Why Life Insurance?
There are many reasons people look at getting life insurance.
From the very young to the old, there are different products to fit different needs.
Here are a few of the most common reasons we see people applying for life insurance:
You’re going to have kids or already have kids
One of the most common reasons we look at life insurance is to cover debts that you have or attain upon passing, as well as provide an income for your surviving family. If you are the sole breadwinner in the family, you need life insurance. The average funeral is anywhere from 5-10,000 and many families are holding consumer debts, mortgages and even education loans. All these expenses can become the burden of your surviving family if they are not taken care of. Another reason it is good to have in place if you are expecting, is the chance that something doesn’t go right in the delivery. You can have peace of mind knowing that your surviving family will be well looked after in your absence.
Lock in great rates
When you buy life insurance, the rates are primarily based on age and health. When buying life insurance at a lower age, you can lock in lower premiums and reduce the total amount you will spend on insurance over the course of your lifetime. Along with age, health is a big factor and usually degrades with age. Getting insured before health conditions develop, such as high cholesterol or high blood pressure, lets you lock-in very affordable premiums for decades to come.
You’re planning to get married
There are many factors to consider before going down the aisle. Like, will you have individual or joint life insurance policies? Certain products (Joint-Life Insurance) are geared towards married people and can be very beneficial for high wealth couples seeking to lessen the impact of inheritance and estate taxes on their beneficiaries.
If either person is bringing children from a previous relationship, there should be a discussion about protecting the assets and inheritance of the children. For life policies where the child is to benefit, a trust should be established because the child wont be able to access the proceeds if they’re a minor
You support aging parents financially
Ideally your parents have already purchased life insurance as part of their retirement planning. However, many young families can end up acting as caregivers for a parent, in-law, or grandparent. If you are caring for your parent at-home, in assisted living, or a nursing facility, life insurance with a long term care rider will help you meet costs.
You work for yourself or have a family owned business
If you or one of your family members is crucial for the business, their death or disability can be very detrimental to the company’s revenue stream. Typically, in this situation you would want to cover the loss of revenues generated by the key person. One way to do this is through life insurance with disability coverage so that the business can continue to operate in their absence.
If you have a business that you are a key person in and want your family to be taken care of, but they are either disinterested or incapable of running the business, you can look at cross-purchase (crisscross) insurance agreements to help fund a buy-sell agreement. We recommend getting the advice of a professional when looking at how you would want your corporate life insurance structured.
You have a high risk job
If you work in a dangerous or high-risk environment, you have a greater chance of dying than someone who sits at a desk all day. Jobs in aviation, construction, firefighting, mining, oil and natural gas, and a few others will almost always result in a higher premium.
Even if you have employer-provided group life insurance, if you leave your job (resign, retire, or are terminated), you lose coverage. Also, group life insurance may not be enough coverage. It is recommended that you typically select 10 times your annual income as your death benefit.
Being in a high-risk job increases the likelihood of disability. Disability insurance is like insurance for your paycheck if you are unable to work. Although many people probably have short-term disability through their employer, long-term disability insurance is the one that most people need and do not have. Long term disability also can keep the income coming in when EI or other government benefits run out.
You have extreme hobbies
If you’re a thrill seeker or are into extreme sports, you’ll probably be deemed higher-risk by a life insurance company. It’s similar to having a high-risk job; you will pay more to be insured, but the cost is worth it considering the likelihood you’ll die from unnatural causes.
If you do have an extreme hobby — like rock climbing, scuba diving, or something equally thrilling — it’s best not to lie about it on your life insurance application. If you die within the first two years your policy is active and you didn’t disclose your regular high-risk activity, the insurance company has the right to decrease the death benefit, or cancel it all together.
As for the cost, you’ll typically see either a higher base premium or an extra annual fee calculated as a percentage of your coverage amount. Every insurance company assesses the risk of hobbies differently, so it’s good to comparison shop if this applies to you.
You want to build toward the future
There are different types of permanent life insurance options that give you access to capital for future investments, loans and give you the ability to “be your own banker” These insurance policies have paid up values that can be accessed later in life or can be used to increase the overall death benefit. These policies can be structured in many ways for different purposes.
To maximize the benefits of life insurance, it’s wise to include a financial advisor, accountant, and estates attorney in your decision-making process to ensure you have proper coverage that adapts as your life changes.
If you are interested in learning more, or have any questions regarding Life insurance, disability coverage or any other concepts talked about in this article, please feel free to reach out!