Get the Life Insurance Coverage You Need

Recently, during our move to a new location we uncovered the following article from June 1998, written by John Sabourin. As we read through it again, it became apparent that over the last 11 years the need to assess your insurance needs is just as relevant.

It's a fact. Most Canadians are underinsured. A $200,000 or $300,000 policy simply won't replace the breadwinner's income, let alone provide for your children's education or your spouses retirement. It's vital that Canadian families assess their life insurance needs using assumptions that are valid today, not a decade ago.

That includes taking account of low interest rates that will affect earnings on policy pay outs. For example, if the proceeds of a $300,000 policy are invested in GICs, they may generate only $15,000 a year, and that income is taxable (the proceeds from the policy aren't).

Consider term insurance, which pays out upon the death of the "insured". No cash values accumulate with the term, and it's renewable periodically with higher premiums. Generally, it's not renewable past age 75 or 80. Most term policies are convertible to either permanent insurance or to term plus 100, a type of permanent policy which is less expensive than pure permanent insurance.

More Flexibility in Today's Insurance
Term insurance has changed considerably over the last few years. Some term policies now can insure multiple lives. For example, both you and your spouse may earn substantial incomes. If one of you were to die, the other's income would be enough to support the family. However, if you were both to die, that income would disappear, so a last-to-die policy may be appropriate. Or instead of buying separate policies on you and your spouse, you may opt for first-to-die multiple coverage. You can even add other lives to the policy.

The multiple lives option also makes this type of insurance ideal for covering your mortgage. Mortgage insurance through your mortgagee is generally expensive. It can be much cheaper to take out a first-to-die term policy on you and your spouse for the amount of your mortgage.

Other Riders on Your Policy
Some term policies offer other benefits. You might consider a level payment rider; it offers your parents protection for specific purposes. For example, your parents might be carrying a loan or know that their death expenses will total $10,000 or $20,000 and want to insure these. Doing it on your policy is easy and usually less expensive for them than arranging for the insurance themselves.

New Insurance Assessment System
Term may also be less expensive than in the past. In addition to non-smoking rates, some insurance companies are using other health factors to offer even better rates. If you aren't overweight, your blood pressure and cholesterol are under control and you don't participate in hazardous activities, you could be in store for substantial savings.