Some conversations with friends, clients, and prospects over the past several weeks has led me to share some of the more common questions and comments regarding insurance, benefits, and investments. Welcome to FAQ (Frequently Asked Questions) Week!
Each day this week, I will post a question that I have been specifically asked and my (paraphrased) response. Feel free to comment and share.
QUESTION (from a 36-year old, married, pregnant woman):
I have a great group plan with my employer, which includes a generous amount of life insurance. Why do I need more insurance?
QUICK ANSWER:
The majority of group plans do not last for the rest of your life, and it costs far less to buy permanent insurance well before retirement.
MY RESPONSE:
That is wonderful. You should never take your group plan for granted, so it is very positive to see that you recognize and appreciate the benefits that your employer has put in place.
When considering personal life insurance, we always have to think about your current situation and your future situation. If you have enough group coverage to cover your debts (mortgage, lines of credit, loans, credit cards..) and your final expenses (funeral costs, probate fees, taxes..), then you are fortunate. It sounds like your current situation is settled; but how about the future?
You are not going to work forever (let’s hope!). When you retire, that generous group plan will also retire. Even if you are in the best of health, life insurance for a 60, or 65- year old will be much more expensive than for a 36-year old.
Take advantage of the fact that your premium would be relatively low right now, and that way when you are actually ready to retire then you will still be paying that lower rate, OR you may not be paying a premium at all, depending on the type of plan you choose.
We are always planning for the future. We do not buy RRSP’s to save for today – we buy them to supplement our income after retirement. We do not buy RESP’s for today – we buy them to be used years from now when our children attend post secondary school. We may purchase a home now, that stretches our current budget to the maximum – knowing that in 5 or 10 years, it will be more affordable since the monthly payments can be lower and our income should be higher.
The point is, we often plan for our financial future, and life insurance is most certainly a part of that plan.