Advice For Buying Life Insurance And Critical Illness Insurance?
It is so confusing trying to decide what to do. I am in my late 20′s and am looking for life insurance for after I retire. I suspect I will be the last one alive in my family, assuming I have no children. So it would probably be good to get Universal Insurance so I can cash in my policy if I want. Critical Illness is only offered until I am 45. I suspect if I get sick it will be when I am 50 or older. Do you have any advice? Should I start paying for insurance now while I’m young? OR should I convert my group life insurance after I retire and pay the higher premium? Or do you recommend anything else? I have house life insurace, the house will be paid for if I die before the mortgage is paid off. I have no other big debts besides funeral costs.
I would hope that by the time you retire, you would have a nest egg that could be used to pay final expenses. You can also pre-pay funeral expenses, check your local area funeral homes for more information.
You wouldn’t use a UL policy as your main source of retirement income. You could use it to supplement your RPP (ie: RRSP/RIFF) income if you have maxed your RRSP contributions. A UL is a life insurance policy with an investment component that is exempt from accural taxes. Its main purpose is to cover your risk, the investment side is a “perk”, but not the main purpose of buying a UL contract.
You can convert your Group Insurance when you leave your employer if you need to protection to cover some risk. Otherwise, leave it and enjoy the cheap premiums associated with group insurance.
By ‘house life insurance’ I assume you mean you purchased mortgage insurance through your lender/bank. If so, you might want to look at getting individual term insurance instead. You have to do medical exams, but the insurance premium is much cheaper. You can pass those savings onto the principal of your mortgage payment, and pay off your mortgage sooner rather than later. Plus, most mortgage insurance coverage is decreasing over time (as your mortgage gets smaller), but the bank/lender does not reduce the premium to reflect that lower risk.
As for Critical Illness or Disability Insurance. In my own practice, I find that not enough people have it or think much of it. You can get CI/DI with a premium refund rider. So if you don’t make a claim, then you can get up to 100% of the premium refunded back to you. You could then use that refund to put into your RRSPs. Its a good asset protecton strategy. Illness or injury could wipe out 10 yrs of RRSP contributions in 6 months! CI or DI is another way to cut down your risk.
In the end, you should be more worried about living than dying. You are more likely to get sick (and survive it), than die. CI, DI, and a good RRSP strategy can protect you and ensure you don’t outlive your retirement income.
Ok,
Looking at the grim prospect of you being the last one alive in your family, if you have no children or husband now, you dont need much insurance. Probably just basic burrial expenses & to cover any majors, like the house you mentioned, but you said that is already covered. Lots of people say you wouldnt need any. I say you need a little.
1st & foremost, DO NOT GET LIFE INSURANCE AS A RETIREMENT PLANING DEVICE. Life insurance is to cover your lost income to your family & dependents & to provide assets to them at the time of your death. It is NOT & should NOT ever be considered as a method of retirement funding. Open a savings, brokerage, CD, IRA, 401k, Roth, annuity, money market, mutual fund, or something else to use for that purpose.
When you say you have “house insurance” I assume that you mean mortgage protection insurance. If that is the case, what you really have is term insurance that you are paying too much for b/c you did not take a para med exam. Mortgage protection is actually term life that removes the requirement of the exam by charging extra to those who get it in order to allow more lienient underwriting. Unless what you really have is credit life protection insurance. That is insurance that the mortgage company has you take out (not required to) that makes them the beneficiary & they pay off the mortgage with the money. Double check which one it is.
If critical illness insurance is something you are interested in, then find a different company that goes beyond age 45. Many companies go to age 60 or 65.
Yick,
There are too many issues to address on a message board – what types of insurance you should have as well as the amount of that insurance. A lot will depend on your financial situation – savings, debts, income – as well as on your family situation – spouse, children etc.
It is good that you are planning ahead but realize that your situation will change many times over your life and your insurance should adjust too.
Keep in mind that group term insurance may not be your best option if you are young, healthy and take care of yourself. The insurance company that issued the group term knows that some of the group will be heavy smokers, heavy alcohol and drug users, etc. They price their term policies to reflect that risk.
Go talk to several licensed agents in your area and maybe a financial planner.
Good Luck.