From the first time you hold your newborn child to the last day of work before retirement, life is full of perfect moments.
Protecting those moments and the people in them is important, which is why it’s so critical to get a basic understanding of life insurance before you sign up.
The term ‘life insurance’ doesn’t just refer to one kind of policy, but rather a whole range of options developed to suit a variety of financial needs as well as lifestyles and life stages.
Do your homework
Start by asking yourself two questions: What is my life stage and what do I want to achieve? Do you want a guaranteed lump sum or a policy that would support you through retirement?
For example, term life insurance covers a specific period of 5-, 10-, 15- and 20-year terms, with a premium that stays constant. On the other hand, permanent life insurance is long-term coverage for your whole life and into retirement. With some policies, permanent life insurance can also build cash value, so that if you cancel at any time, you receive cash back. Plus, you can also take out a policy loan, using your life insurance policy as collateral.
Figure out the right coverage for your life
...If you’re young and single.
Is life insurance right when you’re young and don’t have dependents to worry about? True, you may not have to consider children at the moment, but your age and health mean your premiums will be considerably lower than those of someone who is older and faces health challenges. You might also want to consider disability insurance to cover your costs should you have an accident or illness. For the same reason, critical illness insurance is a smart choice for younger people. While you’re out of work during recovery from illness, a lump sum payment can help replace income or cover expenses not paid by OHIP.
...If you’re in a committed relationship and have dependents.
As any parent knows, kids are game-changers. Once children are on the scene – together with the cost of raising them – it’s more important than ever to think about life, disability and critical care insurance. In fact, as your income grows along with your family and your debt load, this life stage is the perfect time to review existing policies to add dependents or adjust according to what you’d need to maintain your lifestyle.
...If you have an empty nest.
Paid off your mortgage or almost there? As your debts reduce and your savings grow, it’s time to review your coverage and consider other kinds of insurance to manage income replacement and estate planning. Long-term care could also be on your mind, making critical care or disability insurance ideal to cover you for unexpected. At this time of life, permanent life insurance you invested in earlier can also be used to take care of retirement.
...If you’ve retired.
For many retirees, having permanent life insurance is the way to go to help cover final expenses, handle estate planning, leave a legacy, or take care of loved ones. If you already hold permanent life insurance, it would be wise to maintain the policy. Even if you receive a pension or rely on RRSPs, but these may not be enough. Funeral expenses and outstanding debts can add up, making the right insurance a relief to your loved ones.
Calculate your debt load
How much insurance do you need? That all depends. By adding up things like mortgages, car loans, credit card or lines of credit debt as well as student tuition and other costs, you can get a clear picture of how much your family might need to maintain their lifestyle. It’s also a good idea to factor in funeral costs, which can be $25,000 or higher. Life insurance can also be used to replace income, should you need to.
Consider your legacy
People get life insurance for a range of reasons. Sometimes, it’s to ensure loved ones are not financially burdened, or it’s used to create a legacy. Often, life insurance protects against future costs incurred by health issues or unexpected events that cause a loss of income. Whatever the reason, it’s important to determine who relies on you and how you want to protect them. Choosing the right policy coverage ensures your family get by financially.
If you’re young, your dependents may include a new spouse, a baby or even elderly parents. This turns into a spouse and school-aged children in one’s middle-age. People around retirement age could also have grandkids to worry about. What stage you are at in life will factor into what coverage best fits your needs.
Find a licensed insurance advisor
Life insurance is a long-term commitment, so it’s crucial to work with a knowledgeable and licensed insurance advisor who can explain your options and help you find the right combination of products for your needs. For example, CAA Protect advisors can educate you on different packages from different companies so you get the best coverage for the best price. Choosing the right life insurance can be intimidating, but CAA Protect are here to help you understand the right policy to fill your needs now and into the future.