Insurance needs follow a lifecycle
Change, we all experience it, every day. Change occurs in unlimited quantities, at home, at work and at play. As investors, we often fight change. We strive to make our investment portfolios rock-solid and secure, ready to fight any market climate but when you think about it a bit more, that’s actually not what happens. Sure, the portfolio structure should be sound but it’s only good for a point in time; your investment strategy and financial plan should actually change over the years as you move from one life stage to the next. Financial and investment needs are rarely the same from one 20-something to another let alone when compared to someone ready to retire. For these reasons, your insurance needs probably need to follow a lifecycle as well. Let’s take a look at your potential insurance lifecycle.
You just landed your first career job – congratulations! Insurance, why bother?! I’m young and invincible! Actually, even young professionals should consider locking up some permanent insurance for exactly the reasons above, they are young, (somewhat) invincible and probably in the best health of their life. 20-somethings can take advantage of their youth by buying a universal life insurance policy at very low costs when compared to other generations. Another alternative is buying a whole life policy that pays dividends which can be used to purchase more insurance on a yearly basis.
30- and 40-somethings
The honeymoon phase is over and potentially for your job as well! Kidding aside, I bet you’re not the same person in your 30s or 40s as you were in your roaring 20s. With some experience under your belt, your financial priorities probably changed as well, maybe you started to contribute to RRSPs, TFSAs, and possible an RESP or two for the kids – good on you. What about your insurance needs now? As a not-so-young professional and potentially a family to take care of, your insurance needs could be diverse. You may want to consider some term life insurance policies, for 10, 20 or even 30 years to make sure should anything happen to you, you’ve got the appropriate amount of coverage for liabilities likes mortgages and loans. You may also wish to consider some long-term disability insurance, critical illness or personal health insurance, especially if you are self-employed. This way, your family is protected from your loss of income and medical expenses if you become seriously ill or injured.
So you kicked the kids out, those kids are struggling through university but at least you’ve got your freedom back! In your 50s, you’ve probably started to think about retirement if not already longing for it. With those days on the horizon, it might be a good time to look at converting a portion of your term life insurance into some permanent life insurance. This will help you on a few fonts in the future. Holding some permanent life insurance will:
- help cover expenses/liabilities if you suffer a premature death,
- reduce taxes payable on assets deemed disposed after your death, and
- provide financial security to those you love associated with your estate.
I recognize these are not cheery things to write about but they are facts of life and as a 50-something, they are important considerations to mull over.
While the career was a success it was even better to pack it all in. During your career, your time was always precious but you’ve recognized this even more as a retiree; life is for the living after all and you’ve got many things you want to do and people you want to spend time with. As a retiree, you probably gave up some great insurance benefits you were privileged to have at your place of employment. Furthermore, the 20 year term life insurance policy you bought years ago is now done. What insurance needs do you have now? Applicants who are unlikely to qualify for traditional life insurance policies in their 60s should look at securing simplified or guaranteed issue life insurance if they do not have existing coverage. Simplified issue life insurance will ask a reduced amount of questions on the insurance application and will not require any medical tests to be underwritten. Guaranteed issue plans are ‘no questions asked’, since most of these plans are deferred, meaning the death benefit is reduced to a return of the premium plus interest should the insured die with a deferred period (usually two or three years).
To summarize, there are many life insurance products on the market that provide a range of solutions to address personal, professional and family needs – there is no one-size fits all. Just like good financial advisors can help you with your investment lifecycle, a trusted life insurance specialist can help you with your insurance lifecycle. Take time to understand what insurance you might need and why you need it; then work with a qualified insurance professional from there.
What are your thoughts on life insurance? Do you think your financial and insurance needs might change with time? Have you already experienced these lifecycle changes?