Life Insurance is used to protect your assets and to replace income. It is essentially a financial benefit received in the event of the insured person's death. The policyholder agrees to pay a monthly premium to an insurance provider in exchange for a guaranteed payment (financial tax free death benefit) to a designated beneficiary or loved one upon the death of the insured. So why is it so important? Life insurance provides peace of mind, a future for your family and no scary surprises during that challenging time in one's life.
The future is unpredictable. Covid 19 made that every more so, as many patients (young and elderly) and pregnant women filled hospital ICU beds; and with numerous variants and mutations since March 2020 it is preying on the weak, vulnerable, unhealthy and our children. We have no idea what tomorrow may bring. If you have children or a spouse who depends on your income, life insurance means your loved one could be protected from paying your debts and funeral expenses, and may even help them to be completely debt-free when you're no longer around.
So, a question at this point is to ask yourself; is life insurance worth it? To answer that you have to assess what's important to you. There are many reasons to buy it, the first is to protect their loved ones. If you have a partner or a family (especially a special needs child) and don't have life insurance, they could lose everything if something happened to you. Life insurance will help ensure your family will be taken care of if you're not there and allow them to continue their standard of living. A Plan B is just as important because if something ever happened to the breadwinner, the other parent would potentially have a number of expenses such as child care, children's activities like gymnastics, hockey, soccer expenses, house cleaning on top of their car payments, care insurance, home insurance, mortgage payments, property taxes; which could deplete and eat into your savings, TFSA and RRSPs very quickly. Even if you don't have a family yet but plant to, it's more affordable the younger and healthier you are.
Life Insurance isn't just for individuals and families, it's also for business owners (Accountants, Dentists, Doctors, Lawyers or any small business owners and entrepreneurs). Why? Again it will protect your own family, and should you have one or more business partnership agreements, if something happens to one of you, the other partners would take over your share of the business, while the family of the person who dies would get a life insurance payout.
The cost of not having life insurance is that if something were to happen to you either at work or driving to or from work, that you're not able to take care of the people you care about for the rest of their lives, and potentially losing everything. Although life insurance can be a part of your investment plan, it should never be the whole thing. Remember: the primary goal of life insurance isn't to ensure tax-deferred savings; it's to protect your loved ones in your absence. Please book an appointment with me so we can build a stress free retirement plan for your family.
Is Life insurance a good investment?
Term life insurance is cheaper and has a single objective: to pay out a death benefit. For the majority of Term policy owners, it is the most effective option. A permanent policy though, can play a part in a strategic financial plan. You will pay higher premiums if you have permanent life insurance, but the reason for this is that a portion of the premium will be set aside in a savings vehicle for you. The key is to continue to pay your premiums, the policy will remain active, your savings will continue to build. It's a safe way to save money with little risk. Once you have built up your nest egg in the permanent life insurance, you can borrow on that money if you need it. For example, if you have owned a policy for 10 - 50 years, the permanent policy may have accumulated enough dividends and compounded growth to pay for you child's post-secondary tuition or even help pay for that new cottage renovation. You'll need to pay that money back eventually, with interest, or else it will be subtracted from your death benefit. But it could be an attractive option when you need an infusion of cash. Borrowing from a permanent policy has other tax and credit advantages as well.
Schedule a Zoom meeting (email me at devin@dlwealthmanagement.ca) or call me at 416 882-7462 so I can discuss Term or Whole Life advantages and how it can benefit you and your family!