| |
 Your
Money Matters
November
2009 Issue
Using Insurance to Bridge the Gap
You
put a lot of time and effort to ensure your responsibilities are
taken care of. Your bills are paid, you try to put as much savings
aside for emergencies, your kids’ education, major purchases and
your retirement. The plan is for your family to receive the money
from the investments should something happen to you. But what if
your death coincided with a market downturn? Those investments would
be worth less than the plan intended, leaving your family with far
less support.
For
most of us, our financial plan relies on the market maintaining a
certain level. If we look at the market downturn from January 2008
to January 2009, losses were considerable for that period. The
markets have recuperated substantially since then, but what if your
death occurred in January 2009?
There
is an inexpensive, easy solution to bridge the gap: term insurance.
Term insurance is the most cost-effective life insurance you can
buy. Unlike permanent insurance, it expires or terminates after a
pre-determined time period, and many term plans offer a lot of
flexibility. For example, you can convert to a permanent plan down
the road.
If
you had term insurance and died in January 2009, your family would
have received the tax-free proceeds of the term insurance, thus
eliminating the shortfall between what you intended them to receive
and what they actually received. In other words, the term insurance
would put you back in the same position you were in before the
market started its dramatic decline.
What
happens when the markets rebound?
Thanks
to the flexibility of term insurance, there a lot of options:
-
continue to pay the low-cost premiums for extra piece of mind
-
reduce the coverage
-
convert all or some of your term insurance to a permanent plan.
How
much does a term insurance plan cost?
Here’s
a look at the monthly premiums for a male, non-smoker, in good
health
| |
$250,000 |
$500,000 |
$1,000,000 |
|
Age 35 |
$17.19 |
$27.00 |
$48.00 |
|
Age 45 |
$29.43 |
$52.38 |
$99.45 |
|
Age 55 |
$71.55 |
$135.00 |
$262.35 |
|
Source: Based on RBC Insurance, Term 10, Renewable &
Convertible |
Theresa Wever and the Money
Concepts Team.
Commissions, trailing commissions, management fees and expenses all
may be associated with mutual fund investments. Please read the
prospectus before investing. Mutual funds are not guaranteed, their
values change frequently and past performance may not be repeated. |
