If you can reduce it to the basics, people buy life insurance for
one of two reasons. First, is to create an estate and second is to conserve an
estate. Generally people
will work for their entire career in an effort to provide their family with
what is referred to as their life style. In the event that a person dies, they
most often want the family to be kept in the same life style they are used to.
Life insurance is most often the solution to this problem.
Life insurance creates tax free dollars which can be used to replace the
breadwinner’s income, and thus replaces life style.
Beyond this, if an individual has worked long and hard enough
before he/she dies, then the need changes. The need is no longer required to
“create” an estate, because it has already been created by your hard work. For
example, the home is paid off, the cottage is paid off, and there is some money
in the bank. At this point, life insurance is most often used to conserve the
estate rather than creating one. This need is often reduced when compared to
the need at the start of your career. When conserving the assets, the insurance
proceeds are now used to pay bills and taxes so that assets are not required to
be sold.
In the beginning of a career, the
bulk of insurance is a temporary need and diminishes. In the long run, the need
is permanent and never goes away. The products required to solve the needs, are
often a combination of Term (temporary) and Whole life (permanent). The amount
of coverage depends on your life style and income earned.
People buy products as the need develops, and as the finances
dictate. If permanent products are out of range, then term insurance most often
fits the bill as a short term solution. A unique feature of some term polices
is the ability to change or (convert) the policy to a permanent policy at a
later date without the need to show evidence of good health. Thus a proper
solution might be to incorporate group insurance, with personally
owned term coverage, along with some form of permanent insurance. It’s
never an all or nothing answer.
Buying life insurance is a process and not an event. People
generally purchase coverage on average seven times in their life. Seldom does
anyone buy everything all at once. The need changes and the cost of insurance
has also decreased in recent years because people are living longer. Also, a
review of your insurance often creates unexpected savings.
A good piece of advice is to develop
a relationship with someone you trust, and work with them over the long term to
build a strategy.
If you are in Nova Scotia and would
like some insurance advice, please contact Corry Collins:
corry@maritimewealth.com
902-444-7000
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