Are your group insurance sufficient?
A few weeks ago, I wrote a column about the lack of enthusiasm around the subject of insurance.
To my great surprise, many of you submitted your questions and personal situations to me for case study; no, so this is not a boring subject, luckily I have proof of it now!
Let's start today with one of the cases submitted by a reader.
Jean and his wife, Sylvie, 55, have a gross annual income of $ 480,000. The couple have two adult children who are still dependent on them, but whose higher education is in the process of being completed. The couple have assets totaling $ 4.6 million, free of debts.
Two avenues for reflection
Mister mentions that the couple's savings are $ 100,000 per year. His life insurance coverage is $ 500,000, through his employer's group plan.
The latter having agreed to provide me with the details of the plan, I was also able to confirm that he has long-term disability insurance coverage. He thinks he doesn't need the extra insurance and asks for my opinion. His case gave me two avenues for reflection.
The long term, sometimes it goes quickly!
Although the term "long-term disability" (LTD) generally leads people to think that their coverage is very strong, always refer to the definition in your employer's benefit booklet.
In this case, the definition of total disability is "the inability, due to illness or accident, to perform the main duties of one's regular job".
This insurance applies for the first 24 months and then becomes much more restrictive: you will have to be unable to perform any gainful employment to be entitled to it.
Thus, the famous LTD will therefore be limited, in the vast majority of cases, to a two-year benefit period, when the real financial risk is to be unable to generate income for a longer period!
Each person will thus establish their tolerance for risk according to their reality. In the case of John, if his lifestyle costs $ 150,000 net per year, it will then be necessary to calculate, according to the return on the assets associated with his investor profile, whether financial independence has already been acquired in order to specify his scale of personal risk.
In this case, it is very likely that the group disability insurance is sufficient. But if you haven't achieved that financial freedom, it's much more likely to be the opposite.
In addition to the duration of the benefit and the definition of disability, senior employees should also be interested in calculating the amount of the pension to which they are entitled, as this is often capped.
It is possible to supplement the protection with an individual policy, which will always be in effect if you change employers. Keep in mind that being covered by an employer plan does not automatically solve everything.
Life insurance: what are your goals?
When it comes to life insurance, the key is to understand the distinction between temporary needs and permanent needs.
Temporary needs include protecting your dependents in the event of death
premature.
Life insurance needs arise when the death of one of the two spouses can jeopardize the financial security of the family or children, or the financial goals established by the couple. To establish the required amount, income replacement and debt repayment calculations are then performed.
Without even doing a full analysis of their situation, it is possible to say that, in the majority of cases like that of Jean and Johanne, the needs for life insurance are more permanent than temporary.
The situation of Jean and Johanne requires obtaining the wills since the analysis of the surviving spouse's needs could vary if specific bequests apply (or if it is an intestate succession).
For example, if the children or third parties are the heirs of the majority of assets upon death (which is sometimes the case in blended families), term insurance could remain relevant to protect the spouse despite the financial independence acquired.
But insofar as the two people mutually bequeath all their property by tax rollover, taxes being deferred on the second death, their life insurance needs are then permanent and not temporary.
The major takeaway from this case study is that life insurance needs evolve and that our reader is coming to an important transition from the life insurance stage as a protection tool, as a tool for optimization and diversification. .
It is not so much whether the coverage amount of $ 500,000 is
إرسال تعليق