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Your guide to picking the right insurance policies

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It's never the wrong time to build a buffer against life's surprises and having insurance is a good place to start. From preparing legal wills to declaring beneficiaries, prioritizing risk and addressing your situation can be a smart move. 

Preparing for the unexpected is an essential part of financial planning. And, even if you have a policy in place, it's smart to regularly review your coverage to ensure it's aligned with your current reality.

Keep reading to learn what coverage you may need and for helpful tips on how to choose the best insurance policies:

Key factors in knowing how to choose coverage

There's no “one-size-fits-all" plan. Finding the right insurance depends on many considerations. Here are some things to look at:

  • Age and stage: Your stage of life will dictate a big chunk of your insurance needs. Having a baby, taking on large liabilities (like buying a house), or starting a business are just a few circumstances that influence your insurance needs. Your age matters, too. For instance, if you're a retiree with no debt or dependents, maybe a life insurance policy isn't as essential. But it could be important for a 30-something with a spouse, young children, car loan, and a mortgage. Your annual income can also play a role. “The more income one generally earns means a higher amount to replace in the case of injury, illness, or death," says Tyler Saito, Director, Investment & Life Insurance at Coast Capital.
  • Your liabilities:What you owe others is important. Considered liabilities, these could include the amount of secured and unsecured debt that you hold, such as personal loans, mortgages, unpaid taxes, car loans, credit card bills, and so forth. Tally up the total—because that number will play into what type and how much insurance you'll need. “A secured debt would be your home," says Saito. “If you have dependents or a partner that may need to use your mortgaged home [to get by], then it may be prudent to have insurance to cover all or a portion of the debt."
  • Your dependents: Do people rely on your income? If you become disabled, sick, or die, you don't want to leave your loved ones dealing with the financial fallout. There are types of insurance designed to replace your income and bridge that financial gap. But it can also cover what your dependents may need down the road. For instance, if you have kids planning to go to post-secondary school, the payout from your life insurance policy could pay for the tuition and living expenses. “Dependents are relying on your income," says Saito. “How long will they require your financial support and how much of your income is appropriate are good things to ask."
  • Your financial health: If disaster strikes tomorrow, can you tap into your savings or investments? If you've got ample assets, getting every type of insurance on the list may be overkill. But if you're on a shoestring budget, living with insurance gaps could mean risking your financial stability. Doing a financial fitness checkup can help you assess your needs or enlist the help of a Coast Capital financial expert.

Understanding different types of insurance

You probably know the basic forms of insurance, like car and home insurance. But there are other types of coverage to consider, such as life insurance and critical illness and disability insurance. Review what follows and make sure you're protected.

Life insurance

Life insurance is a biggie, as it provides financial support to your loved ones if you pass away. Think about it: If you died tomorrow, what would happen to your loved ones? Would they be able to pay the bills and maintain their existing lifestyle? Or would taking out loans or selling the family home be necessary to stay afloat? Would your kids have to take out student loans to finance their post-secondary education?

Life insurance is meant to replace your income and protect your loved ones from financial hardship. How it works: You pay a monthly amount (or a “premium") to the insurer, and if you should die during the term, your beneficiaries receive a one-time, tax-free lump sum payment called a “death benefit."

Some Canadians get life insurance as a work benefit, also known as “group life insurance," but it's usually not enough. Employer-provided life insurance is typically worth one- to two times your annual salary. So, at maximum, if you earn $70,000 a year, that works out to $140,000—probably not sufficient to cover a mortgage as well as support your family for a reasonable amount of time.

A recent poll from online insurer PolicyMe found that 53 percent of Canadians without additional coverage are between 30 to 50 years of age—a demographic that's most likely to have dependents and large liabilities, such as a mortgage. Yikes!

The bottom line: buying your own policy to follow you throughout your career could make financial sense, especially if you have dependents or debt.

Critical illness and disability insurance

Unfortunately, death isn't the only misfortune that can strike. The reality is, Canadians under the age of 75 are more likely to be diagnosed with a critical illness (like heart attack, cancer, or stroke) than they are to pass away. “If you become disabled or are diagnosed with a serious illness, how will you continue to pay your bills?" says Saito.

If you're dealing with a critical illness or disability, it can cause serious financial stress for you and your family. You may need to take a lengthy break from work—which could span years—to undergo treatment and recover. In some cases, returning to work may not be viable at all. That means not only dealing with lost income, but also finding funds to cover additional costs (such as prescriptions, home care, and so forth). And, says Saito, a good portion of mortgage foreclosures are due to critical illness.

Critical illness insurance protects you from the loss of income and high expenses that come if sickness or accidents strike. How it works: A beneficiary is paid a lump sum after receiving a critical diagnosis, so they can recover on their terms.

Benefits could allow them to pay for medicines and treatments not covered under group insurance or provincial government health plans. Likewise, disability insurance will replace a portion of your lost income if you're unable to work for an extended period due to a disability.

Staying future-focused

Now that you've got your policies in a row, each time they come up for renewal ask your insurers about cost savings. By doing some negotiating, you may be able to reduce fees without giving up a lot of coverage—and that could add up to hundreds or even thousands of dollars in future savings.

Since no one can foresee the future. For now, your best defence against life's unpredictability is getting insured before you need it. The old adage may still hold true: Hindsight is 20/20.

If you've still got questions, book a chat with a Coast Capital financial expert, who can help you nail down your insurance needs.


The stuff we have to say.
Coast Capital Savings Federal Credit Union provides advice and service related to deposit, loan and mortgage products. Coast Capital Wealth Management Ltd provides investment and financial planning services. Coast Capital Financial Management Ltd. provides advice and service related to segregated funds, annuities and life insurance products. Worldsource Financial Management Inc. provides advice and service relating to mutual funds. Mutual fund values change frequently and past performance may not be repeated. Commissions, trailing commissions, management fees and expenses may all be related with mutual fund investments. Important information about mutual funds is contained in the relevant fund facts and simplified prospectus. Please read the fund facts carefully before investing. Only deposits held in Canadian currency, having a term of five years or less and payable in Canada are eligible to be insured under the Canada Deposit Insurance Corporation Act.
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