Insuring your Support Payments
Your separation is documented. It outlines the obligation to pay and receive Child Support and/or Spousal Support.
You are ready to move on in life.
BUT What if?? the payor dies, becomes disabled or ill and can not pay?
More lawyers are bringing the subject up, but they are not always detailing enough it in your agreement. My recomendation is you insist on it. The solution and most cost effective method is to protect using insurance.
You need to understand the pros and cons as well as the benefits and pitfalls. There is more to life insurance than you think.
You should try to match coverage with needs and wants.
The primary purpose of life insurance is to:
Replace income in the event of the death of a wage earner.
Pay debts (such as a mortgage) on death, pay final expenses, pay tax due upon death.
Create, conserve, maximize or equalize and estate.
Provide an endowment to a charity.
There is a difference between Term and Permanent Insurance.
Term Insurance is initially inexpensive but prices increase dramatically with age. The price increases at each term renewal with a variety of term options available from 5 years to Finite life – noting that coverage ends at age 75-85 (depending on the insurance company). When selecting a term product you should consider the time frame that you will need the coverage, and take into account when: debts such as mortgages will be repaid, retirement savings will be fully funded primary dependency period will end especially children’s education.
There are three types of permanent insurance:
T-100 – without cash value
Universal life – with cash values
Whole life – with cash values.
The characteristics of Permanent Insurance can include; Level price for life or annual renewable term. The coverage stays in place until death, no matter what age. Universal and Whole life also have two components consisting of insurance and investments. The insurance company makes the decisions on the investments and usually pays a guaranteed rate where as Universal Life, the client selects the investments.
Note: neither one of these are better or worse. You must evaluate your needs and determine the strategy the best suits that.
Our biggest assets is our ability to make a life, earn a living, be productive in whatever we have chosen as our life’s purpose and mission. Your challenge is having the financial resources to pay for it. You may be thinking..It’s too late. I ask you this question...What can you do now to protect the ones you love? And how long has it been since you have been declared “clear”?
I have learned “Never say never”. One in three people on average will be disabled either suddenly or by a degenerative disease and lose the ability to earn an income. The bills do not stop. How will you pay for them? Short term and long term? You might think you are OK because you are cover through your employer.
Review your group coverage because all too often we think we have something we do not. If you are self employed you are also able to get coverage. Look for the facts. Items like, when the coverage kicks in. How long will it last? 2 years or to age 65? Then what? What kind of disabilities will your current insurance cover?
Read the definitions and fine print. It’s always too late once something happens. The language is different. Make sure you understand that “regular” occupation is not the same as “own” occupation or”any” occupation. This makes a BIG difference in what job you may be forced to go back to.
As you know a critical illness can happen to anyone, any time. Any age. It is estimated there are over 70,000 heart attacks in Canada each year. There are between 40,000 and 50,000 strokes in Canada each year. An estimated 3,075 Canadians will be diagnosed with cancer every week.
Few people are prepared for the financial burden that can come with surviving a critical illness: Convalescence, private nursing costs, reduction or loss of income, child care, medical equipment, home refitting. Critical illness insurance can help protect your finances against the high cost of dealing with a critical illness and rebuilding your lifestyle. It can help manage your expenses so you focus on getting better.
Long Term Care
It is difficult to imagine when we are healthy and independent that at some point in our lives our health status could change and we could require specialized, ongoing care from someone else. Often, when we think of the need for long-term care, we think of the elderly and the need for care in a nursing home. Let’s not forget there can be circumstances in a younger person’s life when long-term care could be required.
An unexpected debilitating illness or an accident could result in the need for around-the-clock care for people of all ages. I witness a friends spouse have a stoke and the extra care required let alone her needing to quit her job as he needed full time care. Planning ahead is not only for the aged. 74% of Canadians admit they have no financial plan to pay for long-term care if they needed it.