Building Your Personal Insurance Portfolio

September 26th, 2011 | Author: Mitch Reynolds

Designing a Personal Insurance Plan with Life & Health Insurance

A personal insurance portfolio has a hierarchy of needs

If you have even gone through a complete personal insurance planning exercise, you will find there are many life and health insurance products that could benefit you. Can you afford to buy all the insurance you need? Doing your personal insurance planning is a financial balancing act. You can’t be “insurance poor”; spending so much money on life and health insurance that you can’t afford to save for retirement or forgo a decent lifestyle today.

So, based on your budget, there is a hierarchy of needs when doing your life and health insurance planning. As you put your personal insurance plan in place, most Canadians should take care of these risks in a methodical way:

Life Insurance is your personal insurance plan cornerstone

Life insurance is the cornerstone to any financial plan. That is because a premature death is the most financially impactful event that can happen to a family. Death is an “end game” scenario! Unlike a disability or getting a critical illness, where there is a good chance of recovery and continued life and income, once a person dies there is total loss of that person’s financial contribution to their family.

Imagine a primary bread-winner was to pass away at age 40. If that partner to the family was making $100,000 per year, the immediate loss to the family would be $2,500,000 without factoring in raises and bonuses over time.

Also, there is a need for permanent life insurance planning, such as buying whole life or universal life insurance, for long term estate and legacy planning needs. The younger you buy permanent life insurance the better it is for you. Starting to plan both your short term and long term life insurance needs when you are young will provide both risk management and equity growth throughout your life.

Disability Insurance covers your biggest risk

Disability insurance covers the biggest risk factor of your personal insurance plan. Many people are covered by a group benefits plans through their employers, but still over 40% of Canadians are either self employed, working for a small company without benefits, part-time workers, or working on contract without group disability coverage. These Canadians need to do personal disability insurance planning, especially since the risk of suffering a long term disability sometime in their working career is about 45%.

Also, there is a need for highly paid Canadians such as managers, executives, top paid sales people, etc. to look at a personal disability insurance plan as a top up to their current base group insurance plan. Typically these group insurance plans have a monthly benefit cap and they don’t cover bonuses and/or commissions. Only base salary is covered. This leaves highly paid Canadian workers, who are arguably the most valuable to their company, the least insured against a disability. This large risk exposure should be covered, especially considering the risks.

Critical Illness Insurance can save your personal financial plan

Any personal insurance plan should also include critical illness insurance coverage if you can afford it. Critical illness insurance covers a very common risk, with 1 in 3 people suffering from one or more of the covered critical illnesses before age 65 (illnesses include cancer, heart attack, bypass surgery, stroke, MS, Parkinson’s, and many more). You can get very inexpensive short term critical illness insurance like a term 10 policy or a lifelong permanent plan with full return of premium if you never get sick.

You should really take a look at this very important health insurance policy to protect yourself and your family from the devastating financial impact of getting a life altering critical illness. Once you have had an event or a serious illness you can no longer qualify to add critical illness insurance to you personal insurance plan.

Health & Dental Insurance is a cash flow management tool

A health and dental insurance plan covering prescription drugs, dental costs and extended medical expenses is really a cash management plan for your personal insurance plan. Insurance companies are not in the business of paying out more benefits than the premium they are taking in. In fact, the insurance company has to make a profit on this product! Therefore they take in more premium over time than benefits paid out.

The real advantage to most people who own a health and dental plan is feeling secure that they are not going to have to pay a very large amount of money out of pocket in any given month. They want to be secure that ongoing medical expenses will be paid from the health and dental insurance plan in exchange for an ongoing monthly premium. It basically gives people financial peace of mind with their monthly budget/expenses.

Life Guard Insurance can help design a personal insurance plan for you

If you are looking to either start your personal insurance plan or take the next step, we can help. Contact Life Guard Insurance to be put in contact with a local life & health insurance broker who can help you design your personal insurance plan.

The article was written by Mitch Reynolds+. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article Building Your Personal Insurance Portfolio would be very much appreciated.