Bill’s Blog | October 22, 2021
I recently completed a couple of seminars on “the power of life insurance and your four options.” I felt it would be helpful to share some of the seminar content with you to help you make better decisions when it comes time to purchase life insurance. I will address four options later in the blog. First, I will provide you with some basic facts regarding life insurance. In addition, I will address the key benefits of life insurance. Then, I cover when and when not to purchase life insurance. Next, when will life insurance NOT payout? Finally, how much coverage should I get, and who should have life insurance?
Basic Facts and Guidelines:
- Approximately 43% of Canadians have no life insurance. That is concerning for two reasons. One, we all have a 100% risk of death. Second, death is expensive (taxes, funeral, probate, possibly lawyers and accountants). Without proper planning, it can create a real mess for those left behind.
- Approximately 20% of those who have life insurance are either underinsured or possibly have the wrong product.
Key Benefits of Life Insurance:
- Life insurance protects our loved ones in a death event. Losing a loved one is very difficult, and it can often take years to recover emotionally. It is best not to leave a financial crisis on top of it.
- You can create a large sum of wealth for a relatively small amount of premium to offset all debt and leave enough for your loved ones to get through the crisis period.
- Life insurance is a tax-free payout in most cases to the beneficiaries.
- The paid out is done very quickly and, in most cases, about one month.
- Life Insurance proceeds stay outside of the estate, making them free from long delays, probate, taxes, and done with privacy.
When to purchase life insurance and when not to:
- It is best to purchase insurance when you are younger and healthy. However, there are solutions for all ages, but it does cost more the longer a person delays or ends up having health issues.
- There are two times when NOT to try and get insured. One, when you have an undiagnosed health issue. Two, when you are awaiting surgery. Once either of the above issues is resolved and the doctor confirms you are OK, it is appropriate to undergo the underwriting process.
Two times insurance will not pay out the full benefit:
- If a person fails to disclose a significant medical issue, a dangerous sport or a hobby in the application, this will be considered fraud. Honesty is always the best policy.
- All insurance companies in Canada have a two-year suicide clause. If a person commits suicide in the first two years of the policy, the insurer will not pay out the insured amount. I know of a situation where this occurred, and it was devasting to the wife and children left behind.
Who should get insured, and for how much coverage?
- Truthfully, almost 100% of Canadians should have insurance and that even includes children. Why? I often say in seminars, “living is costly, but so is death.”
- When there is a couple, I recommend both get equally insured to protect each other. It is even of more importance if children are involved, as raising a child on one income is challenging and costly.
- Why should I insure my children? Good question. If a child or teen receives a severe health issue like cancer, juvenile diabetes or other life-threatening diseases, they most likely will be uninsurable as an adult. Putting even a small amount of insurance in place can provide guaranteed coverage as an adult. Also, if something tragic happens, it protects the family.
- Even ultra-wealthy Canadians often use life insurance as part of their wealth planning because of its many incredible benefits in estate planning.
The critical question is, how much should I purchase? The answer can vary based on several factors, goals and your unique circumstance. However, a good rule is to pay off all debt and provide two to three years of annual income to get them through the crisis and adjustment period.
Four basic types of life insurance:
- Term insurance is often a great solution in several circumstances. Young adults who are budget conscious, as they are early in their careers and income potential. As stated, it is a fixed term (5, 10, 20, 30 years or even a term 100), and there are no cash values. If you end up with a life-threatening health condition, you may not be eligible for insurance at the end of the term. Term insurance is generally very affordable until you reach your 50’s.
- Term insurance is an excellent solution for business owners with term loans or buy-sell agreements.
- Permanent insurance generally means to age 100. However, there are several variations of permanent insurance that can create a lifetime solution. You can create several excellent strategies with permanent insurance, especially when cash values are attached to the policy. The most common types are whole life or universal life policies. Again, purchasing younger allows you to lock in the premium, which will not change over the policy’s life.
- I prefer Whole Life Participating insurance as you do not need to focus on the investment portion of the policy. Insurance companies are very good at defensive management of the investments and providing consistent dividends to the policyholders.
- Hybrid Strategy uses a combination of permanent and term insurance. The hybrid solution can be excellent for the right person and circumstance, creating a possible one-time insurance event with a built-in retirement strategy.
- Simplified insurance requires no medical tests, and you answer a series of questions (often 30 to 35 depending on carrier) and the more NO’s you have, the better the coverage and rates. These policies are excellent for those with health challenges, declines from regular insurers, past addiction issues they have overcome, or those who do not like needles. They can also be more lenient around the use of marijuana. If you have overcome cancer for five-plus years, you can, in most cases, get some coverage. Simplified insurance is ideal for seniors who want enough insurance to cover death costs or leave a legacy to their children or grandchildren. These policies can have almost instant approval or in just a few days.
So I have not covered every angle regarding life insurance. Still, I have provided much of the foundational knowledge you need to consider when choosing the right coverage for yourself, your family or as a business owner.
I am a life insurance broker in British Columbia and can help any individual, family or business owner in our beautiful province. An important fact, I can do help clients via the internet as most major carriers now have online applications. Using a combination of Zoom and the online carrier application, I can help you be fully insured, often in just a few-week process and sometimes shorter.
If you need help finding the best life insurance solution for your life and situation, please reach out to me. 778-539-7107 or firstname.lastname@example.org. I have a simple 3 part process—intro call or meeting to access your needs. Two, provide a quote or a couple of options to consider. Three, implementations once you are comfortable with the right solution, we do the online application process. In most cases, it requires less than one and a half hours (fully underwritten policies) and, if it is a simplified application, less than 30 minutes.
Bill Westmacott, Owner