Investment Goals
How to Set Investment Goals
December 12, 2018
Life Insurance

Life and health insurance play an important and stabilizing role in your investment plans. It can be one of the best and the safest investments for any individual in terms of financial planning. According to Canadian Life And Health Insurance Facts (CLHIA), around 22 million Canadians own $4.7 trillion in life insurance coverage. What makes life insurance so popular among Canadians?

Most Canadians buy life insurance on a ‘Individual’ basis through an insurance or financial agent or advisor. The policy can also be acquired on a ‘group’ basis through an employer or as a member of an association. The risk characteristics of the group members are taken as a whole rather than on an individual basis. As a person grows older, get married, has a family, and eventually retires; life insurance becomes fundamental and indispensable for their financial plan.

Replaces Lost Income

In the event of an untimely death of the life assured during the policy period, the nominee receives either a lump sum amount or monthly installments, depending on the plan selected. The monthly installments of cash flow help your family to maintain household expenses and any other financial needs. This way it replaces the loss of income during an untimely death of life assured. If received in lump sum, the money can be wisely invested to give regular returns for the same purpose.

Secures Your Child’s Future

Life insurance provides protection to your child’s future without sacrificing their dreams in the event of your untimely death. A life insurance policy can help your child’s future in the following ways:

  • It allows your child to concentrate on their education.
  • It provides them relief from student loan debt
  • It keeps their stress away in terms of finance, thus, enabling a healthy, stress-free life.

Pays Off Debt

Have you ever wondered about what would happen to your debt if you met with a premature death? You don’t want to create debt load on your dependents, in such an event. The payout by your life insurance policy can be used to pay outstanding debts, if your family needs to. Paying off your home mortgage can be a good strategy if you and your partner have co-signed a mortgage loan. Having a life insurance eliminates the fear of your dependents to liquidate the assets to meet your debts and avoid creditors who will try to collect money from your family. Life insurance can be an excellent tool for your estate planning. It allows you to provide extra security to your beneficiaries and prevent any burden on them in terms of your debt.

Builds Cash Value

One of the reasons you buy a whole or universal life insurance policy is because it builds cash value. The cash value is a portion within many life insurance policies. A life insurance policy’s cash value is separate from the amount received as your death benefit. Life insurance has a built-in savings element due to the payment of premiums. Hence, there is build up in cash value within the policy. Cash value of your policy is essentially an amount that you would receive if you decided to give up your policy. Cash value helps to build your cash value by forcing you to save money that you could have spent otherwise.

Enables Diversified Investments

Life insurance is sometimes used as an investment tool with universal life insurance policies. A diversified life strategy can help you design products with different plans as it can help create a portfolio of policies that complement each other. Having multiple layers of coverage helps to maintain a level of protection even if the policy expires. When multiple policies are purchased at the same time, the insured only needs to go through the underwriting process once. A life insurance diversification strategy can complement a broader overall financial plan.

Helps in Business Planning

If you own a business, it is vital to have life insurance. While you may not realize it, life insurance may be able to help you ensure that your business continues to thrive. It covers your obligations so your hard work doesn’t go to waste. Life insurance planning can help with the transitioning ownership if it ever becomes necessary. The policy retains key employees to protect the future of your business. You can also plan your own retirement with the regular payouts that some life insurance policies offer.

Provides Affordable Coverage

Coverage often ends up being pretty affordable. There many life insurance companies in Canada providing affordable coverage plans. Having an affordable coverage encourages all individuals to have a life insurance. Term insurance is less expensive as compared to whole insurance or universal insurance. Compare your policies for better coverage in your region.

Brings Peace of Mind

Having life insurance helps to mitigate financial securities, create wealth, and save money as no one can truly predict the future. Life insurance prepares you and your family with protection against unforeseen incidents. It secures your dependents so that they can live in peace, especially if you are the bread earner in the family.

What are the types of life insurance available in Canada?

  1. Term insurance – This insurance is cost-effective and provides temporary coverage. Premium of the term insurance typically increases over time. Term insurance usually provides a right to convert a permanent insurance without further underwriting with the same insurer. It provides the consumers with the ability to adjust coverage features to address long-term needs.
  2. Permanent insurance – This insurance meets life-long protection needs. In addition to death protection, cash values are accumulated and can be used for financial emergencies. Premiums can be paid for life or for a set number of years.
  3. Whole life insurance – This is the traditional form of permanent insurance where the insurer takes on both, the risk related to death and the underlying investment risk. Under Universal life insurance, consumers select investment options and the insurer assumes the risk related to death. 

When you buy life insurance, check out the policy that fits your needs and compare them. If you need more guidance, a financial advisor can help guide you towards the right life insurance policy based on your coverage. Justin and Amy are financial advisors who can help you in your insurance and financial planning.

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