For many Canadians, it’s also the main, or perhaps only, source of money to pay a wide variety of expenses, maintain a home, raise a family, invest, prepare for the future, and, oh yes, enjoy life if there’s any left over.

In fact, for nearly every Canadian, the ability to earn a living is their most important asset. That’s why we seek to protect that ability - and the possessions it has bought for us - through various types of insurance. And that is especially true if the family depends financially on only one wage earner. Try to imagine what would happen to your dependents if you were to die or become incapacitated. How would they ever replace your lost income? How would they make ongoing mortgage and other payments? To make sure this doesn’t happen, insurance experts generally recommend that you buy life insurance coverage equal to at least ten times the annual income of the working family member.

But don’t forget stay-at-home spouses. Even though they don’t earn a weekly paycheque, the ‘value’ stay-at-home parents provide is considerable - everything from quality child care and housekeeping services to chauffeuring and much more. And if a stay-at-home parent isn’t able to provide this ‘value’ the family would have to pay someone else to do it, which could cost thousands of dollars in additional expenses. So insurance is important for those who stay home, too.

Fortunately, you have a number of insurance options to choose from that can provide flexible ‘wage-earner’ and ‘stay-at-home-parent’ coverage to suit your evolving insurance needs and budget.

For younger couples in good health, term insurance might be the right ‘starter’ option since its initial low cost allows for the purchase of the large amounts of coverage typically needed by young families. Term insurance provides protection for a set length of time - usually five, ten, or twenty years - and pays a specified amount to beneficiaries. You can usually renew your insurance when the term is up. The premiums may seem pretty affordable in the beginning, but they will increase with each policy renewal and most term policies do not allow you to renew after age 75 or 80, by which time the premiums would be very expensive.

Permanent life insurance is designed to stay “in force” for your entire life. Typically, the premiums are set at time of purchase and are guaranteed never to change. The two most common forms of permanent insurance are whole life and universal life, and each renews automatically for your lifetime, as long as you pay the premiums.

If you’re paying a sizable amount of your monthly cash flow on a mortgage, you should ensure that you have insurance that covers your mortgage debt. You can get mortgage insurance that pays the full remaining balance directly to the lender, but the more flexible option is renewable term insurance that allows your named beneficiaries - perhaps a stay-at-home parent - to use the proceeds (which are usually tax-free) to pay off some or all of the mortgage or for other pressing expenses.

Disability and/or critical illness insurance can also be used to cover mortgage or other payments should the sole wage-earner become unable to earn an income for an extended period due to accident or illness. Critical illness coverage is equally important for the stay-at-home parent - providing a lump sum of money that can be used to pay for the replacement of their ‘valuable’ services while they are unable to maintain their usual activities.
As a general rule, you should increase your insurance protection to keep pace with your income and lifestyle. Whether you’re a sole wage earner or a stay-at-home parent, your financial advisor can help you make the right insurance choices for your family.  NL


This column, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact Jeff Colbourne, Investors Group Consultant at 403 220-9654.