Bill’s Blog August 7, 2020
I recently had a brief discussion with a person, who said he did not believe in life insurance. I felt like saying, “Oh, I guess you do not believe in car, home or travel insurance either”. I restrained myself. To be honest, I was shocked by his comment, but I was not going to change his mind. I have learned ignorance is not bliss, and it leaves a trail of pain and loss behind when a death happens.
I will briefly share my own story to make the point. I still remember the phone call in the middle of the night. The hospital called to inform my mom that my dad had died of a massive heart attack. They were very sorry they could not save him. I was 11 years old at the time, in grade 7 and our world would never be the same. I did not fully understand at the time all the ramifications of my Dad’s death.
My father was only 54 years old. I would later in life grasp that, “life insurance is for the living, not the dead”! Sadly, my Dad did not have life insurance, no will, or joint bank account and left my Mom in a big mess at age 56 with two kids. I do not think my Dad had an aversion to life insurance, but he just never got around to it or understood how important it was to protect his loved ones. Sadly, I come across this all the time. People say they need life insurance, but they keep putting it off because they are too busy or truthfully, it is not a priority.
When I do seminar’s or lunch and learns, I often ask the audience, “what is your risk of death”? When people think about it, well, 100%! So, if we all have 100% risk of death and most people do not have the means to payoff all their debts, taxes, burial costs or the means to care for the future needs of their family when you are gone. Well, then you should have life insurance. Please do not keep putting it off, if you know your death would deeply impact loved ones. Every single day people die and no one thinks its going to be them. Death does not care what age you are, and every single day in Canada hundreds of people die from sickness, accidents, suicide and from old age. In 2019, 287,000 people died in Canada.
I am not trying to be morbid, but I am trying to impress upon you how important life insurance is and the tremendous benefits it can provide for you, your family, or even a charity if you are passionate about one and want to leave a legacy. Remember I said, life insurance is for the living. So, let me explain the four ways to structure life insurance and its many benefits.
- Term Insurance: Is often the least expensive until you get into your fifties. Best for young families because of affordability or if you are just covering a specific debt based on time. Some insurers have become more flexible and you can do 5,7, 13, 28-year terms as examples…so you pick the term. Can be used for individuals or business owners. Often used to fund a buy-sell agreement between business partners.
- Permanent Insurance: Generally, this means life-time coverage to age 100. T100 (no cash value) and not that popular. Universal Life (UL) provides the option to add investments to the insurance and you manage the investment options. Whole Life Participating (PAR) insurance provides life time coverage and the insurer manage the investments. I prefer this for most clients, as you do not have to think about it or worry about the investment. The insurer shares in the profits of their investments and you receive an annual dividend that creates cash value to your policy. You can also have non-participating which is less expensive usually. Ideal to provide the necessary coverage for death expenses or taxes owned. For some people’s taxes can be significant with a large estate.
- Hybrid Insurance: You can combine permanent insurance with a term to create a life-time strategy and provides extra coverage in the critical years. Like when you have kids at home/in university or you are carrying a mortgage or other large debts. Ideal for business owners with a Holdco, you can build up a large amount of cash in these polices tax free and exit the monies as part of an excellent retirement plan (again, receive money tax free). This can also be done for individuals as a way to diversify your long-term investment. Best to start these in your 30-s or 40’s.
- Simplified Insurance: These are great solutions for people who may have had health issues (as long as it is not terminal) or for people who do not like the process of a fully underwritten policy or bloodwork. If you are fairly healthy, this is almost instant coverage. The companies that issue simplified insurance have become quite competitive and affordable.
So, in summary, I believe the majority of people in Canada need life insurance for various reasons. Protect loved ones and invest in your family’s future, ensure debts and taxes are covered, build up wealth in a whole life par or UL tax free, ensure you leave a legacy to name a few. If you live in BC and know you need to get coverage please reach out to me and I can access your situation and help you find the best solution for your needs. I can do non-face to face coverage using Skype or Zoom and, in most cases, have you insured in less than 6 weeks. Remember, “Life Insurance is for the living, not the dead”