MOUNT FOREST – It is never too early to think about estate and funeral planning.
Deryck West, a chartered insurance professional at Deryck West Insurance Agency Inc. in Mount Forest, said although conversations around these topics can be difficult, addressing them early can bring peace of mind to you and your loved ones.
“It’s human nature to put your head in the sand, but no one has beaten mother time yet,” said West, who suggests setting some time aside.
“Discuss it now and then put it away.”
Life insurance should be part of estate planning, West said, “because things can get tied up in courts and probate. Sometimes you might have assets, but your funeral has to come relatively quickly. Life insurance is the optimal way of coming up with the funds.”
He noted things to consider are burial plans or cremation plans and possible funeral costs.
“That can be varied, depending on the person – what they want to do and their taste,” West explained.
He recalled a friend’s father wanted a “big Irish wake with an open bar in downtown Toronto.”
West noted “people sang songs, it was a great time, but that’s going to cost you a lot more money than if you just have people bring food and go to the Legion.”
He said if you personally name beneficiaries, your policy will pay out “tax free, it can’t be handled in the court. It’s a perfect way to pay for funeral costs.
“It buys your loved ones time, while estates are settled so that they don’t have to cover the costs themselves.”
Ideal to start younger
Arranging life insurance when you are young is “going to be a lot cheaper than when you are older,” West noted.
“There is nothing worse than people coming to the realization in their late 60s, or early 70s, and trying to take insurance out. You’re talking hundreds or thousands of dollars a month.”
West believes that, “for a majority of people, a combination of term and permanent (insurance) is best, depending on their stage of life and personal situation.”
With term you have flexibility and can alter your coverage through life’s events, like getting married, buying a home, starting a family and retirement.
Terms can be set for a certain number of years, or to age 65. And if you opt for the guaranteed renewability feature, there are no repeat medicals until age 85.
The policy premiums will be higher each time someone renews, and “as you get older the premium will become quite high since there would be no underwriting or medicals,” West explained.
“Also, the policies renew at the same term as the original policy.” The same applies if you convert (up to 100%) of your active term coverage to a permanent policy.
Because it does not pay out at the end of its policy, term insurance is not as costly (per thousand dollar base of coverage) as permanent insurance.
West explained that with “whole life” permanent insurance, “As long as you pay your premiums, and you keep the policy in force, it’s going to pay at some point in time.”
And with permanent, the premium never changes. “You can be in your 60s and still pay the same premium you did in your 30s,” and won’t have to fill out health forms again.
West notes that with permanent life insurance, “There are policies that are participating (earn dividends) and non-participating (do not earn dividends). Under each of those two categories there are different policy types, with different benefits and features.”
“With ‘universal’ life insurance, you have certain flexibility,” West explained.
But this flexibility, “does not have the same guarantees as a whole life policy. A universal life insurance policy has two components: life insurance and a tax-sheltered accumulation in an investment account.”
West noted he’s had many conversations with clients about, “smoking rates versus non-smoking rates when it comes to life insurance. It’s astronomical. We’ve had people actually quit smoking. It’s never too late.
“Whether you are taking out permanent or term, it (smoking) is definitely a factor in the cost of your premiums.”
Taking time to discuss dreams and goals with an insurance agent can help build the insurance portfolio that is best for you.
Whatever types of life insurance you decide on, West said the policies can “help conserve your estate for inheritance and charitable donations.
“Your family’s going to have to do taxes, pay debts and all the stuff that no one likes to talk about. Your life insurance can take care of all that.”
He noted that as well as covering those immediate costs, “It buys your family time just to relax and figure some things out because they’re going to be going through an emotional time.”