When a person dies, it’s always sad and unfortunate. What people don’t realize are the many loose ends that come after the death has occurred. For example, cancelling utility services, income tax for the deceased, and outstanding mortgages/loans. Did you know the minimum cost of a basic funeral arrangement in Canada is $5000? This is where your insurance policies comes in handy. Life insurance is a lump sum of money paid to your beneficiaries after you have passed away. This money will help pay for your outstanding debts, as well as, look after your loved ones during this difficult time. There are two types of life insurance policies:
Universal/Whole Life Insurance is more expensive and you pay the premiums for your whole life, but your policy does not expire. Universal/Whole life insurance is great for those who want guaranteed money payouts for their loved ones when they die.
Term Life Insurance expires after a set amount of years, but you can choose to have a higher payout at a lower cost. Term life insurance is great for those who need coverage for a specific period of time. For example, you would like coverage between 30 to 60 years due to mortgage loans, personal debt, childcare, and potential healthcare expenses. Term life insurance is the most suitable for those who will establish a good retirement fund that produces on-going income. See my blog on The Dividend Investing Strategy for Long-Term Passive Income to retire sooner than you originally planned.
The insurance payout amount will be pre-determined by you during the application process. This amount will depend on factors such as your loans, mortgages, business expenses, living expenses, your children’s needs, your spouse’s needs, care for elderly parents, pet care and other dependents. So ask yourself how much money would your loved ones need if you were to die today? The higher the payout, the more expensive the premiums will be. Another great benefit of life insurance is that your beneficiaries do not pay taxes when they receive the money. Use this Term Life Insurance Calculator from Ramsey Solutions to help you determine how much coverage you’ll need.
To learn more about other insurance policies click here.
Disclaimer: I am not an insurance advisor. This article was written based on personal experience and opinions. Please seek an insurance advisor for advice tailored to your needs. Click here to see the full disclaimer.
– The Wealthy Sheep
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