Life Insurance is a 1 way contract between client and company. It is a legal contract to protect yourself, family or business from adverse financial difficulties due to death, illness or accident.
Do you need it?
While some people believe that everyone should have life insurance, the following cases should seriously consider purchasing it.
- If there are people that depend on you financially
- If you have debt that you are responsible for.
What would happen financially to your family/loved ones if you passed away tomorrow?
Categories of Insurance
There are 3 categories of Life Insurance
- Term
- Universal Life
- Whole Life
Needs Change
Everyone’s situation is different and therefore their needs are different.
- Mortgage
- Income Replacement
- Education Funds
- Final (funeral) Expenses
- Debt and Taxes
- Family Legacy
- Estate Planning
The exact mix and levels of insurance that is appropriate is dictated by your immediate needs as well as your long term goals.
How much is needed?
To determine how much insurance is really needed, we would perform a Financial Needs Analysis (FNA). We would consider the following during the FNA:
- Income replacement
- Debt repayment
- legacy or succession
- funeral expenses
- taxes
How Life Insurance works
If the policy is paid for with after tax dollars, the death benefit is tax free.
If the policy is paid for by a corporation out of its funds, they would receive the benefit tax free. For Professional Corporations, the money could then be extracted from the corporation. The taxes owing would then depend on the Corporate Capital credits.
Owner of the Policy
- There can be either a Single Owner or Joint owners but the owner has to have an insurable interest in the Insured.
- The owner can be a Person or a Corporation.
Insured
There are a few options for types of policies:
- Single;
- Joint First to Die;
- Joint Last to Die; and,
- Multiple Lives
Payor
If the Payor is not the policy owner, a 3rd party designation is required. Most of the time the Payor is the Owner, but common exceptions are when a corporation owns the policy on an employee, or a grandparent buying a policy on a grandchild as a gift.
Beneficiary
Can be anyone. If the policy is owned by a corporation, the corporation must be the beneficiary.
A Beneficiary that is under 18 must have a trustee.