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The Case for Life Insurance

The costs are probably not as high as you expect, says Freisenbruch expert
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One of the harsh realities about life insurance is that many people don’t understand how important it is until it’s too late. Yet, death will always come with some form of financial liability and, according to Freisenbruch expert Keishon Wilson, those you leave behind should not have to be responsible.

“There was an article in the paper some time ago that touched on an individual who became terminally ill,” said Mr Wilson, a senior life and pension sales advisor. “The first thing he remembered once he found out was the life insurance policy he did not follow through with. There are many cases like this where people regret not doing it because they no longer qualify, or the price would have been better had they done it years earlier.”

Life insurance is a proactive way to make sure your loved ones don’t have to pick up the pieces.

The main reason people put it off, Mr Wilson said, is misinformation or simply a lack of good information. Many people believe they can’t afford it and don’t take the time to check.

To illustrate this point, Freisenbruch provided the example of a $250,000 term life insurance policy for a healthy 30-year-old. In a recent survey, 80 percent of people overestimated the cost of this policy by five times. In fact, the individual in that example would have to pay just $220 per year, which is $20 per month, or $0.66 per day.

Mr Wilson said: “It’s easy to ease these concerns because a lot of people associate life cover with large amounts of death benefits that don’t apply to their needs for cover. Having a conversation and identifying one’s needs for cover allows you to address financial concerns by only offering what someone needs based on their financial situation.

“Proactivity will always be key. Also, having access to the right information. The best thing anyone can do right now if they don’t know about life insurance is to sit down and discuss with a professional to not only help understand the product better, but also help understand how the product best fits into your life. This is the one time where what you do not know can cause harm to you and your loved ones.”

Life insurance has numerous potential benefits, including:

  • cash-on-demand for future use;
  • a supplement to your retirement income and plan for your financial future;
  • provision for your family when you’re no longer available to do so;
  • protecting your family from unnecessary financial strife by covering final expenses, paying off debts and providing an income;
  • protection for your business.

Even if we understand all this, many of us might feel we already have enough on our plates finding money to survive the daily grind of grocery bills, mortgage or rent, electricity and medical costs, without worrying about safeguarding what will happen long into our future.

Mr Wilson insisted that doesn’t mean life insurance should go on the backburner.

“Life insurance should be considered at all ages starting from birth,” he said. “If a parent were to secure their child’s insurability from birth, there is no way they can be disqualified if they were to develop any illnesses. After all, they are already covered. Also, the younger you start, the cheaper the premium. Now will always be the right time to take control.”

So, if you do decide to get life insurance, how do you go about it? Here is Mr Wilson’s step-by-step guide:

STEP 1: Make an appointment with a professional at the insurance company and carry out a needs analysis.

STEP 2: With the professional, select the best plan to meet those needs and fill out the application forms.

STEP 3: The insurance company will then schedule clients for a paramedical test and submit the results along with the application.

STEP 4: Freisenbruch’s team in Canada will finally review the application and make a decision regarding insurability.

Your two main options of life insurance are “whole of life” and “term”. Whole of life is permanent coverage that lasts as long as you live and make payments. Mr Wilson explained: “It also builds cash values that you have access to during the lifetime of the policy. You can also withdraw whatever cash value you have built over the years should you no longer wish to keep the policy.”

He said a whole of life policy can provide great benefit to your beneficiaries, as well as to you, should you ever need to access the funds you have available.

A term policy, meanwhile, is a temporary and less expensive cover option that does not build cash value and expires completely when the term is done. Mr Wilson said “This is an amazing tool to cover the larger amounts of your debts or liabilities while it is needed.”

A mortgage is an example of a term policy. “You can have a 30- year term plan for one million to cover a 30-year mortgage for one million,” Mr Wilson said. “If anything were to happen to you, your beneficiaries would not be left with mortgage payments they can’t afford.”

When figuring out how much coverage you need, Mr Wilson said there is no one size fits all. It is solely down to the individual.

Life Insurance Market Research Association says that you need seven to ten years of your annual salary in insurance to be comprehensively covered. “This should align also with any debt that you will create or debt that you have already created,” Mr Wilson said. “However, everyone is still different.”

For further information, contact Freisenbruch on [email protected] or 296-3600.

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