurance needs.