Financial Power

Life insurance is not something that everyone likes to discuss, let alone try to compare quotes and then buy a life insurance policy. Unlike auto insurance, life insurance is not something you need to have by law. But if you want to provide a safe future for your loved ones after you are gone, life insurance is a very good option.

Money from life insurance can give the ones who depend on your financial support an income if you die suddenly. Life insurance funds can also be used to cover any taxes and final costs due at your death.

People don’t “need” life insurance- it is something they want to buy. It is all about how much you care about what you have built and whom you are leaving behind. The biggest motivator is caring about someone you will leave behind when you go.

Even so, the insurance industry maintains that many people are underinsured, given family and other responsibilities. According to research from insurance companies, 50% of North American families have less than $100,000 in coverage, including group plans they get from work.

There are three main reasons for buying life insurance coverage:

• To pay your immediate costs and debts in the event of your death.

It is fairly simple to calculate your “once and done” costs. Include your funeral and final legal costs, which could be $10,000 or higher, plus your debts(including your mortgage, credit card balances, car loans and lines of credit) and a six-month emergency fund. If you are a person with dignity, you’d certainly want to leave your spouse with a clean slate.

Also include in this calculation lump sumps to cover your children’s college or university costs, a retirement fund for your spouse and any money you may want to leave to charity.

• To replace your income.

If you are the main breadwinner in the family, your spouse will need a lump sum that can be used to generate an income to replace your paycheque.

A rule of thumb is that if we have one income in the household, we want to replace 80% of the income. If we have two incomes, then we would replace 60% of each individual’s income – although every situation is different.

• Estate and retirement planning.

Insurance can protect your estate from the taxman, who will come knocking on the door for his last tax grab when you die. Insurance, for example, can be used to pay capital gains taxes that would levied on a family cottage or a business that has increased dramatically in value over the years.

Of course, if none of the above situation apply to you, you may need very little or no life insurance coverage.

I personally do not believe that you need life insurance forever, as some insurance agents are trying to talk you in to permanent insurance. With a good financial plan in place you will need only term life insurance for a period of time, until you’ll have sufficient asset, pay of your debt and have no dependents.

Assuming, however, that life insurance is in your future, there are three types of coverage to consider:

1. Term Insurance
2. Permanent Insurance:
   • Whole Life Insurance
   • Universal Insurance
3. Term-to-100

So, what do you buy? Let’s analyze and see which insurance really makes sense to buy. What’s right for you the consumer, not what’s right for the insurance companies and insurance agents?

Next Step: Buy the Right Kind of Insurance!

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Money Saving Tips When Buying Life Insurance

Have You Made These Life Insurance Mistakes?

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