You’ve planned for the future, created a plan and are following it. That plan likely does not include an unexpected death. Life insurance is an effective solution that helps navigate this unexpected situation, pay off debts, estate expenses and provide for the same security you had always envisioned. The purchase of life insurance is an important decision for both you and your family.
Some types of insurance.
Term insurance provides protection for a specified period of time and usually have expiry dates of age 75 or 80. There are many terms available such as 5, 10, 20 years or to a specified age such as 80 and “term” refers to the number of years the premium remains level. With the exception of term-age policies, the policy may renew at the end of each term and, although rates are generally low in the early years, premiums increase, sometimes substantially, at each term renewal. If you die while the policy is in force, the company will pay the face amount of the policy to your beneficiary. If you live beyond the expiry of the policy, no benefit is payable.
Permanent insurance is designed to provide coverage for your entire lifetime. The cost of insurance can be guaranteed level at issue and never increase. Depending on the type of policy, coverage may increase and there may a cash value associated with the coverage. For some polices, it is possible to deposit additional funds in order to take advantage of (tax-sheltered) growth within the policy. Permanent coverage affords estate and tax planning opportunities.
Types of permanent include Whole Life and Term to 100 and Universal Life.
What’s the risk?
Life has risks. Unexpected events such as illness, injury or even a death can derail the best laid plans.
For a male age 45, here are the risks:
- 31 % Disability before age 65
- 24 % Critical Illness before age 65
- 5 % Dying before age 65
- 46 % Probability of dying, becoming critically ill, or disabled before age 65 *
- The combined risk for a male age 45 and female age 45 increases to 68%*.
What would happen if you were unable to work due to a serious illness or injury? Would you or your family have the income that is needed to maintain your lifestyle? The risk of disability before age 65 can range between 30-56% depending on if you are single or married. With two people in a family unit, the risk that one person will become disabled before age 65 increases dramatically.
An individual disability policy can help protect against a loss of income in this event. If you are unable to work for longer than 90 days due to a significant illness or injury, individual disability insurance policies pay a tax-free monthly benefit that replaces your income until you get better or age 65 whichever is less.
If you are an employee, you likely feel that your group benefits provide you with the coverage you need. In our experience, most group plans have caps that limit the amount of income that will be covered. In this case, we add what is called top-up coverage to maximize your benefits during your period of disability.
If you are self-employed, you may not have any coverage or you may have coverage that you took out when you first started your business which no longer accurately reflects your current income situation. We, at Producers Group, Ltd, can assess your individual situation and make recommendations to adequately protect you.
Long Term Care (LTC) can have significant costs associated with it. These costs can seriously impact a client’s retirement and the value of their estate. Long Term Care is broken down into three broad categories: Home Care, Retirement Homes and Nursing Homes. There are some government subsidies available for this type of care but there are usually waiting lists and limitations on the type of care provided (ward room versus semi private or private).
If a client wants to remain independent for as long as possible in their own home, then Home Care is the choice they usually make. In the client’s home, they may require only a little bit of help with things like meal prep, cleaning, etc. all the way up to full time nursing care. The costs for this run between $32 and$100 per hour.
The other option for a client who does not have significant health impairments but requires help is a retirement home. Retirement homes can cost between $1,200 and $6,475 per month depending on the type of accommodation the client is looking for.
Lastly, when the client has significant health issues, the only option that often remains is a nursing home. Even with the government subsidies, the cost of a nursing home can be $30,000 per year.
Long Term Care insurance can provide a client with a weekly benefit that can be used to cover the costs of these options keeping a client’s investments and estate intact. The cost of the insurance is substantially cheaper than the cost of care.
*Source: Manulife Financial InsureRightTM calculator – Male age 45, healthy, non-smoker, Female age 45, healthy non-smoker
The probability of dying, becoming critically ill or disabled before age 65 was determined by projecting claims experience to age 65 using these incidence rates and determining the probability of at least one event occurring. The probability of at least one event occurring is less than the sum of the probabilities for all three events, as individuals may incur multiple events.