Adèle Manseau | Desjardins Group
It's a common misconception that life insurance covers your "final costs"--but this isn't the case! By the time you retire, you should have already planned for those costs. You might, however, have other needs. Taking a serious look at your overall situation can help you choose an appropriate life insurance strategy. What will yours be?
We sat down with Norbert Labelle, an advisor with Desjardins Financial Security,* to learn about 4 different strategies that might be wise during this stage of your life.
1. Paying back your debts
"Do you still have a mortgage? How much time is left on it? You'll need a backup plan for your death, since loan insurance often runs out too early: after age 69, you're no longer eligible for loan insurance. If your loan is going to extend past that age, it's a good idea to take out your own individual insurance," Norbert explained.
2. Wealth creation
Everything's going great. You're in good health, your financial situation is under control, and you have a regular income that lets you live comfortably, with no financial stress. You also have a lot of assests: RRSPs, and money lying around in accounts or investments that you don't plan on using.
In this scenario, you should consider life insurance part of your wealth creation strategy. Take some of the money you weren't planning on using, and purchase life insurance! You'll grow your wealth and benefit your heirs--and it's not too much work!
3. Planned giving
Instead of making an annual donation to an organization or charity, you can purchase life insurance. You use the amount of money you would have donated to pay the annual premium, and you receive a tax slip from the organization you've selected. When you die, the full amount of the life insurance policy is paid out to them. This means they don't receive annual donations from you--but the life insurance amount will be even larger!
4. Covering taxes
"What taxes need to be paid when you die? If you're not sure, your financial planner can help you figure it out. Who will pay for them? Your heirs or the insurer?
If you take out life insurance to offset these costs, your estate remains intact. Technically, your heirs will be paying, but the money they use will come from the life insurance policy.
These days, you should think of life insurance as just another financial tool, with different advantages depending on the strategy you choose," Norbert explained. "Some types of life insurance let you include tax-sheltered investments, which are another convenient way to grow your savings. "
Your financial planner and financial security advisor are your go-to resources when deciding on the best product and strategy for your situation.
You should also learn ...
... about the insurance offered by your employer:
- Does it continue after you retire?
- If so, in what ways?
- Is any coverage cancelled?
- What is your alternative?
Ideally, you should review your group insurance plan between 5 and 10 years before you actually retire.
In general, group insurance plans in Quebec no longer include health coverage once the insured reaches age 65--from that point on, retirees receive this coverage through the Régie de l'assurance maladie du Québec (RAMQ).
... if it's a good idea to take out additional insurance:
Everyone's needs and situation are different, based on their family's medical history: cancer, heart disease, loss of autonomy, etc. Depending on your needs, critical illness insurance or loss of independence insurance (also called "long-term care insurance") could help to ease any financial concerns you may have.
*Employee of Desjardins Financial Security, Financial Services Firm.