Life Insurance Article from The Globe and Mail

Mitch Reynolds interviewed about life insurance ownership for young families

Last week journalist Diana Lawrence of the Globe and Mail published a story on life insurance planning for new parents in Canada. It was my pleasure to be one of the life insurance brokers she interviewed for her piece. I found the article very informative for readers, especially those who have never really looked at buying life insurance before.

Diana interviewed me for about 30 minutes and recorded a lot of information, but as is with most journalism, it all gets boiled down into a few of the best sound-bites. I wanted to take a moment to elaborate on one of the things said and on what I was quoted on in the article. The part where I talk about “Permanent life insurance is like buying the house. You don’t own it fully in the beginning, but you build equity in it.” could be a little confusing for readers. The life insurance death benefit is payable upon death immediately after you buy the policy (i.e. you bought $100,000 of permanent life insurance, if you died your beneficiaries get $100,000 paid out tax free). What takes time is to become fully vested in the death benefit – that is you own it in the future and could stop paying premiums and your $100,000 of life insurance will remain intact for the rest of your life (and in many cases grow much larger than the initial $100,000).

Anyway, I will post the article below in its entirety for you to read. I hope you find it informative and useful for your life insurance planning.

New parents must ask themselves, ‘What if?’

Kids don’t come with instruction manuals, and neither do their financial futures. New parents are faced with a host of monetary issues, and among them is whether to invest in life insurance or other financial instruments.

 

Melanie Kirkey knows firsthand. The 34-year-old and her husband decided to look into life insurance following the birth of their first child three years ago.

 

“It was daunting and pretty complex. It was a lot of information that’s written in this specific language that’s not layman’s terms,” says the mother of two. “And there are so many choices.”

 

Life insurance is generally thought of as income protection in the event of a person’s death. But, like other financial investments, buying the proper insurance can be about finding the balance between a family’s immediate financial needs and their long-term requirements.

 

You have to prepare for future expenses, but this includes ensuring that future can be maintained in case of death, says Saundra Edwards, assistant vice-president for product marketing for Great West Life, Canada Life and London Life.

 

“If you’re hit by a bus tomorrow, what expenses would you need to cover?” asks Ms. Edwards. These are the harsh, realistic questions young parents need to ask themselves, she says.

 

Ms. Kirkey and her husband hired an investment broker to help them navigate the confusing world of financial planning, including the types of insurance.

 

Life insurance can be split into two main types: term and permanent.

 

“Term is like renting an apartment,” says Mitch Reynolds, president of Life Guard Insurance in Calgary. “It provides you all the functionality you need. If you rent an apartment you’ve got a roof over your head, a bedroom, a bathroom, a kitchen, and everything works. Same with term life insurance, it gives you the risk protection.

 

“If a person was to pass away while they’re ‘renting,’ the company will pay ‘x’ amount of money out.” Term policies have an expiration date, and people have the chance to renew the policy, but the price usually goes up after the term is complete.

 

“Permanent life insurance is like buying the house,” says Mr. Reynolds, adding that this type offers coverage throughout your life. “You don’t own it fully in the beginning, but you build equity in it.”

 

Permanent insurance premiums pay for the death benefit and add to the policy’s cashvalue, which you can usually withdraw from or borrow against. Permanent life insurance can be very complex, Mr. Reynolds warns.

 

There are no hard and fast rules recommending how much insurance to buy. In some cases, a combination of life insurance alongside other investment vehicles may be a better approach. Best to consult a specialist, experts say.

 

But understanding the objective – whether it’s retirement, education or mortgage payments in case of income loss – will help narrow down the options.

 

“They need to assess what their needs are,” says Royal Bank of Canada financial planner Narinder Gaday. “You say, ‘I want financial success,’ or ‘I want financial freedom.’ Well, what does that mean to you? Is it an education fund for your children, or is it just a case of if the spouse passes away they need to be taken care of financially? Or is it successful retirement?”

 

Parents need to know what they can realistically afford and maintain for an extended period of time. “A lot of people do not have a grasp of what their cash flow is,” Mr. Gaday adds.

 

So when should parents start investing in life insurance or other investment options for their children?

 

Mr. Gaday’s advice: “The earlier the better, no doubt about that.”

 

DAINA LAWRENCE

The Globe and Mail, Canada

Published Thursday, Dec. 01, 2011

Contact Life Guard Insurance if you’re a new parent looking for life insurance advice

At Life Guard Insurance we help young families every day get the life insurance and risk management planning they need to protect their children and their family’s future. Contact us today for a free, no obligation review of your life insurance needs.

The article was republished 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 about new parents needing life insurance would also be very much appreciated.

No related posts.