The last few years have put many things into perspective when it comes to our livelihood and loved ones. We were lucky that the outcome was unlike that of the 1919 Spanish flu, which killed an estimated 50 million worldwide. The Great War and the following pandemic ripped apart many families. Many who lived during that time are no longer with us to share their stories. Loss of life was common for families back then. In today’s world, we enjoy longer and healthier lives. Many of our friends and loved ones have never had to deal with an unexpected death. Death is foreign to this generation, and as a result, we tend not to plan for the unexpected. We all expect to live long lives and as Canadians, in general we have very low life insurance ownership rates. Canada has one of the lowest policy ownership rates in the world. Canadians pay more in cell phone bills than they pay in life insurance premiums. Only 10% of Canadian families own a true life insurance policy. We will cancel a life insurance policy when money gets tight but keep our gym memberships and cable packages. This is very concerning and we must ask the question, “Why?” Why are we comfortable spending hundreds of dollars a month for entertainment, and think life insurance is unnecessary?
In Canada, we have strong social nets that can make us feel like all will be ok if we die or lose a loved one. Many people don’t account for the mental shock of a sudden death or an accident. We also don’t carry six months of cash for a stormy day like our elders did. Most of us live paycheck to paycheck and a short interruption in income can be financially devastating. Many of us don’t know the tax implications of death on our estates or the value of our spouse’s income.
Will the family I leave behind be able to enjoy a comparable standard of living? Will my children be properly cared for? Will my children need to pay a large tax bill and pay for my final expenses? These are all questions that you need to ask. You need to have the conversation with your children and your partners. Death happens and when it does, many are left shocked at the cost of death and the large tax bills estates are left. You may have a large nest egg you want to pass on, but keep in mind that the tax department and lawyers will be paid first. What remains after taxes and bills can be as low as 40% of the original amount. Do you know how much the government will get of your estate?
Did you know registered investments are taxed at full rate at death, if you are the sole remaining spouse? Did you know the family cottage can be lost to the government to pay taxes, or that rental properties can be taken to pay capital gains? Funeral homes need payment upfront. Are you going back to work right away after the loss of a loved one? Can you live the same lifestyle with one income? Did you know mortgage insurance is not life insurance, and is not guaranteed to pay out if you die?
Have the talk. Don’t leave anything to chance. Look after your loved ones. They will thank you for it. Death happens, and when it does, don’t you want to be prepared?
his article is original content from Whitley Newman Insurance.
