The higher your income, the more you have to lose if you were to be diagnosed with a serious illness, become disabled or are otherwise be unable to work.
Your ability to earn is a valuable asset, and just like you would insure your home or vehicle, it should be protected, too. There is no greater threat to your retirement plan than an unexpected tragedy that cuts off your income stream ahead of schedule.
It’s best to speak to your financial advisor about strategies you can use to make sure that your wealth stays intact, as this is one of the most crucial aspects of a sound financial plan.
Having the appropriate insurance plan in place will alleviate the financial stress that can come with illness, disability or death (either your own or that of a loved one).
Your advisor can help you implement the following strategies:
Life Insurance:
Life insurance pays a benefit to designated beneficiaries upon the death of the insured.
There are two different options when purchasing life insurance: term and permanent.
- Term insurance is comparable to renting protection. You pay premiums for a set period of time – say ten years - and the insurance company agrees to offer you a set amount of insurance for the duration of the term. Once the term runs out, your insurance is either renewed for another term at a higher cost or the coverage ends. Term insurance is by far the most affordable way to protect your family.
- Permanent insurance can be thought of as owning your protection. There are two types of permanent insurance: whole life and universal life.
Whole life insurance offers a permanent life insurance solution that offers fixed lifetime premiums and a cash value component that accumulates for the duration of the policy.
Universal life insurance can offer a flexible, permanent insurance option that also has a tax-advantaged investment component. If properly managed, it can help you to build wealth and provide protection.
Permanent life insurance offers many advantages: It provides your family with lifelong protection at a predictable cost, tax advantaged transfer of wealth, and estate preservation or creation.
Critical illness insurance:
Critical illness insurance pays a lump sum benefit to the insured in the event that they are diagnosed with one of the settled-upon conditions of their insurance contract.
It can be either purchased for a term or as a permanent insurance solution. There are agreed upon conditions covered in your contract. If you are diagnosed with one of these conditions, you can claim on your policy and be paid your benefit. There is typically a waiting period.
Dealing with an illness can be very expensive. The cost of treatment and care is often greater than most of us have planned for. A critical illness policy can provide you with the capital necessary to recover without threatening your financial goals. Most importantly it can protect your savings and prevent you from having to draw on your RRSPs, which can have significant tax consequences.
Disability insurance:
Disability insurance is an income-replacement insurance that will give you a monthly income in the event that you are unable to work. The policies can offer a wide range of protection options for both long-term and short-term disability.
The premiums are determined by your income, occupation, and any other customizations you may make such as the benefit amount, the waiting period, and the benefit period.
Disability insurance can protect your retirement savings and keep you from having to liquidate your assets for income.
Life, critical illness, and disability insurance can provide you with different levels of protection and be personalized to your needs. They will allow you to preserve your wealth and protect your family, no matter what life throws your way.
Harley McCormick is a financial advisor at Keystone Wealth Management
The information provided on this article is intended for
informational purposes only and is not intended to constitute financial, accounting, and legal or tax
advice. For information specific to your situation you should consult a professional. Mutual funds
provided through FundEX Investments Inc.
Research provided by ADVISOR Research Group May 10, 2019
