A lot happens in life and it’s not always good. That’s why insurance exists – to protect you financially against the many things that can go awry. Insurance needs may not be as great when you are young, but as the years pass and you end up with a growing family, insurance becomes a key strategy for making sure you and your loved ones, and the assets you’ve built up, are protected no matter what.
We asked Heather Clarke, Vice President of Insurance Service at Investors Group, to help us decipher the different types of insurance and when you might need to seek advice to determine your needs.
If you have anyone in your life – a spouse, kids or even an aging parent – that relies on you for support, you need life insurance.
Do your homework
To gain some initial understanding of the different types of insurance and how needs are determined you can do some research online and try out the various needs calculators, says Clarke. However, you’ll get the best recommendation based on your unique situation by sitting down with a licensed insurance advisor. “A good advisor will conduct a full discovery of your financial situation, your goals and concerns, including your current and future insurance needs,” she says. “The advisor will then provide you with coverage recommendations that are a precise fit for your needs and budget. And you make the choice.”
Look at life insurance
If you have anyone else in your life – a spouse, kids or even an aging parent – that relies on you for support, you need life insurance. Even if you have significant assets, you don’t want a loss of life forcing others to deplete those assets just to get by. “As you mature and your personal and financial life becomes more complex, you realize your life insurance needs – and those of your spouse – have also changed,” Clarke says.
Clarke says that as a general rule, you should increase life insurance protection to keep pace with your income and lifestyle. Term insurance, which protects you for a predetermined length of time and pays a specified amount to chosen beneficiaries, is great to cover temporary needs such as a mortgage. Permanent life insurance is meant to stay in place for your lifetime to cover permanent needs such as providing liquidity on death for your loved ones or covering a tax liability. This policy has an investment component that grows over time that can be accessed in a variety of ways. There are many options so it is critical to work with an advisor who can explain the difference between universal life and whole life and recommend a plan design with riders that deliver you the best coverage for your situation.
Take disability payments
You might feel great today, but illness and accidents happen. A recent survey found that the number of Canadians whose workplace benefits include disability coverage is falling and fewer companies are providing support for their employees’ financial health. If you are self-employed, you may have little safety net if you were to become injured or ill.
According to the Canadian Life and Health Insurance Association, one in three Canadians, on average, will be disabled for 90 days or more at least once before they reach age 65.
Disability insurance offers some income replacement while you are unwell, making sure you and your family don’t fall behind on your expenses or are forced to draw on your savings. “Even if you already have some disability insurance as part of your employee benefits package, backing it up with your own personal plan should be considered because your employer-sponsored plan ends with your employment while a personal plan stays in place regardless of your employment as long as you continue to pay the premiums,” says Clarke.
Cover yourself with critical illness
Like disability insurance, critical illness insurance provides coverage if you are diagnosed with a specified medical condition, such as heart attack, stroke or cancer. It pays a lump sum which you can spend any way you like, including to help cover expenses, or pay for medical care you need that’s not covered by any medical insurance.
Look at long-term care
As you age, you may worry that your income won’t cover your needs, should your health decline. Long-term care insurance provides funds when you are no longer able to carry on some of the normal activities of daily living. Some plans pay a lump sum while others provide an income stream over the balance of your life time to use for home care services, or to help pay for nursing home care.
Clearly, there are many insurance options that people can tap into today with many choices to fit an individual’s unique needs. A licensed insurance advisor will provide the advice you need to determine what type and how much insurance is required in your financial plan.