Are You Covered by These Five Key Insurance Policies?
Carl Martel
President & Wealth Manager Providing Financial Services to Individuals, Business and Real Estate Owners
Insurance is one of those financial products that often doesn’t get the attention it deserves. Most of us purchase a policy, then forget about it, thinking we have done our due diligence and crossed that off the financial responsibility to-do list. But a great investment portfolio means nothing if your financial plan doesn’t include appropriate protection against risks. Risk management through insurance is a critical part of a comprehensive financial plan. Without adequate insurance coverage, your financial future is not secure.
With the right insurance tools, you can ensure that your assets are protected and your family or business has a secure future, even if the unexpected happens. Here are five key insurances that are an important part of your financial plan.
1. Life Insurance
Thankfully, this is the least commonly used insurance of the five, but the most regularly purchased due to its importance. Life insurance protects your dependents in the event of your death, so it’s crucial to carry life insurance if you have children or other dependents. Additionally, it’s wise to make a habit of updating your coverage based on your needs at least once per year.
As of 2013, only 43% of Canadian households owned individual life insurance, even though many families would be in dire straits without it if something tragic were to happen. (1) Life insurance policies should be purchased to take into account mortgages, non-mortgage debt, childcare, college savings, and more. Stay at home parents should also have coverage since they provide valuable work that would be costly to outsource in the event of their death. Business owners may have other insurance needs to protect the future of their business.
The next four insurance coverages are considered living benefits insurance. In other words, these policies serve as income replacement and health cost coverage tools to have in place in order to ensure that you and your family can reach your financial goals with as little financial disruption as possible while you are living.
2. Long-Term Disability Insurance
About one in four Canadians have had to take time off of work due to a disability, even though most people believe that disability is rare. (2) An accident, injury, or illness that keeps you from working can wreak havoc on your financial plans and set you back months or years. Common long term disabilities can even include neck, back, or joint disorders.
While many people believe they are covered by their employer’s long-term disability insurance, the coverage may be limited and inadequate. Coverage of up to 2 years is the typical limit with employer benefit long-term disability plans. The need for a private long-term disability coverage will pick up where employ long-term benefits fall short. Before your employer long-term benefit is activated, most employer’s short-term benefits will provide coverage for three to six months. Private long-term plans can be very costly and therefore tend to be a more practical option for higher paying income bracket careers such as executives and business owners.
3. Critical Illness Insurance
While no one wants to think about a life-changing illness entering their life, it happens more than you might think. Critical illness insurance pays a lump sum amount to help with the costs associated with the illness. This insurance is unique because there is flexibility with how you can allocate the funds. You can use it to replace income for you and your spouse while you are dealing with the illness or it can provide for alternative medical treatments not covered by government health insurance. If you don’t want to be worrying about money while dealing with a serious illness, consider critical illness insurance for peace of mind.
4. Long-Term Care Insurance
If you are nearing age 65, it may be a gamble to go without long-term care insurance, especially since long-term care is not covered by Canada’s public healthcare system. According to a study conducted on behalf of the Canadian Health and Life Insurance Association, 74% of Canadians do not have a plan to pay for long-term care, (3) and 52% would not be able to afford long-term care if they were to need it right away. (4)
Long-term care insurance covers the cost of services for a variety of tasks you may need help with as you age. Today’s long-term care policies offer more flexibility and benefits than ever before. It is important to understand the long-term care insurance options available to you and whether or not a policy is appropriate for your lifestyle and needs. While some policies can be expensive, requiring long-term care without insurance in place can be financially devastating.
5. Special Insurance For High Net Worth Clients
There are lesser known insurance product strategies that preserve the size of estates and keep taxes to a minimum, which are particularly interesting for High Net Worth individuals or families. To name a few; “Joint Last-To-Die Policies”, “Back-To-Back Annuity” or “Key Person” Insurance for clients with major stakes in their business. We won’t go into details with those products, but it just shows that once you have covered the basics of life and health insurance policies, you can still go further by covering more focused needs.
Have you reviewed your insurance coverage within the last twelve months? If not, you may benefit from a comprehensive review to protect your family and your financial future. If you need a second opinion on your portfolio or would like to discuss how insurance can lower your risk, book an appointment now!
About Carl
Carl Martel is the president and portfolio manager of Montag Private Wealth. Along with more than 15 years of capital market experience and 10 years of experience in real estate hard assets, he is a Chartered Investment Manager® and holds a Certificate in Derivatives Market Strategies from CSI Global Education, a Masters of Science from Laval University, and an MBA from l’Université du Québec à Montréal. A focused and pragmatic, results-oriented investment professional and entrepreneur, he specializes in serving the unique financial needs of high net-worth individuals and families, foundations and endowment funds, and business owners. To learn more, visit http://montagprivatewealth.com/ or connect with Carl on LinkedIn.
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1 http://www.investmentexecutive.com/-/fewer-canadians-buying-life-insurance-but-the-need-remains
2 http://www.rbc.com/newsroom/news/2014/20140923-ins-disability.html