Do You Really Need Life Insurance?
Some people don’t have life insurance because they feel the cost is too expensive, they aren’t sure if they need it, or because they have no idea how to go about purchasing a life insurance policy.
Which category do you fall under?
If you’re not quite sure whether life insurance is the right financial strategy for you, feel free to contact me to find out how I can help protect your loved ones, how much the insurance premiums cost and how much life insurance you actually need
Here are four reasons why buying life insurance is a good idea:
1. If you have children.
Typically when you mention to a person that they should insure their children against death, they tend to look at you like you’re from another planet; probably because it seems odd to benefit from the loss of their child. However, it’s important to note that parents buy life insurance on their children not to get rich from the tragic event, but because you probably won’t be able or willing to work after the loss of a child. The proceeds from life insurance can help cover an income gap during this difficult time.
As a parent, you will most likely require months of time off to recover from the death of a child and the money from the insurance ensures you will be able to recover without bankrupting yourself in the meantime.
2. If you want to donate to a charity.
Life insurance proceeds do not need to have a physical person as the beneficiary. You can purchase a life insurance policy to create a charitable legacy. When you buy an insurance policy on your life and name your favorite charity as the beneficiary, you are leaving behind a legacy that will help others for years to come.
3. To cover the final costs and debts.
Believe it or not, there are a lot of costs involved when someone passes away. As part of the estate planning process, I can assist you to make sure that there is enough money to cover the cost of all final expenses through a life insurance policy.
According to Canadian Funerals Online, the average cost of a cremation in Canada is $300 to $600 depending on your province and the average cost of a burial is $5000 to $15,000.
Does your family have the savings to cover those costs?
If the answer is no, then a life insurance policy to cover the costs is just what you need. The proceeds can also be used to pay final estate taxes and any outstanding debts.
4. To pay off an outstanding mortgage balance.
The reality of Canadian finance today is that more and more people are retiring with mortgages (The Globe & Mail). Could you imagine having your spouse pass away and being left alone to cover the costs of owning your home and making mortgage payments on a single income? Many of us can’t. This is why buying life insurance is critical to help cover the costs of your outstanding mortgage balance.
Many financial institutions offer a version of life insurance when you apply for a mortgage. Although costs may be cheaper, this type of policy is not advantageous for several reasons.
The first reason is because the lender a.k.a your bank is the actual beneficiary of the life insurance policy; the money is solely used to pay off the outstanding balance of your mortgage and it doesn’t leave any money leftover for your loved ones.
The second reason buying a bank life insurance policy is not preferred is because if you as the borrower choose to move your mortgage to another lender, the policy cannot be transferred and therefore your coverage terminates. Applying for a new policy with the new lender can be significantly more expensive in premiums because you will be older and may have health risks.
Having a fixed amount of life insurance coverage where you can name different beneficiaries as well as final expenses is a much better financial strategy.
Contact me today to discuss your life insurance and estate planning needs.