Q. Why would I purchase life insurance over mortgage insurance?

A. Most people apply for mortgage insurance through the bank not understanding the real cost and details associated with this type of insurance. For example, with every mortgage payment the insurance coverage decreases but the premiums never go lower. In other words your mortgage balance goes down but you pay the same premium amount that is being amortized with a 9% provincial sales tax for less insurance.

Purchase personal life coverage if you truly want your family to receive the money when you pass away. This way your loved ones can make their own decisions on whether they pay part or the entire mortgage as well as paying off any other debts they may have incurred.

Q. If I passed away how could I make sure my spouse could retire in comfort and my children will be able to go to college?

A. Besides paying off your mortgage, Life insurance can give you the opportunity to pay off other debts, estate taxes and possibly leave money for a spouse or family member so that they can continue or create a new lifestyle. Your insurance could also give your children the opportunity to have an education fund or allow your spouse time away from their own work so they may grieve or be there for your children.

Q. Why would I insure my children when they are young?

A. There are three important reasons. The first is that when you purchase life insurance early in life the cost is very low. This would make permanent coverage very attractive as the low cost premium never changes for the duration the policy. As your child becomes older, cash values could be used as a down payment on a home, help pay for tuition or be an addition to future retirement income.

A second reason would be to guarantee insurability for later on in life. Depending on the policy it may have riders to increase the insurance coverage in the future without medical evidence. This could be very advantageous for a child who may develop diabetes or some other illness at an older age and would be rated (insured as older) or even declined by an insurance company.

Thirdly, if a misfortune were to happen, the proceeds from the life insurance policy could help the parents pay for any unforeseen expenses and supplement their income while taking an extended period of time off from work during their grieving period.

Q. My parents are in their 70’s, why would I insure them?

A. A majority of parents would like to leave money to their children, but in today’s economic situation why not give them the freedom to spend their money and allow the power of insurance to guarantee an inheritance for you. Insuring a parent creates the possibility to receive a tax free gift. Within this scenario, you can choose the option to have the face amount plus all premiums paid to you when they pass away. The proceeds could help to pay for your loved ones’ final expenses and help to fund your retirement.

Q. I am young and single why should I get life insurance?

A. When you’re young, single and insurable, a cash value life insurance policy is worth purchasing. This would be a great way you could take advantage of tax-free accumulation at an early age. The additional money invested inside the policy would allow you to benefit from compounded interest to create high cash values for future financial transactions. Lastly, this is an easy option for you to be accountable to your immediate family for your personal debt and final estate expenses should you pass away too early.

Q. I already have life insurance through work, why should I take out personal coverage?

A. Given the state of our current economy losing your job is very possible. If your employment is terminated, you will lose your group life insurance coverage. Depending on your age and health you could either end up paying more for insurance or not being insurable at all.

Q. I’m a homemaker, why would I need life insurance?

A. Every couple with or without children should have Life insurance to produce an income in the event of a spouse passing away. If that spouse happens to have been a homemaker, the family truly suffers as this loss will incur new costs associated with stabilizing the home. As an example a housekeeper may need to be hired as well as daycare costs or a nanny to help with driving children to activities, etc. A lump sum of tax-free capital can be placed in a long term investment to provide a monthly or annual income for the loved one left behind.

Q. I own a business. Why would my business partner and I need life insurance?

A. Life insurance is a cost-effective method for funding a buy-sell agreement ensuring that funds will be there when they are needed. It can provide immediate tax-free cash to help the business replace a key person or employee. It is very economical since it is one plan that covers all business partners. The coverage can be adjusted as the business grows and it can be used to pay capital gains tax on the increased value of business which is payable when the owner dies. The funds can be used by the beneficiaries to pay estate taxes.

Q. We have a substantial estate to leave to our children, why would I have life insurance as well?

A. By purchasing an exempt life insurance policy, money placed within the policy would accumulate without having to pay any tax. When the owner passes away the beneficiary receives the face amount plus additional invested money tax-free. Beneficiaries are named directly on the insurance contract to bypass the estate and probate fees. Otherwise during probate, if your will is challenged, the distribution of your estate could be delayed by months or years. This is also another way to avoid claims by creditors since the proceeds are paid directly to the beneficiary.

In summary, life insurance is more than just a product.  It gives peace of mind by protecting people’s hopes and dreams. It adds financial value by creating or preserving a family legacy if you pass away too soon.  They say in every down moment there is an opportunity.  I see life insurance as a financial flashlight helping us to see what is really important when you’re feeling like you’re lost in the dark.

If you are interested in learning more about the power of Life Insurance, contact us for more details and our professional service.

- Article by Garen Lewis