Insurance Planning is a very important step in the preparation of the overall financial plan. It includes the analysis of your current policies in place, in addition to understanding your unique healthcare fund needs and the many insurance options in the market.
Insurance protects your greatest asset: You – Your Family – Your Business!
None of us plan on catastrophe striking, but when it does, it is imperative that you have proper insurance in place to replace the income that is lost as a result of death, disability, or a critical illness. An individual, family, or business’ focus should be to prevent the erosion of their wealth and the possibility of lost income due to death, disability, illness or taxes.
What is Life Insurance?
Life insurance enables individuals with a way to provide for their families financially, in the event of their untimely death.
By purchasing life insurance, a person can provide enough funds to pay for not only the funeral and other estate expenses, depending upon the amount of life insurance purchased but also the following:
- To continue to make mortgage payments on the family home
- To pay the mortgage balance in its entirety
- Provide funds to the survivor to replace loss of income of the passing spouse
- Provide future retirement funds of the surviving spouse
- Provide education funds for the future education of children
- To fund annuities or trusts set up for surviving family members/beneficiaries (especially useful in cases where the beneficiary is a disabled family member)
- To provide sufficient funds to cover any tax liability of the individual or the estate, thereby leaving the estate intact to surviving family members
- Several other financial strategies can implement the use of insurance policies
What is Critical Illness Insurance?
Critical Illness Insurance is designed to provide you with a large amount of tax free cash (lump sum payment as opposed to monthly income payments traditional to disability insurance policies), paid 30 days after being diagnosed with a life altering illness covered within such an insurance policy. There are several critical illnesses covered within a traditional critical illness policy such as cancer, heart attack, stroke, multiple sclerosis, to name a few. This insurance benefit can be used in any way you choose.
The most common uses of Critical Illness Insurance benefits are:
- Relieve debt obligations like your mortgage
- Replace lost income due to you or your spouse being off work
- Make modifications to your home for access and mobility
- Travel outside of Canada for private health care vs. waiting for treatment in Calgary
- Pay for cutting edge treatments not covered by the Alberta Health Care Insurance Plan
- Seek alternative treatments around the world
- Have the financial freedom to spend quality time with family and friends
Check out the MyCancerIQ link to understand the SIX different cancer risks and to learn what factors decrease your cancer risks.
What is Disability Insurance?
Disability Income Insurance provides coverage against one’s inability to work due to serious injury or disease. When you are no longer able to work, disability insurance will provide money to make up for lost income. How much you get and for how long depends on whether you have short or long term disability insurance.
Short term disability insurance provides coverage when you are temporarily unable to work due to short term illness or injury. Coverage usually starts after you have exhausted any sick leave you may be entitled to. The payments are initially at your level of income but gradually fall to 60% of your income and usually continue for six months.
Long term disability insurance on the other hand covers permanent or long term inability to work. It starts where short term disability insurance leaves off and can go on for years. Ideally, a permanently disabled person will have solid disability insurance that pays until retirement income takes effect.
What is Long Term Care Insurance?
With age or illness you may find yourself needing some form of long-term care, whether you receive the care in your home; a private care facility; or a government-subsidized facility. Long term care insurance is designed to provide you with a tax-free monthly benefit payment in the event that you are unable to perform at least two of the six activities of daily living on your own: bathing, dressing, toileting, transferring, eating, or suffer a cognitive impairment as defined in the specific policy contract. You will have the freedom to use your benefit the way you see fit. Receive the type and quality of care you need or use it to replace the lost income of a family member that provides the care you deserve.
Designating a beneficiary has the added benefits of avoiding probate (including delays and related expenses) and the seizure of the benefit by creditors of the estate, and maintaining confidentiality as to who is the recipient of the funds. Always consult with your FA to determine if naming a beneficiary is most suitable to your insurance and estate planning needs.