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Insurance for Life’s Stages


lifestageswebUnforeseen events such as loss of a job, a disabling illness or accident, and death, are part of life. Canadians recognize the importance of insurance in helping them prepare for and manage the unexpected, but many either are under-insured or have no insurance at all. In fact, ownership of life insurance is at its lowest level in 30 years.

According to a recent study by BMO Wealth Institute, two thirds of Canadians admit they would have difficulty meeting their everyday living expenses immediately or within a few months if their income was cut off due to unemployment, illness or disability. Fifty-one per cent are concerned about the well-being of their families if they were to die suddenly and only 16 per cent feel they have a good understanding of insurance products that are appropriate to their stage in life.

“The insurance that people take really should be dictated by their goals at the various stages of their lives,” says Rocco Casullo, head of direct-to-consumer insurance with BMO Insurance. “As life transitions it’s important to recognize what you want your insurance to do for you.”

BMO suggests people consider taking the following types of insurance at the four main stages of life – starting out, settling down, mid-life and retirement.

The best time to buy insurance is as soon as you can afford it because youth and good health are the main drivers of costs and options. Life insurance protects the personal and financial goals that young people are working to build. It lays down the foundation for the protection of future loved ones and will provide a tax-free cash lump sum to beneficiaries to use however they want.

Critical illness insurance pays a lump sum upon diagnoses of a serious illness such as cancer or heart disease requiring surgery. It can be purchased on its own or added to a life policy or group plan and allows the insured to decide how to spend the cash benefits – medical bills, caregivers, living expenses or other needs.

Accident insurance can cover out-of-pocket expenses if the insured is hospitalized as well as medical bills or related expenses not covered by provincial health care plans. Travel insurance provides coverage in case a trip is cancelled by a medical emergency, lost baggage or flight delays as well as accidents or illness that might occur on the trip.

As you settle down in life with a partner, raise a family and buy a home, responsibilities increase. Beneficiaries, usually a partner, child or other relative, can use the proceeds from life insurance for funeral costs, to settle outstanding debt and replace income of the deceased to cover living expenses.

Critical illness and disability insurance become important for singles and people with families who are dependent on their own ability to earn an income while creditor insurance will pay off an outstanding credit balance or makes/postpones payments in the case of death, disability, illness or job loss.

In mid-life as the family matures and children leave home, life, critical illness and long-term care insurance become important. Some life insurance plans offer both insurance and investing benefits, providing the opportunity to tax efficiently accumulate and transfer wealth to the next generation.

While disability insurance replaces lost income, a lump sum payment from critical illness insurance can provide funds for other expenses that may arise such as home renovations, out-of-country medical care, home care and physiotherapy. Long-term care insurance provides monthly lump sum payments to be used by the insured should they lose the ability to perform two of the five normal daily living activities — feeding, dressing, bathing, grooming and continence.

Insurance again needs to be reviewed in retirement. Life insurance can cover debt obligations and maintain the standard of living for a surviving spouse, medical insurance can pay for expenses not covered by group or provincial plans, life annuities and segregated funds can help create and sustain a steady source of income in retirement, and travel insurance can protect against medical treatment away from home.

“Insurance can be complicated and a financial advisor can help walk you through the options to ensure you have the policies that are right for you at your stage in life,” Casullo says.

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

Copyright 2015 Talbot Boggs