Choosing the best life insurance for your needs


Financial planning will look different in different seasons of your life, so you should definitely re-evaluate your needs and adjust your coverages over time.

Isabelle Paradis | Contributor

Permanent, term, redeemable...it can be hard to grasp all this life insurance jargon. Nathalie Tremblay, a product manager at Desjardins Insurance1, offers a practical approach to help you understand it and make the right choice.

Not everyone wants to leave their family an inheritance. "Before talking life insurance, you should determine what your loved ones would need in the event of death," says Tremblay. "For example, if you have a family with young children, your priority will be to maintain their quality of life. That means the kids would be able to stay in the same house, go to the same school and have the same chances of pursuing a postsecondary education," she says.

Financial planning will look different in different seasons of your life, so you should definitely 
re-evaluate your needs and adjust your coverages over time. With that in mind, here's an overview of Tremblay's needs analysis and the types of life insurance that can meet the needs of various families. 

Family with young kids
Needs to consider
  • Pay mortgage
  • Maintain family's quality of life
  • Have immediate access to liquid assets to pay final expenses
The best life insurance for your needs
  • Term2
  • Add permanent insurance if your budget allows

Family with older kids and/or adolescents
Needs to consider
  • Pay the mortgage balance if applicable
  • Have immediate access to liquid assets to pay final expenses
  • Maintain family's quality of life
  • Leave an inheritance
  • Give to charity
The best life insurance for your needs
  • Term1
  • Permanent or whole life insurance (participating if needed)

Couple with no kids
"Don't think that things are easier for couples who don't have kids. A death can cause tremendous financial stress for the surviving spouse," says Tremblay.
Needs to consider
  • Reduce the surviving spouse's financial stress
  • The surviving spouse's ability to pay the mortgage
  • Give to charity or make a bequest to a close family member
The best life insurance for your needs
  • Term1
  • Permanent, if you want to give to charity or make a bequest to a close family member, regardless of the age of death

Self-employed workers
If you're self-employed, you'll need to factor both your family and business situation into your needs analysis.
Needs to consider
  • Pay debts following death
  • Allow successors to cover professional financial commitments (like a commercial lease)
The best life insurance for your needs
  • Term1

Pre-retirees
"These people have a clear idea of when they'll be retiring," says Tremblay. "This is the time to do estate planning and address issues like how much money will be available in retirement, how much taxes will be owing at death, bequests to children and so on."
Needs to consider
  • Leave enough money to pay taxes, including those on certain bequests, like a secondary residence, business, etc.
  • Leave children an inheritance
  • Give to charity
The best life insurance for your needs
  • Permanent
  • Consider taking out a single joint last-to-die life insurance policy to pay taxes owing at death 

 

A few helpful definitions

Term
  • Coverage for a limited period of time--10, 20 or 30 years
  • When the policy expires, you can renew your insurance without having to provide new proof of good health (for the same term as the initial policy), or convert it to permanent life insurance
  • Costs less than permanent life insurance, especially in the first years of the policy
  • Cost increases with age
Permanent
  • Coverage for life
  • Guaranteed fixed cost
  • Option to choose limited-pay products (i.e., you pay for 10 or 20 years and then you're covered for life without ever having to pay additional premiums)
  • Covers the same needs as term insurance, while also leaving an inheritance
Participating
  • Coverage for life
  • Guaranteed fixed cost
  • Part of an investment strategy
  • Provides tax advantages
  • Allows you to build tax-sheltered savings (medium- and long-term)
  • You can add to or withdraw from savings as needed (e.g., to finance the growth of a business or increase retirement income)
Joint last-to-die
  • Single insurance policy that covers both spouses, but that pays out only on the second death, i.e., when the surviving spouse dies
  • Very smart choice when assets are rolled over to the surviving spouse, with no immediate tax consequences

 

1 Desjardins Insurance refers to Desjardins Financial Security Life Assurance Company.

2 Term insurance that can be converted to permanent life insurance gives you more flexibility as your needs evolve.


NOTE: To keep things simple and easy to understand, this article addresses only life insurance needs. A needs analysis usually considers other insurance products as well, along with savings and investment products. It's best to consult a life and health insurance representative, who can help you do a thorough needs analysis.

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