Life insurance, like Goldilock’s porridge, can be served too hot, too cold or “just right.”
If you are reluctant to think about your life insurance portfolio, it is not surprising. Life insurance is often referred to as the most buyer resistant of all financial products. None of us like to contemplate our own mortality.
Besides, when you consider purchasing life insurance or increasing your existing life insurance coverage, you may face a quandary. Am I going to use funds for today’s pleasures or will I use them to secure the future financial wellbeing of my dependents?
Reluctant or not, life insurance plays a vital role in most people’s financial plans.
You may already have some life insurance in place. It is likely not enough. Today’s lower interest rates mean most life insurance buyers need larger coverage amounts just to maintain necessary income levels for beneficiaries. Like many Canadians, you may be relying on group life insurance for your primary protection. Typical plans are set up to provide just a year or two of protection for your estate.
When you are considering how much insurance you need, think about what you can expect to earn over your working lifetime.
Many income earners are surprised to learn just how large their cumulative income potential may be. For example, a 35-year-old earning $45,000 per year will earn more than $2,000,000 by age 65 assuming annual pay increases of three per cent. Smaller family assets such as cars and homes are usually insured to full value, but what about this $2 million asset? It is often underinsured.
Once you decide to obtain or increase your personal life insurance, you will enter the underwriting process. This will include questionnaires that assess your family and personal health, your smoking status, driving record and your height and weight matrix.
Working with a reputable life licensed advisor is your best bet for arranging effective and appropriate coverage for your life insurance needs.
They can assist you in co-ordinating any existing policies from group to mortgage and personal. With their experience and knowledge, they can help you to determine the amount and the type of coverage appropriate for your situation.
It is important to get it “just right.” Just ask Goldilocks.
Rock Hutsul is The Hope Standard’s personal finance columnist, bringing you rock-solid advice on how to live your best financial life. Email: rhutsul@telus.net.