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?.
Ross and Janis lived a typical Canadian life. They were married, had two children, Melissa and Kyle, and both worked outside the home.
An avid golfer, Ross also went on fishing trips with friends and helped coach his son's hockey team. Janis played the piano, enjoyed bike rides with her friends, and was treasurer for her daughter's soccer team. They played in a mixed curling league.
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.
Sarah was texting while driving and lost control of her car. Fortunately, she was alone in the vehicle when she hit the ditch, and no other vehicles were involved. Unfortunately, the car rolled several times. Sarah was left paralyzed and brain injured.
Don, 65, and Marie, 63, are about to retire. They have accumulated about $500,000 in their RRSPs and own their home, free and clear. They want to leave as much as possible to their two children. Don and Marie realize that the value of their home should pass tax-free to their children and know their RSPs will be fully taxable at that time.