At the beginning of a “living-together” relationship, life is pretty simple. Your biggest responsibilities are paying the rent, buying groceries and deciding whose turn it is to clean up. It’s not until you buy your first home that you feel the need to do something to protect your investment. It’s not uncommon for mortgage protection to be your first encounter with insurance. If the unthinkable were to happen, insurance can provide a tax-free, lump-sum to cover the mortgage or other expenses.
Life insurance to cover your mortgage is an easy conversation to have with your partner, but the conversation shouldn’t end there. Tragedy can take many forms, like disabilities from illness or accidents and critical illnesses. While the odds of surviving a serious illness are improving, it can still be challenging to cope with the after-effects – emotionally, physically and financially. Think about the impact on your family’s lifestyle if you were unable to work and required assistance to do simple things like cooking, bathing, and dressing. A serious illness affects everyone in your family.
You may have some form of insurance and benefits through your employer, but this may not be enough in extreme circumstances. Benefits can also end if you’re no longer able to work, so relying on it as your main source of protection may not be the best plan. If you think you can’t afford another monthly expense, think about what would happen if you didn’t have any money coming in to cover the mortgage. Your financial plan should cover all the bases including budgeting, savings, a will and family protection.
Life insurance is designed to provide your loved ones with security when you die. In exchange for regular payments, a lump-sum amount of money is paid to the beneficiaries after the insured person passes away. Insurance can provide the assurance that your loved ones will be supported at a time when they need it most. The beneficiary can receive the money tax-free and can use it to pay down the remaining mortgage, cover funeral costs or create a retirement plan that would have been funded by your income.
There are three types of insurance to choose from:
* Term – A policy purchased for a certain term, such as the length of your mortgage. You can decide on the amount you need and may have the option to renew at the end of the term. This type of policy has no cash value.
* Permanent – This type of plan covers you for life and is more cost-effective for long-term needs. Premiums are higher than term insurance when you’re younger, but lower when you get older. Permanent life insurance usually accumulates a cash value, which can be paid out if you cancel the policy.
* Universal – A universal life insurance policy provides lifetime protection and offers more flexibility than conventional permanent plans. Premiums may increase or stay the same, depending on your policy. The big benefit is if you make payments greater than the required cost of your policy, the excess can be invested and grow tax-deferred.
Critical illness insurance
We’d all like to imagine a future with perfect health, but the right time to plan for the unexpected is when you’re healthy. Once you become ill, your options are limited. Critical illness insurance can help cover the costs associated with a life-altering illness. Imagine needing daily medication for a year that
costs $100 a day. Ask yourself: Do your other plans – life, group health, or disability – offer adequate coverage? Would your retirement goals still be realistic if you withdrew $50,000 for medical expenses? Your family income could be reduced if you’re unable to work, need to travel to medical appointments and need home-care.
Having additional funds if you become seriously ill allows you to focus on recovering, not your finances. If you’re diagnosed with one of the illnesses covered by your policy, after a set time period, you’ll receive a one-time, lump-sum cash payment. You decide how you want to use it – cover expenses, pay medical bills, or take a family vacation.
Chances are, you know someone who’s been impacted by a serious illness. Critical illness insurance can provide you with the peace of mind knowing that you’re financially covered and allows you to focus 100 per cent on what’s important - recovering.
Making it part of your plan
Family protection insurance helps ensure your loved ones are financially prepared should something happen to you. This can seem overwhelming and is a lot to take in. Let’s talk – I can explain how life insurance and critical illness insurance can work together to protect your family, now and in the future.
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