Peter Boys, Boys Financial Services

Defining Your Life Insurance Needs

Insurance Needs

There are many reasons and ways to buy life insurance and there are multiple product available. Yet why do an increasing number of Canadians either have inadequate coverage, or rely on creditor coverage that they have no control over?

It’s important to understand how insurance can help manage a wide range of financial risks we are exposed to in today’s complicated world.

Insurance needs are different for every individual, family, farm or small business. When defining that need, it usually requires getting financial information to identify the financial risks to be covered, then identifying the right insurance products to mitigate those risks.

Here are a few of the reasons that come out when going through this discovery process.

  • Pay off debts owed by an individual, family, farm or business with tax-free cash
  • Replace the lost income earning capacity of the deceased spouse or partner
  • Pay funeral expenses
  • Set up an education trust fund for children
  • To pay taxes due on death, such as from RRSPs, capital gains, etc.
  • To create, maximize or equalize one’s eventual estate
  • To fund a gift to charity, or a bequest
  • Maximize one’s pension with an insured annuity or insured retirement plan
  • Another tax sheltering option to RRSPs that builds cash value inside the policy

Even during our lifetime, properly structured life insurance can provide benefits such as protection from creditors or legal judgments, when family members are named as beneficiaries. A personally owned life insurance policy can also be assigned as collateral for mortgages or loans, replacing the need to buy the lenders’ plans. This not only covers the risk, but because you own the policy and the coverage, you have the flexibility to shop around other lending institutions and move your mortgage if you find a better interest rate.

One of the biggest benefit is that the wealth is transferred to beneficiaries tax-free, bypassing probate and in complete privacy.

This then begs the question, what type of life insurance is appropriate for you? Like most products, life insurance comes with a vast array of plans and options.

Term insurance is a cost effective way to provide protection for your family or business.  You might compare it to renting a home as it provides protection but doesn’t build any cash value.  The premium increases at every term period from 5 to 40 years, and usually runs out by age 80.  For most people it eventually becomes unaffordable as you age.

Term 100 is a term product at a guaranteed cost for life, with no savings component.

Permanent Insurance is a mix of insurance and tax-sheltered savings with the growth participating in the company’s dividends.  The insurance company makes thee investment decisions, and there is no clearly defined breakdown between cost of insurance and the investment portion.

Universal Life offers the most flexibility, the best growth potential and can be tailored to one’s specific personal or business insurance needs.

From this you can see that life insurance can fill a multitude of roles and comes in a wide variety of options. It requires in-depth analysis of each individual situation to determine the need, and the right product. And most important, the solutions can be cost effective compared to other financial options and should be part of every sound financial protection, tax-saving and investment strategy.

These are benefits than only a licensed insurance broker can provide for you. Take the time to sit down with one to find affordable and effective protection for you, your family or your business.
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