Life and Living Benefits Insurance

Life and living benefits insurance is the term used to describe insurance on your life and health, and your ability to work.
In this article we will deal with Life Insurance.

If you have a spouse and/or children or other dependents, the loss of your life could leave these loved ones financially wanting. A Life Insurance policy could pay out a lump sum of money to supplement any other existing or ongoing assets and income.

Life insurance is a contract between the owner, the insured person, and the insurance company. The insurance company promises to pay out a lump sum benefit upon the death of the insured person, as long as the insurance policy is “in force” at the time of the person’s death. Usually, the owner is the insured person, but sometimes the owner could be someone else, such as a parent, grandparent, or spouse who buys and pays for insurance for someone else.

The first important step in considering life insurance is to determine if there is a “need”. If you don’t own a car, you would never consider buying car insurance. Following this train of thought, since everyone has a life, maybe everyone should have life insurance, right? Wrong.

Life insurance pays out an amount when the insured person dies. Pure life insurance does not pay out a benefit during the insured person’s lifetime, so that person cannot benefit directly from the insurance. Therefore, the need for insurance goes beyond the individual named as the insured person in the insurance policy or contract. The person or people who will benefit from the policy are called the beneficiaries and are usually the immediate family.

When someone dies, their debts become due and must be paid out of all the savings, investments, or other assets of the deceased. If the debts exceed the available assets, the shortfall creates a problem for the estate of the deceased person, and in turn their survivor(s). One major asset might be the home of the deceased. If there is a spouse and/or dependents, it is usually safe to assume that the house cannot be sold to satisfy debts. One solution is to have enough life insurance to pay off the mortgage, or at least cover mortgage payments for a number of years.

Loss of income is another major hardship experienced by the family when someone passes. Life insurance can provide funds to replace the lost income for a period of time.

The calculation of how much life insurance is needed depends on the values and priorities of the insured person and their family. It is best to work with an experienced insurance advisor to calculate how much insurance is needed based on assets and debts, and the shortfall of family income should one of the income earners pass away.

In the next article we will talk about the different kinds of life insurance.

Karin Rimnyak, Certified Financial Planner®
Investment Advisor, iA Private Wealth
Insurance Advisor, Action Financial Group Ltd.

David Dryburgh, Certified Financial Planner®
Investment Advisor, iA Private Wealth
Insurance Advisor, Action Financial Group Ltd.

Ian Barrie,
Certified Financial Planner®
Investment Advisor, iA Private Wealth
Insurance Advisor, Action Financial Group Ltd.

This information has been prepared by Karin Rimnyak who is an investment Advisor for iA Private Wealth. Opinions expressed in this email are those of the Investment Advisor only and do not necessarily reflect those of iA Private Wealth. iA private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.