Do you need Life Insurance?
THE STACK #12Much like a Will, Life Insurance is one of those things we don't like to think about.
For some, we're not even sure if we need it.
In today's STACK, we will go over some quick facts about Life Insurance and if it's right for you.
THE STACK
What is life insurance?
Life insurance is a contract that agrees to pay a guaranteed sum to the beneficiaries of an insured person upon their death.
When you die, your beneficiaries will get a check from the insurance company.
You pay a monthly or yearly premium in exchange for that big fat check.
Importance of life insurance
Your dependants or beneficiaries don't have to struggle to make ends meet when you pass away.
To cover your funeral arrangements so your loved ones don't have to worry about the cost
Your beneficiaries will receive a tax-free payout.
Who needs life insurance?
You need life insurance if you have people that depend on your income, such as a:
Spouse
Dependant child
Child with a disability or special needs
Aging parents
Other family members
Do we both need life insurance?
Yes, both you and your spouse need life insurance.
Especially if you're a one-income household.
There will be financial impact if the working spouse passes away.
There will also be financial impact if the non-working spouse passes away, such as extra childcare costs.
How much life insurance do you need?
The amount of life insurance you need will depend on the following:
Your family lifestyle (how much your family spends every month)
Size of family
Amount of debt you have (including your mortgage)
How much savings/investments you've accumulated
If someone in your family has a pre-existing medical condition that requires additional care costs
How to calculate how much life insurance you need
Some experts use the DIME method
D = Debt -the current amount of debt owed by you and your spouse
I = Annual Income x (# of years your family will need it)
M = Mortgage - what's left on your mortgage
E = Education cost for your kids (if applicable)
Add all these numbers up and subtract any compensation you will get from the government or your workplace.
This will be the amount of insurance you need.
Types of Life Insurance
Term life insurance
This type of insurance stays in effect for a fixed term and a fixed premium.
You can renew (the premium could increase) or cancel your insurance at the end of your term.
Permanent/Whole life insurance:
This type of insurance lasts your lifetime (as long as you pay your premiums).
It also offers both a death benefit and a cash value.
The cash value is guaranteed and can be cashed in by you while you're still alive (based on the terms of your insurance contract).
THE TOOL
Where can I get Term Life Insurance in Canada?
Many life insurance policies sold to people are expensive and unnecessary.
Insurance and investments should not be mixed..., but that's a topic for another STACK.
Life insurance shouldn't be expensive, which is why I recommend PolicyMe.
They offer term life insurance at one of the most competitive rates (cheaper than the cost of take-out) in Canada, and you can send in your application in just 20 minutes.
Sign up today using my referral link.
THE ACCOUNTABILITY
Do you have life insurance already? That's awesome!
Ensure your beneficiaries are up to date.
I once heard a story about a man who passed away and forgot to update his beneficiaries, so everything went to his ex.
His current wife and kids got nothing, and the ex refused to give them a dime.....yikes! 🥴
THE COURAGE
THE KNOWLEDGE
Beneficiary
The person(s) that will receive payment from the life insurance company after you pass away.
Death Benefit
The lump sum your beneficiaries will receive after you pass away.
Premium
The money you pay upfront to your insurance provider to sustain your insurance policy.
Coverage
This is the amount of insurance you sign up for when you open the insurance policy. It is also the amount your beneficiaries will receive.
That's it for this week's STACK!
Talk to you next week,
But until then...Keep Stacking!
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