Peter Boys, Boys Financial Services

Financial Risk Management for Young Families

manage risk

 

The average Canadian family is getting ever deeper in debt, so the need to manage the associated risk has never been greater. Adding to this is the low level of personal savings to cover unexpected events such as a major car repair, the dryer packing in, or any of the 101 other things that happen out of the blue. Expenses are high, and it’s difficult to even think of adding even more. But there may be a solution.

Most people have house insurance, life insurance, auto insurance, so who wants to talk about more insurance? But insuring our greatest asset, our income earning potential is probably the most important of all. Before age 65 we have a much greater chance of becoming ill or disabled than of dying.

What options do you have if you were unable to work for several months or even years?

  • Consider that a 30 year old male or female earning $40,000 a year has the potential to earn $2.4 million dollars by the time they reach age 65.       How big would this number be taking future pay increases and inflation into account? Conversely, what would happen to their earning potential if they suffered a disability due to an accident or sickness?       Would they have a way of covering their bills and expenses until able to return to work? Would their spouse be able to take on the dual responsibility of being both breadwinner and care giver?
  • Many Canadians have some level of disability coverage at work or with Worker’s Compensation. Unfortunately these plans have limitations. Group disability often has holes in the coverage and Worker’s Compensation only covers you while at work. A personally owned plan may be able to fill the gaps at relatively low cost.
  • Canadians should consider enough critical illness protection for themselves and their spouses to cover at least 12 months of bills while unable to work. Very few people have $25,000 or more in available cash to cover these emergencies! When dealing with an illness or disability we want to provide for our family, not be worrying about bills or losing our house or car.
  • For people who have health or other issues that make them hard to insure, guaranteed issue or accident only disability plans can provide a basic level of coverage. Accidental death and dismemberment plans that don’t require any medical evidence can also provide some basic level of protection.
  • Compare a couple both aged 30, paying $115 a month to give them $1 million of term coverage each, to paying this or more to insure their $30,000 vehicle.       Is your life less valuable than your vehicle? For many in this age group, I recommend buying enough cheap term coverage to cover future needs, then convert some or all of it to permanent coverage when your debts are paid down. This can be done without any additional medical underwriting.
  • But we come back to the question, how can you afford more insurance? It’s easy, just find out how much you are currently paying for your insurance coverage, and then sit down with an insurance professional to aid you in finding cheaper rates. You may find that you can add in some critical illness and disability coverage for the same costs you are paying now. Same costs, more insurance coverage, to know that your family is protected.

You owe it to your family. Find out how you can protect you and your family against the financial risks we all face in today’s world, while getting the best value for your hard earned dollars.
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