Lise Allin Insurance

Why Buy Life Insurance?

Why Buy Life Insurance?

by Neil Denison

There is a need for life insurance to cover the risk of premature death at every phase of one’s life.

Purchasing life insurance for a newborn child makes good sense for the new parents. This coverage will protect them against the cost of funeral and last expenses, which could be overwhelming in the event of the tragic death of a child.

The young working couple will purchase enough life insurance to cover them in case of death of the breadwinners in the family. This coverage would assist the individuals in the family to maintain their current lifestyles. The amount of coverage that is needed is generally equal to ten times the combined yearly salaries for the couple. At this stage, term insurance is the recommended product as it is more affordable.

When the couple is middle aged and often at a higher income level, more life insurance protection is needed. In this situation, insurance with cash values is useful in preparing for the next stage of life, retirement years. At mid-life, it is important to become insured while health is good and the individual is still insurable.

To prepare for retirement years, much planning should be done to ensure that there would be enough income to cover the standard of living of the peak working years. We choose insurance with cash values that can be converted into an annuity providing monthly income, just like a monthly pension from work.

Life insurance, which remains in place after retirement, helps to cover expenses when the last spouse dies and the estate has to be settled. If there are large amounts invested in RRIFs (Registered Retirement Income Funds – the maturity option usually used for RRSPs) in the estate, a significant tax bill will result (50% tax rate). Life insurance on the surviving spouse can cover this expense and preserve the estate.

In any event, be sure to review your life insurance needs at every stage of your life, to ensure that your estate planning goals are met.