We've all read or heard about the unlucky family that is wiped out by a house fire and didn't have any fire insurance. All too often, people mistakenly believe that it won't happen to them. The reality is that bad things CAN happen and there is nothing that guarantees they will be immune from disaster. Insurance is simply an economical way to protect ourselves from the financial loss a tragedy can bring.
Many believe that if they need long term care, either in their home or in a facility, that the cost will be covered by provincial health care or other government agencies. While there are certain programs available, a significant portion of these costs are the responsibility of the patient.
Most people have a false sense of security by believing that they will not be victims of a critical illness like cancer, heart attack or stroke; and if they are, that the healthcare system will look after them. Nothing could be further from the truth.
As they take the big step of moving out of their parents' home and into their first apartment or other living quarters, the last thing on a young person's mind is insurance. Yet, this is an area of great importance as they also begin their journey on the road to financial wealth and health.
Ted and Martha had about $600,000 in their RRIFs generating the minimum monthly income of almost $4,000 before taxes. Then disaster struck.
Ted developed a cognitive impairment. Martha was able to look after him at home for a little over a year, but eventually had to place him in an extended care facility.
Depending on the province, even with government help, the additional monthly cost to Martha can range from about $1,200 to over $4,700 (Source: Province of Alberta website). In their case, it cost $2,500 per month for Ted's long term facility care.
Graham, like millions of other Canadians, has and uses credit cards. He often carries a balance from month to month and is concerned about making the monthly payments if he becomes disabled or gets seriously ill. Graham doesn't want to stick his family with the balance if he dies before paying it off.
The credit card company offered him Credit Balance Insurance (CBI) that would take care of these concerns. After looking over the offer, he wondered if it was such a good deal.
Making the right choices for protecting you and your loved ones in the case of a premature death comes down to understanding some basic principles and rules of thumb. The first is that the name is all wrong; life insurance does not help you, it helps to protect the standard of living and lifestyle of those you leave behind. So more accurately it should be called something like: loved one's lifestyle assurance plan?.
Ray had thought of his life insurance purely as a protection plan. The anti-avoidance rules and general restriction of tax benefits applicable to most shelters prompted him to take a new look at his life insurance for tax deferral as well.