Major life events bring changes that often call for a review of your financial plan. When your income increases, you’re about to borrow for a new home or car, move to a new job, enter a marriage or your family grows, there’s more on your mind than your insurance coverage. However, when meaningful change happens, it’s a sure sign to look over your insurance strategy and how it fits in your overall financial plan.

It’s understandable that when we think of life insurance, we may think about the negatives associated with insurance, such as the loss of a loved one. However, there is a positive side to insurance – you are buying peace of mind and protection for your family and loved ones.

Imagine your spouse having to make mortgage payments, pay living expenses, put your children through school and prepare for retirement when the earnings expected from your career are cut short. Having the right type and amount of insurance will ensure that life continues without major sacrifices and struggle for your family. Our ability to earn an income is clearly valuable to our spouses and family.

Insurance can be thought of as financial protection for dependants. It can replace the income that your family will lose if you were to die unexpectedly, become critically ill or were disabled and unable to continue working. With the right amount of insurance, you’re making sure that the money you intend to earn in your working life will be there for your spouse or family to use.

There are many different ways to meet your insurance needs. The most basic form of insurance is term insurance which is simply protection against an individual’s life for the payment of so many dollars which is called a premium. It may have riders that vary the amount of the death benefit, extend or renew the term or convert it to another form of permanent insurance, but the basic policy covers the life of the insured. It usually has no savings component or cash surrender value.

Term insurance is traditionally issued for periods of one, five, ten or twenty years or till the life insured turns 65 or 70. Therefore term coverage is not a commitment by the insurance company to cover the life of the insured for the whole of their life. The insurance company doesn’t have to pay out benefits in the vast majority of cases; therefore term insurance can be made available at comparatively low rates. At each renewal the new premium is based on the current age of the insured and becomes progressively more expensive as time goes on. This makes it ideal for income replacement as our need for insurance usually decreases as we get older and the children leave home and we have build up savings to replace the need for this type of coverage.

The need and type of insurance to protect our families and loved ones isn’t a topic we usually like to discuss but one we need to cover so those unexpected events don’t leave them with one more issue to deal with at a very difficult time.

April 2, 2008