Hey everyone: my name is Bridget Casey and I'm a Canadian personal finance expert, and today I'm going to tell you everything you need to know about life insurance.
Life Insurance is actually one of the most important products that you will ever get in terms of your finances because it protects your most important asset, and that is your income. . In the event of your death, life insurance provides a lump sum cash payout to your insurance policy beneficiaries to help provide for them financially.
Now that you will no longer be able to. And if you're thinking Oh, my God, it's super dark in morbid to talk about my death''. I mean I'm with you. . It is.
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But the last thing you want to do is leave your family in financial distress when they're already grieving the loss of you. , Let's jump into exactly what life insurance Is and how it works.
So there are two types of life insurance policies that are available. . The first is whole life.
Insurance sometimes is called universal life insurance, and this works as a life insurance policy, that's kind of blended as a tax, sheltered investment, product. Insurance sales, people of whole life insurance policies, really push this tax-sheltered investment option, but it honestly does not make sense for anyone whose income is below $ 200,000 to $ 250,000 per year, and even at that point like it's, it's not the best one out there.
Everything You Need To Know About Life Insurance
If you are earning less than $ 250,000 per year, then actually the Tax-Free Savings Account and the Registered Retirement Savings Plan, as well as the Registered Education Savings Plan, are all better tax shelters. . The other downside of whole life insurance policies is the premiums, are typically really really high.
So, if you've subscribed to one of these policies and you're contributing hundreds of dollars per month, those are hundreds of dollars that cannot go to the better tax shelters like the TFSA and the RRSP.. It's. For this reason, I'm not a big fan of whole life insurance Policies.
I think they're really rigid. . The other major downside is, If you ever miss a payment, you risk losing your insurance coverage and you also risk losing all the money that you put into it. It's just not good overall. Term life insurance, on the other hand, is what I subscribe to it's.
What I think is best for most Canadians. , It's what PolicyME offers and it provides you all the insurance coverage that you need, but it's at a much lower cost. , And that way you have a lot of extra cash in your budget that you can use to save.
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In other tax, sheltered Investments like the TFSA and the RSP, and so on. , Just like with whole life insurance, your family will get that lump sum cash payout in the event of your death to help them with any financial needs that they have at that time. When you're purchasing term life insurance, you have to choose the length of the term. It comes in 10, 15, 20, 25, or 30-year terms.
How much coverage you need the amount and the length of the term really depends on where you are in life and what your financial situation is. . Now, when you're young life insurance is cheaper, but you also need more coverage because you're at the start of your career, your children are young.
You might have high liabilities like a Mortgage and other debts, and you probably don't have a lot of financial assets built. . As you age, this actually reverses.
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You don't need as much insurance coverage, but it becomes more expensive. . The good news is when you're older you're further along in your career, and you've maybe paid off some debts.
You've accumulated financial assets and your children have grown and maybe won't depend on your income as much or for very much longer. . This is why it's important, when choosing a life insurance policy, that you hit the right balance between the length of term and the cost, as well as the coverage for you and your family.
The other thing that's great about the policy term life insurance policies is they provide a ten thousand dollar child benefit absolutely free.
This is a benefit that pays out as a lump sum in the event that one of your children were to pass away, and you can use this money to help with things like funeral expenses. . I know talking about the death of a child is even darker than talking about your own death, but it is something to think about.
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Or actually, you don't even have to think about it because you get it for free with the PolicyMe Term, life insurance policies. . This ten thousand dollar child benefit applies to all biological adopted and stepchildren as well as children.
You have right now and children in the future, so it's automatically added and it's totally taken care of for you. . Once you have life insurance coverage, it becomes part of your total financial picture that you want to review on at least an annual basis to ensure that it's all meeting your needs.
Everything You Need To Know About Life Insurance
I typically don't recommend anyone cancel or reduce their life insurance coverage, but there may be circumstances where you actually want to add more.
The application for life insurance is really straightforward. It takes about 20 minutes online on the policy website. , Then, after that, they may also request a physical from your family doctor, and often they'll send a nurse to your home to actually take some blood samples. I know that sounds really intense, but I promise it's not.
I had some hesitations about it, but it ended up being very chill, not a big deal. Experience and it's just an insurance company that can confirm your health and offers you coverage. Once your insurance policy is approved and the First payment is debited from your account.
Your coverage is active. . I actually set up the payments to come automatically out of my checking account to ensure that I never miss them. One of the best analogies I ever heard about life insurance was comparing it to an emergency fund.
You would have to save about $ 2,000 a month for 10 years to leave your family with $ 250,000 savings. With life insurance. You can get that amount right away.
The first month, for only like $ 20 $ 30 $ 40 dollars a month. . It's incredible! So you get all that safety and security of financial protection for your family at a fraction of the cost.
You don't have to save for a decade, it is instant and so much more affordable than socking $ 2,000 a month away. . If you have any questions about life insurance, please leave them in the comments below. More: Life insurance & Types
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