Live for the best and prepare for the worst

By Janice Desautels

I’ve recently returned from a company conference in Hawaii. Not a bad place to have to attend a conference – with sunny skies, warm weather and the splendid scenery. What could go wrong?
Tragedy can strike us anywhere, at any time. Our organization lost one of our members due to drowning, something no one would have ever conceived of happening on a joyous occasion such as a trip to Hawaii. This is a jolt back to reality; none of us is immune to the probability of loss. A comfort to this family was the background work they did to prepare for the unthinkable.
When we talk about insurance, it most often is around physical items that we place a high value on such as our home, car, electronics and jewelry, to name a few. However, can you answer this question: How would my family fare if I was not here to contribute?

If the answer is that they would be worse off, then shouldn’t the highest value be placed on your ability to generate an income? Over our working life, we use a substantial amount of money to live – money our family needs to reach its full potential.
Mitigating risk is a part of our responsibility as family members, especially if our income is required to support others. The most economical way to do this is through life insurance and critical illness insurance.
One of the most common reasons cited for not insuring ourselves is the lack of knowledge about what to do, resulting in a reluctance to make a decision. There are many companies out there all vying for your purchasing dollar, and good advice through education is essential so that you can trust that you’ve made the best decision.
The following questions will give you a good start in finding the right coverage for you and your family.

What type of insurance do I need?
Over our lifetime, we need to mitigate risks for life events such as income loss, loss of health, debt repayment, children’s education and final expenses. So while income loss will need to be insured over your working life and may need to increase as your income increases, debt repayment may be a shorter timeframe.
In the event of a critical illness, there can be treatments and medication that would not be covered by provincial healthcare, that could potentially consume much of the household income and place a heavy burden on the family.
Some types of insurance are on a term basis, with coverage generally from 10, 20 to 30 years, which can be layered over each other so the insurance expires when you no longer need it. There is also permanent insurance which follows you through your lifetime should you need coverage for a longer period, or for final expenses and protection of your savings. Some types of permanent insurance and critical illness insurance provide a lump sum payment as a benefit.

How much coverage do I need?
First, determine how much of your paycheque is utilized. If there is nothing left at the end of the month, then the answer would be all of it. Field a discussion with your family that answers: in the event of your death, how long of a bridge would they need to make up the gap from the loss of your income?
A benchmark of 10 years is used in a simple calculation, but again, it is personal to you and your family so it may be more or it may be less. What is your debt load? This includes a mortgage and consumer credit.
The need for insurance is very personal and individual. As with our savings goals, this shouldn’t be a “one product for all” approach. The only universal advice is don’t wait, contact the Insurance Council of Manitoba for more information.

Janice Desautels has been working with families and individuals for the last seven years helping educate in the field of financial literacy. She is a Certified Financial Educator with over 15 years experience in teaching and training adults.

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