How does a family adjust their level of life insurance?

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As life insurance needs change through your lifetime you can parallel those anticipated changes with multiple life insurance policies. A capital needs analysis or review reveals the money you would need to meet your current and future needs. This capital need can lessen over your lifetime as you accumulate assets.

For most families The years of child-rearing present the largest life insurance need to create capital for income replacement, child care, clothing, food, college education and the extras.

What plans are best?

     Young families may purchase a large personally owned term insurance plan, or combine it with a small amount of permanent life insurance, depending on affordability. The most important is that the family’s needs are covered properly. Note: Group insurance from work may run out if you change your employment or lose your health. It is not owned independently thus there is no real control over such a plan. If possible shift monies paid for group term to your own term plan.

For empty nesters Life insurance needs may be less when the children have moved out. However if a wage-earning spouse dies, a life insurance benefit can offset the loss of income, pay off the mortgage and/or accrued debt, create an emergency fund, and help shore up capital needed for retirement. Thus life insurance is usually still needed.

What plans are best?

     If the capital need remains high, consider converting a portion of any term insurance you own into a permanent plan, or use a hybrid plan where term is mixed with permanent insurance. You may be able to reduce the face amount while adjusting the total coverage to meet your current need and work out an affordable payment.

Paying for final expenses During retirement every man and woman will one day present the need for his or her spouse or family to have capital to pay for final expenses in relation to and depending on the funeral expenses. Not everyone has saved up sufficient funds for this expense. Where there is life insurance it can save children and/or siblings the possible need to pay that expense for you.

What plans are best?

     It is wise to have a certain amount of permanent life insurance to offset these expenses. At the age of 50 plus consider converting some or all your term insurance if you do not yet own a permanent life-time plan. Aim to own at least $25-50,000 worth of permanent life insurance just to pay for the final expenses.

What is the purpose of life insurance?

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Individual life insurance is primarily designed to protect against the financial loss that can occur with the death of a loved one. While individuals are typically very good at insuring their car or their home, they frequently do not insure their most valuable asset; their ability to earn an income. Life insurance provides a death benefit that can provide much-needed income to support your family, your business, or to send your children to college. Additionally, life insurance may offer many tax advantages.

There are two types of individual life insurance: Term life insurance and permanent life insurance. Both term and permanent policies offer an income tax-free death benefit to the policy beneficiaries. There are, however, several key differences to keep in mind when purchasing the right life insurance. It is one of the most important decisions that you can make.

How does life insurance protect my income in the future?

In the event of the death of the insured, life insurance is designed to create capital precisely in the unpredictable event of death. It provides a precautionary financial strategy to stabilize the financial security of loved ones reliant on your income or your capital provision.

Current one-time capital uses are provided by life insurance, such as:

  • Pay off liabilities such as credit cards, bills outstanding, loans, and/or estate taxes upon death.
  • Pay for the final expenses associated with a funeral and burial.
  • Create money to pass on to heirs such as children or a spouse.

An ongoing future use of capital is provided by life insurance, such as:

  • Investments can be purchased from which to create an income to cover the living expenses of a family; often providing for the retirement of a spouse.
  • Funds can establish a trust, from which family can acquire income.

What if an insured lives and cannot work due to a disability?

The individual should include some form of disability coverage to replace his or her income. Talk to your advisor about the following other types of insurance:

  • Income Replacement Insurance: This covers a percentage of your income in the event that you cannot work for a certain period of time due to a disability; some allowing coverage for a lifetime.
  • Critical Illness Insurance: In the event of a critical illness such as a stroke or heart attack, a significant lump sum benefit can be paid, depending on the plan’s coverage.

Check your group insurance benefits at work which should be considered when buying the above insurance.

Can insurance protect my financial security if I have a critical illness?

Our provincial health plans do not allocate funds to help patients who face a critical illness, to recover financially. They are established, not to build or replace wealth, but to provide basic health care. If you have little or no income, these plans would pay you only a small disability benefit if you meet specific situations. 1

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1. Lump-sum benefits are paid:  Critical illness insurance offers a lump-sum payout of cash if you are diagnosed with a critical illness covered by the policy (such as stroke, heart attack, or cancer). Its purpose is to provide a considerable amount of money (referred to as a living benefit).

2. Allows time to convalesce:  The critical illness insurance capital can help you convalesce over longer periods and in the company of loved ones, without a concern that the expenses related to a previously enjoyed lifestyle must be immediately eliminated. After all, there may be an extended time necessary to recover before you can return to work.

 3. Money for exceptional health care:  Critical illness insurance can fund expensive drugs or out-of-country health care. You may need to employ a private nurse to live in your home, hire a nanny, receive physical therapy and/or renovate your home to meet accessibility needs related to the illness. Critical illness insurance can help pay these bills.

4. Critical illness insurance enables a career change:  Due to medical advances, many people totally recover from critical illnesses and re-enter the workforce. Unfortunately, many others live the rest of their lives partially disabled, unable to do the same work. There may be a need to finance training for a career and search for new employment. Before you establish a new source of income, where will your money come from? Critical illness insurance keeps you financially stable through a critical illness.

1 Canada Disability Benefits – Canada.ca

How can I avoid Financial Internet Scams?

Online Identity theft is any Internet fraud that results in acquiring your data, such as unique Logins and Passwords, usernames, banking information, or credit card numbers. Moreover, it is theft of your financial identity!

  • How to avoid donation scams Be on guard if you receive an unsolicited email message from a charitable organization asking for money concerning a news event such as a natural disaster, a national election, or a significant change in the world financial system. Don’t open any attachments or click any links. Manually type the charity’s web address into your browser’s address bar and make sure the request is legitimate before donating.
  • Phoney links in email If you see a link in a suspicious email message, don’t click on it. These links might also lead you to .exe files, known to spread malicious software on your computer.
  • Fake Alerts and Threats Some thieves use threats that your Hotmail, Google, Facebook or bank account will be closed if you don’t respond to an email message? Internet criminals often use threats that your security has been compromised.
  • Spoofing popular websites or companies Scam artists use graphics in email that appear to be connected to legitimate websites like Facebook or your bank. How do they achieve this? Using fake logos to request your Login and Password, you are directed to phoney scam sites or legitimate-looking pop-up windows to ask for your financial information.
  • Fake web addresses Internet criminals also use slightly altered web addresses that resemble the names of well-known companies.
  • Lies about your computer software Internet criminals might call you on the phone and offer to help solve your unknown computer problems warning of viruses or speed-slow downs. They might try to sell you a software license or an agreement to assist you periodically. In most cases, neither Microsoft nor Apple make unsolicited phone calls to charge you for computer security or software fixes.

Source: Microsoft

How can I protect my family with life insurance?

If you have a spouse or children, make sure you have adequate life insurance coverage.

There are two types of life insurance. You can either buy pure term insurance coverage or a plan that can last a lifetime with various investment vehicles that can gain value and enjoy tax advantages while the policy remains in force.

Lifetime plans can resolve estate-planning problems. With additional investment vehicles (some include the use of the life company’s dividends) the cost of lifetime insurance coverage is higher. Yet the tax-free death benefit can solve estate-planning problems such as paying an estate’s tax liability on capital gains.

Life insurance is generally affordable. If you can’t afford the premium for lifetime coverage, consider term insurance or a combination of both. Term plans are quite affordable. For example, at 3%, $1,000,000 will generate $30,000 annual interest as pre-tax income.

Buy enough insurance to meet your needs. Many families need $250,000 or more—even up to $1,000,000 during low-interest periods—to generate adequate investment income if the breadwinner were to die.

Ask your insurance representative to do a capital needs analysis. You will want to replace the income of the life insured—either yourself or your spouse. It is easy to calculate the capital needed over any short or long period of time in any situation if the life insured were to die.

Buy the insurance you need when you are healthy. If you get high blood pressure or diabetes or suffer from angina before you buy insurance, you may find that your premiums will be higher than for a healthy person. So buy as much as you can afford when you are younger, and healthier if you have capital needs in relation to your dependents.