Life Insurance Is All About Love

August 25th, 2011 | Author: Mitch Reynolds

Life insurance is all about taking care of the people we love

A life insurance policy is not for your benefit

Life insurance Canada Have you ever thought about buying a life insurance policy and decided it was a bad “investment”. If you are calculating the rates of return on a life insurance policy you are probably missing the point.

This is not to say the rates of return on life insurance are poor. Quite the opposite! Life insurance is a long term investment product that has a very attractive rate of return. Permanent life insurance generates excellent returns from it’s long-term investment horizon and from policy holders who cash in their policies early, and never benefit from the high death benefit payout.

If you are buying a life insurance policy, the best rate of return is on the final death benefit of the policy. At the end of your life, if you have lived a normal life expectancy of most Canadians, you can expect your insurance policy to return between 10 – 12% annual compound returns. Not bad compared to the market returns which are highly volatile and filled with risk. Unfortunately a death benefit is not money that you will enjoy using during your lifetime.

Why buy life insurance if it isn’t for me

There are many reasons a person will buy life insurance for both short term needs and long term or lifetime insurance protection. Let’s take a look at both cases:

Short term life insurance needs

Paying off a mortgage
Paying down a business loan
Protecting income and lifestyle for spouse and dependent children
Set aside education funding for children if you died before they finish school
Protect cash flow you have going to other family you support (like aging parents)

Long term life insurance needs

Dealing with a sizable and growing capital gains tax
Leaving money as a legacy to the next generation
Giving money to a charity or not-for-profit organization you support
Helping children or grandchildren get a financial leg up after you are gone
Providing funds for a dependent family member who will need money long after your passing
Providing a life-long tax sheltered investment vehicle inside your life insurance policy

There are many other reasons why a person would buy life insurance, but these are some of the main ones. Temporary life insurance, also called term insurance, is for major financial risk that will disappear in the short term (if you consider 20 – 30 years short term). Permanent life insurance, also referred to as whole life or universal life insurance, is with you for the rest of your life. It doesn’t matter how long you life, there will always be a death benefit payout from a permanent life insurance policy.

You have to look at your needs and determine if they are shoret term or long term financial planning goals. Buying the wrong insurance can be very costly. For example, you need insurance for the next 20 years but you buy a Term 10 policy. After 10 years the price for that term 10 policy goes up by a factor of 5 or more. When buying term life insurance, buy the term you need.

You could have an even more expensive mistake. Buying term life insurance when you really needed a permanent contract. Whewn you realize the mistake, maybe 10 or 20 years down the road, your price to start a permanent life insurance contract has gone up significantly, and you have losty all those years of investment contributions.

No matter what your need, life insurance is for those you love

Buying the right type of policy is impoortant, but at the end of the day the policy pays a death benefit to your beneficiaries or heirs. The death benefit is for the financial care of those you love. All other concerns about rates of return and is the product a good long-term investment are secondary to these fundamental questions:

Does this life insurance policy protect those you love and care about
Is it the right type of policy to provide for them when they will need it
Did you buy enough coverage so those you love will not be lacking financially

When we pass away, either prematurely or after a long and full life, we leave behind family and loved ones who will dearly miss us. That is part of life and can never be avoided. What we don’t want to leave behind is financial difficulties because we didn’t do proper planning for risk protection. We can also use insurance to make our long term wishes and desires come true for our family through leaving a financial legacy for the next generation.

Life Guard Insurance can help you protect the ones you love

No matter what you need the insurance for, either short term or long term risk planning, we can help. Feel free to contact Life Guard Insurance to speak with a qualified life insurance broker who can help you find the best solution for your needs.

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 about life insurance for loved ones would also be very much appreciated.