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Disability Insurance

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We’re all aware of the passage of time and its effects. What we could accomplish with ease in our twenties becomes trying at forty and laughable by sixty-five. In a sense, even natural aging is just the process of losing once-possessed abilities. Of course, acquiring a disability will make you rethink this definition, since there’s a big difference between having to give up beer league hockey and having to walk with a cane. Yet basic provincial healthcare often lacks when it comes to disability coverage. Knowing that, disability insurance is a great option to give you peace of mind.

The Basics of Disability Insurance

One of the most damning aspects of acquiring a disability is that you may lose your ability to continue at your job—thus losing your ability to earn a living. As such, disability insurance provides for this loss of potential income. Disability insurance can come in different forms: individual plans, group plans, special purpose plans, and government plans. For our purposes, we’ll focus on individual plans.

Individual Disability Insurance

Nearly one million Canadians currently own individual insurance plans. This makes sense since they’re steadier than group plans (which change when you change jobs), and you can tailor an individual plan to suit your personal needs. With most insurers, there are three types of individual plans:

  • Noncancellable: With these, you can’t cancel the plan, however the price of premiums also cannot be raised. The benefit of this plan is that it gives you the opportunity to purchase a policy while you’re young and healthy and keep those subsequently low premiums.
  • Guaranteed Renewable: The insurer of this policy must renew the policy as is at the end of the contract, however they may be able to raise premiums depending on the circumstances.
  • Commercial: When the contract runs up for these policies, the insurer is not obliged to renew, and can also charge higher premiums if you have submitted claims in the past.

Of course, these are only the basics of disability insurance. For a more detailed discussion, contact the experienced team at Rockfield Financial.

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Critical Illness Insurance

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It’s not something that people like thinking about, but the fact is that as Canada’s average life expectancy continues to rise, more and more of our citizens will be stricken with illness at some point in their lives. Despite the praise our healthcare receives on the international stage (especially when compared against our friends to the south), many of the needs that illnesses bring about won’t be satisfied with standard provincial coverage. Combine these facts, and any prudent person should be searching out ways to keep himself or herself protected; for most, this means critical illness insurance.

What is Critical Illness Insurance?

Simply put, critical illness insurance is supplementary coverage provided for specific serious illnesses. It differs from standard provincial or employment insurance, though, in that you will be paid in a lump sum if you acquire any of the covered illnesses (whereas standard insurance plans might pay in installments or for procedures directly). In other words, with critical illness insurance, the money that your receive from your insurer is yours to spend as you see fit. This can be a freeing concept, since no one knows what you need better than you yourself.

Is Critical Illness Insurance Worth It?

You might be dubious, though: could it really be worthwhile to pay out regular premiums for only a few specific illnesses? Indeed it is worth it, since the illnesses covered in the majority of critical illness plans include cancer, stroke, and heart disease—some of the most common illnesses in Canada. According to the Canadian Cancer Society, one in three Canadians will develop a life-threatening cancer. Furthermore, the Heart and Stroke Foundation has found that half of all heart attack victims are under 65 and 50,000 Canadians suffer strokes annually (75% of whom end up with a disability). Provincial insurance may not cover the necessary treatments for these ailments (e.g. assisted living, disability modifications, etc.), so, given the odds, critical illness insurance is a wise choice.

Look to the experience of Rockfield Financial for all your insurance and finance needs!

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Introduction to Life Insurance

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Prospective clients – especially young parents who have never bought life insurance before – often ask me similar questions:

  • What is life insurance
  • What are its benefits?
  • Is it for me? If so, what kind of life insurance is the right choice?

Essentially, life insurance is a form of family protection. Let’s say, God forbid, one of the prime income earners in your family dies. In that circumstance, you would want to make sure you can still pay your mortgage, your car payments, and the rest of your monthly bills, as well as cover all your debts.

Basically, you want to make sure you or your spouse want to make sure the rest of the family are taken care of, even if one of you is no longer there.

Because even if there’s a death in the family, which is a terrible thing, financially, life doesn’t stop.

You don’t want to have to pull your kids out of schools or camps, or activities like music or sports. You don’t want to lose assets, such as your home or your cottage that you had hoped to keep in the family. You also want to make sure your family members can pay for such things as funeral expenses, and probate and estate taxes.

So, the benefits – and perhaps even the necessity – of life insurance are clear. (And in Canada, life insurance claims are tax free.)

But which type is best for you?

There are essentially two kinds of life insurance:

  • term, and
  • permanent (sometimes called universal, term 100 or whole life, depending on the type you choose and which company you’re dealing with)

The first type, TERM INSURANCE, requires a medical examination and typically requires you to pay a yearly or monthly rate for 10 or 20 years for a specific amount of insurance. You can renew every 10 or twenty years at a fixed rate, which rises as you age, and it expires at 85, after which you can’t buy it any more.

So, for example, a healthy 35-year-old male might pay about $45 a month, or $500 a year, for $1 million worth of coverage over a 10-year term; about $65 a month, or $724 a year for a 15-year term; or $75 a month, or $830 a year, over a 20-year term.

However, once that man reaches 45, assuming he’s still healthy, he’ll pay about $90 a month, or about $1,000 a year for the same coverage for a 10-year term. And the rates keep rising as the man ages, and they could increase even more if he develops certain kinds of health problems.

With the second type of insurance, PERMANENT INSURANCE, you pay a fixed amount yearly (or monthly) for your whole life. However, even if you don’t have to make a claim in the case of early death, your designated beneficiary will get a payment after you die, even if you live to a ripe old age.

For example, a healthy 35-yeard-old male might pay a fixed $300 a month, or $3,600 a year, for $1 million worth of permanent insurance. That amounts to about $180,000 over the man’s life expectancy of 85, and it doesn’t expire at 85.

Also, if you live past 100 – as more and more people are doing and are expected to do in the future – you’ll stop paying premiums, but are still guaranteed a payout.

I tend to recommend to my clients that they buy permanent insurance, if they can afford it, even if the monthly rate is seems much higher than term insurance payments in the beginning. The reason? Permanent is cheaper in the long run, because you lock in a yearly or monthly rate that never changes, and you get a guaranteed payout to leave to your designated beneficiary at a rate of return that’s hard to beat with other investment vehicles.

By contrast, term insurance, while it may seem cheaper at the beginning, will eventually become less and less affordable and, at a certain point, unavailable.

At the end of the day, life insurance, and especially permanent life insurance, is an investment. You’re paying a small amount of money for a large return down the road (one that’s guaranteed in the case of permanent life insurance).

In future blog posts, I’ll get into more detail about the different forms of life insurance.

Until next time…