Life insurance. You don't think you need it; until you do.

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Life insurance is boring right?  I get it.  It seems to be one of those subjects no one really wants to talk about.  People typically don’t rush to get it, or become excited to learn about it.  The very topic of life insurance often brings about shrugs, eye rolls and sighs. 

Sometimes people talk about their policies with a hint of I’m not sure what I was thinking, or It’s probably a waste of money. Sometimes they have forgotten why they purchased it in the first place and have become unsure about that decision.

Life insurance doesn’t benefit the person whose life is insured, which is one reason it becomes easy to dismiss.  It’s not about them.  It’s not for them.  They may not even care about what happens after they die.  Life insurance is often viewed as an unnecessary expense for something you will never need or use in your lifetime. 

Life insurance is not a selfish thing.  Just the opposite.  It is a selfless thing.  It’s not about you.  It’s about your family.  It’s about your loved ones.  It’s about the ones who are left behind after you have passed on. 

In many instances the need for life insurance isn’t on the forefront of someone’s mind.  As a result, many people don’t think they need life insurance; that is, until they do.  Then it’s a different story. 

When someone passes away or becomes terminally ill, the dialogue on life insurance changes very quickly.  The conversation changes from, I don’t believe in life insurance to Thank goodness we have that policy, I don‘t know what we would do without it, or We almost cancelled that last year, I’m so glad we didn’t.   In these situations the sentiment about life insurance is indeed very different.  One only needs to have been there to understand this.

Life insurance can make all the difference to the survival of a family after a death helping them to make ends meet.  It can:

pay the mortgage and other debt

cover some of the monthly expenses after one income has been lost

go towards saving for education and retirement when saving on one income is difficult or impossible

In many cases it may be the very thing that helps the family make ends meet

On a higher scale, you may be surprised to learn that some of the wealthiest people own some of the largest life insurance contracts.  If they are already wealthy you may ask yourself why. You may even think they are the last people who would need life insurance.  The answer is simple.  When you use life insurance, you pay pennies on the dollar for coverage that can help ensure a smooth intergenerational transfer of wealth, or other asset or business transfer.  The life insurance can be used to:

Pay taxes owing upon death

Transfer wealth from one generation to the next when there is one surviving spouse

Business or Farm succession planning

Estate equalization

Life insurance as a broad category may get picked on by people who may not fully understand the needs or the solution.  However in the end, people choose life insurance for different reasons.  There are people who may not need life insurance at all, but there are many others who do.  Sometimes it’s the answer you haven’t considered. 

If you have never considered life insurance before, you should.  There is no one size fits all life insurance solution.  There are many different reasons for insurance, many different amounts of insurance needed and many different product solutions to fit those needs.  Each situation is unique. Your financial advisor can help you figure out if you need life insurance and if so, how much.

Money can never replace a person, but that’s not the intent.  Life insurance is designed to buffer financial hardships that would arise for your loved ones if you aren’t around unexpectedly.  The best place to start is to consider what your family would need financially if they don’t have you here.  It can be be a difficult but necessary discussion. Don’t wait until it’s too late.  

 

This column was published in This Month in Elgin December 2018 edition.

 

Stephanie Farrow, B.A., CFP., Stephanie has over 25 years’ experience in the financial services industry, a diploma in Financial Planning from the Canadian Institute of Financial Planning and Certified Financial Planner designation.  Stephanie has been writing a financial column for local business magazine Elgin This Month/This Month in Elgin since 2010.  Stephanie and her husband Ken Farrow own Farrow Financial Services Inc.  About our Farrow Financial Team.

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