For most people, their New Year resolutions might have included something related to their family’s financial health. It might be timely to re-evaluate your potential financial risk from death, illness or disability and review whether your level of critical illness, disability or long-term care coverage is adequate. Unfortunately, most people will find their levels of coverage lacking, exposing them and their loved ones to significant financial risk.
Between today’s record high debt levels and the need for two incomes to make ends meet, having adequate life, critical illness, disability or long term care protection for families has never been more urgent. This point was driven home while listening to the news the other night; a young father was killed in a vehicle roll over, leaving a wife and two young children behind. Family members interviewed after the funeral said he that he did not have any life insurance coverage and were asking people to make donations to a trust fund set up for his family members left behind, now in dire financial shape.
Most of us need life insurance, but the question is how much? Different stages of life require different coverage levels and any life changing event such as getting married, having kids, purchasing a home, getting divorced, retired, a new job or promotion or some other financial windfall. Are just some of the triggers that usually require increased life, critical illness, disability or long term care coverage?
Over 25 percent of households today have people living in them with no life insurance and for those who do have any coverage, it’s not adequate coverage for the stage of life their at.
Term life insurance has become very affordable. This is the result of people living longer and increasing competition in the industry for premium dollars.
Another good thing about term life insurance is that you can choose a policy that matches your needs at a particular phase in your life, then re-examine your needs when the term is up. I believe a 30 year old couple with two children should have a minimum of $1 million, but this is best determined by their personal needs. This part of the financial planning mix is one of the easiest and least costly to remedy.
Critical illness coverage provides a tax-free lump sum if diagnosed with any of the covered conditions, the three major being cancer, heart attack and stroke. I recommend enough coverage to pay the bills for a year, as it’s better to lose the mortgage payments than your home.
An often unforeseen issue with someone recovering from a critical illness is that it usually impacts other family members, who end up having to take time off work, or worse, a full time caregiver may have to be hired. A cash crunch can come up very quickly, and RRSPs or other investments may need to be cashed in to cover these costs.
Disability plans differ in that these replaces lost income if unable to work. A fortunate few have some level of disability coverage at work offering short or long term protection. Having checked some of these plans for clients and found them wanting, I recommend they have them reviewed by a financial professional to ensure no surprises should they become disabled.
Long term care coverage is designed to pay the cost of home care or facility care for someone no longer able to care for themselves, once again saving them or a loved one having to cash in needed savings or investments to cover the expense.
Critical illness, disability and long term care plans are costly compared to life insurance, as there is a much greater risk of becoming disabled, suffering a critical illness or needing long term care prior to age 65 than of dying. So please make one important New Year resolution, to have a financial check up this year to ensure your family’s financial health isn’t at risk should something bad happen to the family‘s breadwinners.
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