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Looking To Save Money? Don’t Do It By Cancelling Life Insurance – Insurance – Canada – Mondaq News Alerts

Canada: Looking To Save Money? Don’t Do It By Cancelling Life Insurance

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Today’s financial pressures have many people looking for
ways to reduce expenses and create an emergency fund. In pursuit of
that goal, life insurance premiums seem like an easy tap to shut
off now and turn back on later.

But before you consider cancelling your life insurance policy,
consider what’s at stake for you, your family and your
practice. Below, we offer some options that let you avoid
cancelling your coverage while still securing your financial
future.

What’s at stake

Cancelling your life insurance policy has obvious and
not-to-so-obvious consequences. Here are three risks that should
make this a financial last resort:

1. You give up financial protection

If you cancel your life insurance policy now, you will have to
buy a new one in the future. Because most people put off buying
life insurance, it may be years before you get around to replacing
the coverage you have today. Between now and then, you and your
family will be uninsured and therefore unprotected against the
financial consequences of your death.

2. Changes in your health could mean higher
premiums

Any significant changes in your health could have a big impact
on your ability to qualify for life insurance. And if your health
condition is serious, you could be denied coverage or the premiums
could be very high.

3. Your family assets could be in jeopardy

Life insurance protects your net worth. Without it, your family
may be forced to liquidate assets, such as a cottage or investment
accounts, that would otherwise continue to grow over time. This is
particularly important if you are investing in a whole life
insurance policy as part of your investment and retirement
plan.

What to do instead of cancelling life insurance

Most people have either term life insurance or a form of whole life insurance. In both cases, the
policy was likely recommended because it matched your need for
coverage with your budget and your long-term financial plan. Here
are two of the many options you can consider as alternatives to
cancelling life insurance.

Review the amount of your coverage

If your financial situation has changed since you took out your
policy, you may be able to find savings by simply adjusting the
amount of coverage you have. If you’re close to retirement or
recently paid off a large part of your personal debt, you may need less coverage and the savings
could be put to better use somewhere else in your financial plan;
such as an emergency fund.

Temporarily cut back on investments

Reducing your contributions to a Registered Retirement Savings
Plan (RRSP) or Tax-Free Savings Account (TFSA), or both, may not
have a significant impact on your long-term financial security
compared to the risk of going without life insurance. Your Lawyers
Financial Advisor can help you determine the most tax-effective way
reallocate your contributions well ahead of year-end.

Cancelling a whole life policy? What if it paid for
itself?

A whole life insurance policy is a great
investment because it combines insurance coverage and investment
growth for life. If you’ve been investing in the policy for a
number of years, the cash portion of your policy may be large
enough to temporarily pay the premiums for you.

This could provide the temporary payment relief you want without
having to sacrifice long-term goals or give up the security you
enjoy with lifetime insurance coverage. Find out if this option is right for you.

The need to reduce costs and be prepared for emergencies is a
real concern for a lot of people. How you go about saving money
without giving up the protection of life insurance is a decision
your Lawyers Financial Advisor can help you make with
confidence.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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