Insurance Coverage: Is Yours a Perfect Fit?
By LORI HEEMSKERK
Posted 3 years ago
They say the one thing in life that's constant is change. Clothes that suited you perfectly ten years ago just don't have the same appeal today - if they still fit! The car that was big enough for two has been replaced by a van that accommodates four and you've built an addition on the house to give your family room to grow.
Have you also updated your life insurance? It's safe to say that the plan that worked perfectly for you twenty years ago may not fit your needs quite the same way today as it did back then.
Maybe, it's time for a review.
Are you in your fifties now but set up your life insurance plan twenty years ago? Then, you were thinking about taking care of debts, paying for child care and university educations, making special bequests to relatives and charities, handling final expenses, and ensuring a solid income for your spouse.
Now, it's time to revisit that priority list in light of the changes that have taken place in your life over (the past) twenty years.
If your children were seven and five years old when you set up the plan, they're now 27 and 25. My guess is they don't need child care any longer! With any luck, they've also finished university and are off the family payroll. Your mortgage is finally paid and your debt load is probably much smaller than in the past.
Things have changed, but that doesn't mean you don't still need insurance coverage. The relentless power of inflation has been hard at work all these years, upping not only the cost of living, but also the cost of dying. Funerals are more expensive and those costs will only continue to go up. You need to budget to cover those expenses.
Maybe you've added a couple of grandchildren to the list of your beneficiaries - you'll want to include them in your plans. Oh...and don't forget the Canada Revenue Agency (formerly known as Revenue Canada) the most eager of all beneficiaries. When you die, your spouse will inherit your assets, but when he/she dies, Canada Revenue Agency will snatch the taxes due on your RRSP assets, not to mention any capital gains taxes due. If you've reached the highest personal tax rate that could be between 39 percent and 49 percent, depending on which province you're living in at the time. Scary thought! If you have $500,000 in RRSPs when you die, your heirs will need $245,000 to pay the tax man. You won't have to pay it, but your beneficiaries will! Good thing life insurance is such a great and economical source for the cash they'll need.
One last thought on the insurance issue: term or permanent? Although term insurance is less expensive (in the early years, it will become increasingly more expensive over time and) will only cover you until age 70 or 75. Now might be the right time to consider some more permanent options and sit down with your insurance agent or financial advisor to review your insurance coverage to ensure that it fits you and your plans!
Lori Heemskerk is a Meridian Credit Union Branch Manager in Wainfleet.