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Executive Summary

As your wealth grows, so does the level of financial risk you inherently take on. The higher your income, the more you have to lose if you were to be diagnosed with a serious illness, become disabled or are otherwise be unable to work. Your ability to earn income is a valuable asset, and just like you would insure your home or vehicle, it should be protected. There is no greater threat to your retirement plan than an unexpected tragedy that cuts off your income stream ahead of schedule. It’s best to speak to your financial advisor about strategies you can use to make sure that your wealth stays intact, as this is one of the most crucial aspects of a sound financial plan.

What You Need to Know

Having the appropriate insurance plan in place will alleviate the financial stress that can come with illness, disability or death (either your own or that of a loved one). Your advisor can help you implement the following strategies:

Life Insurance

  • What Is It?
    • Life insurance pays a death benefit to designated beneficiaries upon the death of the insured.
  • How Does It Work?
    • There are two different options when purchasing life insurance:
      • Term
        • Term insurance is comparable to renting your protection. You pay premiums for a set period of time (ex. 10 years), and the insurance company agrees to offer you a pre-determined amount of insurance for the duration of the term. Once the term runs out, your insurance is either renewed for another term at a higher cost or the coverage ends. Term insurance is by far the most affordable way to protect your family.
      • Permanent Insurance
        • Permanent Insurance can be thought of as owning your protection. There are two types of permanent insurance:
          • Whole Life
            • Whole life insurance offers a permanent life insurance solution that offers fixed lifetime premiums and a cash value component that accumulates for the duration of the policy.
          • Universal Life
            • Universal Life insurance can offer a flexible, permanent insurance option that also has a tax-advantaged investment component. If properly managed, it can help you to build wealth and provide protection.
        • Permanent life insurance offers many advantages. It provides your family with lifelong protection at a predictable cost, tax advantaged transfer of wealth, and estate preservation or creation.
  • How Will It Protect My Wealth?
    • Unlike other types of insurance, you buy life insurance for your family. If you die unexpectedly, life insurance can provide your family with the large amount of income necessary to maintain their lifestyle and keep their financial goals on track. Life insurance can also be used to offset the tax implications in your estate, or used to create an inheritance to leave to your loved ones upon your death.

Critical Illness Insurance

  • What Is It?
    • Critical Illness insurance pays a lump sum benefit to the insured in the event that they are diagnosed with one of the settled upon conditions of their insurance contract.
  • How Does It Work?
    • Critical Illness can be either purchased for a term (ex. 10, 20, to age 65/75) or as a permanent insurance solution. There are an agreed upon amount of conditions covered in your contract. If you are diagnosed with one of these conditions, you can claim on your policy and be paid your benefit. There is typically a waiting period.
  • How Will It Protect My Wealth?
    • Dealing with an illness can be very expensive. The cost of treatment and care is often greater than most of us have planned for. A Critical Illness policy can provide you with the capital necessary to recover without threatening your financial goals. Most importantly it can protect your savings and prevent you from having to draw on your RRSPs, which can have significant tax consequences.


Disability Insurance

  • What is it?
    • Disability Insurance is an income replacement insurance that will provide you with monthly income in the event that you become disabled and unable to work.
  • How Does It Work?
    • Disability policies can offer a wide range of protection options for both long-term and short-term disability. The premiums are determined by your income, occupation, and any other customizations you may make. You can customize the benefit amount, the waiting period, and the benefit period.
  • How Will It Protect My Wealth?
    • In the event you can’t work, disability insurance will replace a portion of your income. This income replacement can protect your retirement savings and keep you from having to liquidate your assets for income.


The Bottom Line

It is essential to work with your advisor to curb the risk in your financial plan by implementing strategic elements such as insurance. Life, Critical Illness, and Disability insurance can provide you with different levels of protection and be personalized to your needs. They will allow you to preserve your wealth and protect your family, no matter what life throws your way.