Before shopping for life insurance, you must ask yourself the following question: do you really need it?
Remember that its purpose is to offer financial protection to one or many beneficiaries in the event of your death.
Types of insurance: term and permanent
The first type offers coverage for a limited number of years, usually 10 to 20 years, and is the best option for most people. If you stay alive until it expires, you will have paid the amounts for nothing … but really, can you complain? Premiums are lower for younger candidates, and increase with each renewal. However, your life insurance needs should decrease as you grow older.
Permanent life insurance offers coverage until death, as long as the premiums are paid. It comes in two categories: whole and universal. The first is combined with savings, while the second is combined with an investment. These types of insurance are worth considering for the parents of a child who will never be fully independent (handicap, illness), or small-business owners.
When life insurance is not for you
It’s generally useless for single people who have no children or dependents, unless you want to leave someone dear an inheritance. For parents, it’s worth questioning the need for insurance when your children have become financially independent adults.
When it is for you
Would your debt leave certain people in a precarious position?
If some people depend on you to support them financially, it may indeed be a good idea to purchase life insurance.
The amount your beneficiaries will receive obviously depends on your means and your will to pay the premiums while alive. At the very least, it should usually cover expenses related to your death, such as your funeral for example.
Then comes repayment of debts, such as your mortgage, and any future expenses, such as financial support for the surviving spouse and tuition fees for the children. Note that some of your debts may already be covered by a life insurance. It’s up to you to see if you’d rather exclude them.
If you bequeath large assets, your heirs may have to pay income tax on capital gains (a cottage, for instance). In order to avoid them losing the assets because they don’t have the cash on hand to pay, life insurance could help them keep the family estate. Read our article to find out more about estate planning.
Note that the amount received from life insurance coverage is tax-exempt.
Getting insurance expert help
Each case varies on account of your personal situation, your family circumstances, and your needs. It’s always best to ask a licenced life and health insurance professional to help you determine which insurance is right for you. A skilled advisor will start the process by establishing all your needs, and then suggesting products that best suit them.
Did you know Multi-Prêts brokers offer an exclusive insurance program for their clients? Take a minute to learn more about the exclusive insurance offers available to our clients.
Key takeaways
- Before shopping for life insurance, you must ask yourself the following question: do you really need it?
- If some people depend on you to support them financially, it may indeed be a good idea to purchase life insurance.