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Insurance can last a lifetime – if you need it to

Be sure you have your insurance house in order – awareness can save you money and frustration.

By Deborah Leahy

September was Life Insurance Awareness Month in the U.S. When you consider the benefits you and your family may receive from life insurance, you might agree that Canada should also have a month focused on this important part of your overall financial picture.

According to the 2012 Insurance Barometer Study, published by the non-profit LIFE Foundation and LIMRA, a research and consulting organization that specializes globally in insurance and financial services, too many North Americans are uninsured or under-insured. In fact, nearly one-third of all consumers think they need more life insurance.

It appears that one of the main reasons so many people lack sufficient life insurance is their perception that they can’t afford it. Yet, the cost for basic term life insurance has fallen by about 50 per cent over the past 10 years, according to the LIFE Foundation.

The cost—financial, emotional and psychological—of not having adequate life insurance outweighs the expense of carrying the proper coverage. You’ll hear about many things that are designed to “last a lifetime,” but in the case of life insurance, that expression is appropriate. Consider the various times in which you should look at the need for life insurance:

When you’re married: Many married couples assume they won’t need life insurance until they have children. But if you or your spouse died, would the surviving spouse’s income be sufficient to pay off the mortgage, or even the rent? How about credit-card balances, car loans or student loans?

When you’re married … with young kids: Now, in addition to having to pay off the mortgage if anything should happen to you, your surviving spouse will have to find the money to educate your children—and that’s a big challenge given the rapidly escalating expenses associated with post-secondary education. But with sufficient life insurance in place, your spouse can deal with it. Furthermore, if you have permanent life insurance, such as whole life or universal life, you have the potential to build cash value, which you may be able to tap to help pay for school—while you’re still alive. (Keep in mind, though, that using some of your cash value could lower your policy’s death benefit.)

When your children are grown: Even with your children grown and gone, you can benefit from life insurance. For example, if your spouse outlives you by a decade or more, will he or she have enough money to enjoy a comfortable lifestyle?

When you’re retired: Your need for life insurance doesn’t retire when you do. For one thing, you may be able to access the cash value of your permanent insurance to help meet your retirement expenses. (Keep in mind this may affect your death benefit.)

And your policy’s death benefit could help your children or other heirs deal with estate taxes, if any. Furthermore, if you’d like to be able to pass on something to your children or grandchildren, life insurance may be an ideal vehicle, because the proceeds are typically income-tax free and can avoid the time-consuming process of probate.

Life insurance can offer a lifetime of benefits, so make sure you get the coverage you need.

Deborah Leahy is an investment adviser with Edward Jones and member of the Canadian Investor Protection Fund.

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