A life insurance policy is a means by which to safeguard the financial interests of your family in the event of your death. Usually, the policy offers a lump sum cash payout which is paid tax-free, to your dependents or named beneficiaries on the policy. This can help them with costs such as outstanding debts, funeral costs, raising your family, and/or enabling them to maintain their standard of living if you die.
Life insurance policies are legally binding contracts that outline the specific details of your policy. These details include the price of your insurance premiums, the length of your contract, how long the contract will cover you for, and the sum that will be paid out to your beneficiaries if you die.
Life insurance policies can also be financially beneficial to you in other ways:
- It is possible to build a nest egg of savings for your retirement at the same time as benefiting from the protection of insurance
- You have the choice of naming a charity of your choice as a beneficiary. The policy can donate some or all of the cash payout to them
- You can use the policy to cover estate taxes when you die
- If you own your own business, a policy can provide the funds to buy out a deceased business partner’s shares of the company or can be used to protect a key employee of the business
We can help you figure out what makes sense for your specific situation.
Critical Illness Insurance
Critical illness insurance is an insurance policy which will pay out a tax-free cash lump sum to you in the event that you suffer a major illness or health condition. As life expectancy increases due to improvements in the early diagnosis and treatment of conditions such as heart disease and cancer, those living with the after-effects of such health problems have drastically increased. For many, the burden of extra costs associated with such illnesses can be significant. Such costs can include the need to make up for lost or reduced income while you were too ill to work (or for your spouse to take care of you), paying for caregivers, modifying or purchasing new cars, houses or other equipment to support your needs.
With the Canadian Cancer Society recently reporting that the survival rate for cancer is now over 60%, and many other cancers far exceeding this rate, considering how you would cope financially in such a situation has become a pressing concern for many.
Below are some key features of critical illness insurance policies:
- There is usually a waiting period on the policy – i.e.: a time by which you must survive your illness following the initial diagnosis before the policy will pay out. This is usually very short, often between 30 and 90 days.
- The policies usually cover most major illnesses. This include serious heart conditions, cancer, strokes, blindness, deafness, paralysis and others.
- There are no restrictions on how you use the payment. Once the lump sum has been paid to you, you are free to use it as best suits you and your family. It is known as a “living benefit” as the lump sum is paid to you as the policyholder, instead of to a beneficiary.
- In contrast to disability insurance, critical illness insurance is paid even if you are able to return to work following your diagnosis.
Talk to us, we can help determine what makes the most sense in your situation.
Managing Your Finances
Managing your finances raises a number of topics. None are as tricky and potentially unpleasant as planning for your family and finances in the event that you pass away or become incapacitated. Understandably, these questions are often ignored by many – but don’t fall into the trap of avoiding these difficult matters. Good estate planning will help to make sure that your wishes are carried out and that your family and assets are well protected.
With this in mind, let’s take a look at the key areas that you should consider when designing your estate plan:
- Choosing a guardian
- Life insurance and trusts
- Life insurance gives your family the financial security to continue their standard of living and to fulfill their dreams in the event that you are unable to provide for them yourself. Life insurance payouts can be used in various ways, including paying off debts, paying for college education, or simply helping with general living costs.
- Choosing someone to make decisions on your behalf
- Will, trusts, and beneficiary forms
As with any financial arrangement, changes over time, not only in process and legislation, but in your own personal situation, mean that it is imperative to keep your estate planning strategy under review and regularly updated to ensure that it’s a fit for its purpose and accurately reflects your wishes.
Insured Retirement Program
There are a number of vehicles available for individuals to save in a tax-efficient manner for their retirement – from employer sponsored pension plans to government plans, RRSPs (Registered Retirement Savings Plans) and TFSAs (Tax Free Savings Accounts). For those who earn a higher income, have maximized their current retirements plans and wish to contribute more, options can be limited. The insured retirement program is an effective way to bridge the retirement savings gap for such individuals in a cost-effective way.