Thursday, 23 May 2019
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There’s no such thing as too early for life insurance – Toronto Star

Since finding out we’re expecting our first baby this summer, and since taking possession of our new home in February, life insurance has been on my mind more than ever before. Our life circumstances have changed dramatically, and because the consequences of being underinsured in the event of an untimely death could be financially catastrophic, my fiancé and I have done a deep dive into whether we have enough insurance, and if it’s the right kind.

The results of our research were that we needed more coverage for life, critical illness and disability insurance. Thus, we dialed up our policies and have peace of mind.

Thinking about death and disease is awful. But, you need to do it while you’re healthy, not after it’s too late, writes personal finance columnist Lesley-Anne Scorgie.

Thinking about death and disease is awful. But, you need to do it while you’re healthy, not after it’s too late, writes personal finance columnist Lesley-Anne Scorgie.  (Hon Fai Ng / Dreamstime)

The rationale for insurance: There are certain times in your life when you’ll need life, critical illness and disability insurance more than other times. Specifically, when you have a young family, a mortgage, a business and/or other liabilities (money owed to lenders). But this is the exact time in life when your budget is the tightest, leading to the temptation to cancel the insurance policies in exchange for putting more money back into your monthly budget.

Don’t do this! If you, or your spouse were to pass away, become sick or disabled, the financial consequences could limit your ability to pay for your home, put your children through school or simply cover regular living expenses or funeral costs.

Over time, you’ll need less insurance because your debts will be paid off, your children will move out of the home and you’ll hopefully have more in savings. So, re-evaluate every five years to see if it makes sense to dial back your coverage.

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Determine what you need: The first step is to evaluate all of your current policies. Dig them out of your employer’s handbook (yes, most employers offer some kind of coverage), grab the other policies from your filing cabinet at home and review what you currently have. Specifically, look at the value of the policies and what kinds they are — life, disability and critical illness are most common.

Next, make an appointment with an insurance professional (get a recommendation from a friend or family member) to review what you have relative to what you need.

Hint, you could require a combination of a permanent life insurance policy (like the name says, this is a fixed and guaranteed policy that you’ll fund at a regular amount for up to 20 years) to cover funeral costs plus a term life insurance policy (this policy is adjustable and temporary, meaning if you don’t pay your premiums, you’ll lose your coverage).

The amount you need is generally calculated as the cost of your funeral and replacing your income to cover your household expenses (including paying off the mortgages) for the next 20 years. So, don’t be surprised if your insurance professional suggests a $1.5 to $2 million term policy if you’ve got a young family (and don’t freak out; it’s less expensive than you think). They’ll also discuss policies that cover you and your partner (if applicable) if you become ill or unable to work, which can actually be more financially catastrophic than death.

Affording your policies: Yes, insurance will cost you money and that’s why you need to shop around for the best rates relative to the best coverage, and make room in your budget. Take a look at cutting out unnecessary spending on restaurants, car washes, clothes or entertainment. More than likely you’ll need to find at least $100 to $200 per month in your budget to contribute to these important policies.

I know, I know. Thinking about death and disease is awful. But, you need to do it while you’re healthy, not after it’s too late.

Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star. Follow her on Twitter: @lesleyscorgie

Source: https://www.thestar.com/life/opinion/2019/04/01/its-never-too-early-for-life-insurance-only-too-late.html

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