Term life insurance

What is it?

Term Life insurance pays a single tax-free lump sum benefit when the insured person passes away. Generally, we recommend enough Term Life insurance to pay off any debts that might be left behind, and to replace enough income so that the surviving family members can keep their home and maintain their standard of living.

Why you should have it.

Term life insurance is the most simple and cost-effective choice for most people. You simply specify how much coverage you need and how long you need it. When it expires, you can take out another policy if you still need the insurance.

Whole life insurance 

What is it?

Whole life policies are “permanent,” meaning they never expire. They also add the possibility of building up an investment within your policy that you may be able to cash or borrow against in the future.

What’s the catch?

The downside is they are much more expensive and complicated than term life, and usually not something we recommend. One exception is wealthy individuals who can benefit from the ability to borrow against the policy to extract money from a holding company in a tax-efficient manner. If this sounds like you, we can show you exactly how this works.

Critical illness insurance

What is it?

Critical Illness insurance pays a single tax-free lump sum benefit when the insured person is diagnosed with a serious illness, such as cancer, heart disease or stroke. Most policies cover about 20 more common illnesses. Generally, we recommend enough Critical Illness insurance to pay both your usual expenses plus any extra medical expenses for a whole year while you recover.

Why you should have it.

Critical Illness insurance is sometimes called insurance for your savings account. Why? Because if you come down with something serious like cancer or heart disease, you may very well make a full recovery, but you’ll probably have dipped into your savings account to cover missed work as well as healthcare expenses.

Disability insurance

What is it?

Disability insurance usually pays a tax-free, monthly benefit equal to 65% of your salary until you’re able to work again or until age 65, whichever comes first. This amount is designed to give you comparable take-home pay to when you were working.

Why you should have it.

It is estimated that about one person in three will be at least temporarily disabled due to an illness, accident or injury at some point in their lives. This could be from something that happens on the job or something in your private life, such as a car accident, a back injury, or a medical disease.

Life Insurance v. Legal Will

A common misconception is that if you have life insurance you don’t need a Last Will and Testament because your loved ones will be financially covered. Alternatively, some people believe their life insurance is included in their estate by default which isn’t usually the case.

Life insurance policies are typically known as a non-probate asset, which in plain English means it can be passed directly to a person without having to go through your will. The beneficiaries of your life insurance policy can be the same or different people/charities than those listed in your will.

While the proceeds from your life insurance can help financially support those listed as beneficiaries, your legal will is still required to name your executor, guardians for minor children and distribute your estate (property and assets) according to your wishes. Your will cannot be used to change or override your insurance beneficiaries but you can name your estate as the beneficiary of your life insurance policy if you wish to distribute the proceeds through your will. This could have tax implications so it’s important to research what those might be or consult an expert in financial and estate planning.