Life insurance needs can vary depending on whether you approach the issue from a business perspective, a philanthropic perspective, or a personal perspective. Let us dwell on the latter here, we will touch on the subject from other angles in subsequent columns.
Of course, these guidelines do not replace the services of a financial planner or a financial security advisor and can never replace their expertise, which remains essential. Rather, we aim here to allow you to have a more critical mind and to provide you with a basis for starting a dialogue with your advisers.
That said, to determine if you should purchase personal life insurance, first ask yourself these two big questions:
- Is part of my income used to meet the needs of one or more other people?
- Do I hold a loan jointly or for which a relative acts as surety or endorser?
If you answered no to both of these questions, you can stop reading, you don’t need life insurance. Otherwise, there may be a need.
It is usually prudent to cover any loan where you are not the only person involved, so as not to leave the burden on those who will survive you. By definition, this need is temporary and generally decreasing, since you are gradually repaying your loan. Temporary insurance is therefore quite appropriate.
If there are people who are financially dependent on you, you should consider whether your estate cash flow would be sufficient to support them. Due to the calculations involved, we strongly recommend that you consult a financial planner. They will be able to determine the value of your estate liquidity and whether it is sufficient. If they are, you don’t need life insurance. On the other hand, if these are insufficient, you need Life Insurance in Brampton. It now remains for you to determine which product is the most suitable according to the duration of the need.
When your need is permanent (for example, if you need to protect a severely disabled child who will never be independent), permanent life insurance with no cash value is the product to go for, unless you have maximized your RRSP accounts and TFSA and pay off all your consumer debt. In this case, you will then need to determine if you want to maximize the value of your estate. If so, participating whole life insurance or universal life insurance with cash values added to the death benefit are appropriate choices. Otherwise, you should opt for life insurance whose values are not added to the death benefit.
When the need is temporary (for example, if you want to protect your family until your children are independent or to cover your mortgage balance), then you need to determine whether the need is stable or decreasing. . If decreasing, 10 year term life insurance or declining term life insurance is recommended. Otherwise, opt for term insurance that matches the duration of the need (for example, 20-year term insurance, 65-year term, etc.)
Note that in theory most needs are temporary and decreasing. In fact, as those who depend on you age, and as your assets grow and your debts decline, your need for insurance should decrease over time.
Hopefully this short introduction will help you see things more clearly the next time you are offered a life insurance product.