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Determining, how much life insurance is necessary for your family’s financial security will require an objective viewpoint as you assess the following:
Evaluate the death benefit that you need.
Your advisor can assess the death benefit you need, by using a mathematical calculation that is referred to as a “capital needs analysis”. You may want to have enough capital to pay for your funeral, final taxes in your estate, outstanding loans or a remaining mortgage, and/or your credit card debt.
If you earn an income and support dependents, you may need to provide a significant amount of money to invest, from which your family can earn an investment income to provide a quality lifestyle. Life insurance can also provide enough money to cover a child’s education or top up the potential retirement income needs of a spouse if a breadwinner dies.
Where there are two spouses providing an income for the family, many couples purchase enough life insurance to reciprocally protect the potential income loss of one or both income sources, by covering both spouses appropriately.
Business Owners have special insurance needs
In many families, one spouse is employed, and another is self-employed. If one spouse owns a sole proprietorship business, he or she may need to consider income replacement insurance which can create a replacement paycheck in case you become disabled. There may be business-related debts and expenses, which if not paid, can create liabilities for the family.
If you are in a business partnership, you may want to look at establishing a buy-sell agreement, and/or succession planning facilitated by life insurance capital if you or a partner die; or income replacement insurance if you or a partner are disabled and can no longer work at your business.
Critical Illness Insurance
Many are also using Critical Illness insurance for personal or business planning, which can offer capital solutions if one becomes critically disabled. Once you are certain how much you need, your advisor can offer quotes and several plans most suited to your circumstance.
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Life Insurance and Segregated Funds Disclaimer
Life Insurance policies vary according to contract terms. Please read any
Life Insurance policy contract provided, or the segregated fund summary
information folder prospectus before the time of purchase. Full details of
coverage, including limitations and exclusions that apply, are set out in
the policy of insurance. Commissions, trailing commissions, management fees
and expenses may be associated with segregated fund investments which may
not be guaranteed and their market value changes daily and past performance
is not indicative of future results. A description of the key features of a
life insurance policy, a segregated fund; and any applicable individual
variable annuity contract is contained in information provided by the
company from which it is purchased. Talk to your advisor before making any
financial decision. For specific situations, advice should be obtained from
the appropriate legal, accounting, tax or other professional advisors. The
information provided is accurate to the best of our knowledge as of the date
of publication and is general in nature, intended for educational purposes
only, and should not be relied upon as a substitute for advice in any
specific situation. For specific situations, advice should be obtained from
the appropriate legal, accounting, tax or other professional advisors.
Rules and their interpretation may change, affecting the accuracy of the
information.
