Life Insurance 101: Assessing Your Needs and Organizing Your Finances During Confinement

• What is the purpose of life insurance?
• Who is it for?
• What are the different types of life insurance?

While front-line workers are working around the clock (THANK YOU!), many of us find ourselves with more free time on our hands.

What if we took this opportunity for a financial spring cleaning between a Netflix marathon and a Zoom meeting?

Because if something is to be learned during these uncertain times, it’s that financial planning and preparing for the worst are indeed essential.

 

The budget

First, we need to get the basics covered. While we had every excuse to procrastinate, now is the time to set up and follow a budget. It’s a habit that saves money and costs barely anything in time.

I’ve put together a list of user-friendly applications right here!

 

Life Insurance

As this crisis reminds us of the importance of planning for the worst, life insurance is definitely one way to do so.

 

 

Here are some answers to help you better understand this financial product.

 

Is there an ideal age to buy life insurance?
Do I absolutely have to take the life insurance offered by my mortgage lender?

 

No. And no!

Life insurance comes in many forms and can be useful to anyone who wants to provide protection for their loved ones.

It can even be useful for people without children or dependents. For young professionals who have just started to deal with financial responsibilities and debt, it’s a way to avoid burdening family members with funeral arrangements, amongst other things.

 

 

It becomes vital if you share a mortgage or a lease with a partner. Life insurance could allow the surviving spouse to keep the home, or at least have the means and the time to reorganize.

Also, mortgage lenders do offer life insurance, but it’s best to evaluate your options with your financial planner before signing anything. It may very well be that your current coverage is sufficient or that another life insurance product is better suited to your needs.

 

 

For parents, it is a matter of securing their family’s financial future. But even when the children become independent and the mortgage is all paid off, life insurance is a tool that can be part of good estate planning.

 

What are the types of life insurance?
Who are they for?

 

Term life insurance

It’s active for a predetermined period. It is more affordable in the short term, which makes it particularly useful for a young couple of homeowners. The objective is to avoid leaving the other with the entirety of mortgage payments in the event of death.

 

Permanent life insurance

 

It is a must as soon as one becomes financially responsible for someone else. We think of parents or anyone supporting a loved one who lacks autonomy.

Because it offers better protection, permanent life insurance is more expensive at the beginning. This could serve as a good reason to subscribe as early as possible in order to take advantage of a smaller premium due to young age.

However, it is possible to convert term insurance to permanent coverage. This can be useful when the renewal of a term insurance policy arrives because premiums may increase to the point where they become more expensive than those of permanent insurance.

 

Other forms of permanent insurance can also be used for financial planning.

Universal life insurance

It offers a combination of investment accounts and life insurance. It can be especially useful for families and entrepreneurs who want to grow their savings and already have a TFSA and an RRSP.

 

Participating life insurance

It is an all-in-one product for those who want to add diversification to their investments.

 

We understand that the range of insurance products is so vast that it can be difficult to figure out which is the right one.

But in the end, insurance must be chosen based on several factors and fit in with your overall financial planning.

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In order to find the product that best suits your needs, make an appointment with one of our advisors at MCB Group.