{"id":3830,"date":"2022-06-10T13:28:51","date_gmt":"2022-06-10T20:28:51","guid":{"rendered":"https:\/\/www.iafp.ca\/planners\/?p=3830"},"modified":"2022-06-10T13:31:59","modified_gmt":"2022-06-10T20:31:59","slug":"be-the-beneficiary-of-your-own-insurance","status":"publish","type":"post","link":"https:\/\/www.iafp.ca\/planners\/articles\/2022\/06\/10\/be-the-beneficiary-of-your-own-insurance\/","title":{"rendered":"Be the beneficiary of your own insurance"},"content":{"rendered":"\t\t
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Q:<\/strong><\/span> Your most recent article, about mortgage insurance, was right up my alley and I\u2019m wondering if you would recommend the same strategy for my situation. I\u2019m male, 45 years-old, divorced and my sole beneficiary is my son. Thankfully, he is well-launched into his career and no longer dependent on me or my ex-wife. I\u2019m refinancing the mortgage on my Dundas bungalow and the current balance is $232,000. The amortization is now 20 years, so I intend to retire at 65 and simultaneously be mortgage-free. The lending company has offered me mortgage insurance but because I don\u2019t have any dependents, I\u2019m guessing you\u2019ll suggest I decline the mortgage insurance. Do I need this coverage or would the money be better spent toward my retirement savings?<\/p>\n

A:<\/b><\/span> In my last Money for Life column (thespec.com<\/span><\/a>, May 26), I discussed the advantages and disadvantages of mortgage insurance versus personally-owned life insurance, both of which pay upon death of the insured.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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You may recall the key question in deciding whether you need either type of life insurance: \u201cIf you were to die, would anybody be in financial hardship?\u201d<\/p>\n

For your situation, I suspect the answer would be \u201cno\u201d because your son is no longer a dependent. If you were to die without mortgage insurance or personally-owned life insurance while you still had the mortgage, it\u2019s likely your house would be sold, a portion of the proceeds would be used to eliminate the remaining mortgage, and the net amount would form part of your estate.<\/p>\n

In all these scenarios, your son would benefit \u2014 not you \u2014 because he is the sole beneficiary of your estate and would presumably be the beneficiary on any life insurance policy.<\/p>\n

However, there is a type of insurance that you ought to contemplate \u2014 for which you would be the beneficiary \u2014 if something bad were to happen, as you plan for your retirement and mortgage elimination over the next 20 years.<\/p>\n

With critical illness insurance (CII), you receive a tax-free lump-sum if you are diagnosed with a listed critical illness, such as heart attack, cancer, stroke, brain injury or brain tumour, becoming blind or deaf, coma, heart bypass surgery or heart valve replacement, dementia or Alzheimer\u2019s disease, kidney failure, major organ transplant or being on a waiting list, multiple sclerosis, and Parkinson\u2019s disease. The policy does not pay out if you twist your ankle or break a leg; it\u2019s meant to cover you for any illness that could really throw a monkey wrench into your financial situation and retirement plan.<\/p>\n

You do not have to prove you can\u2019t work or are disabled; the policy pays at diagnosis and you can use the funds for whatever you wish. Perhaps you would elect to reduce any debts (including your mortgage), create an income stream, take time off work, invest the funds for your future, seek out-of-country medical care or fund in-home private care or the proceeds could be invested to generate income that could pay the current monthly mortgage payment. CII proceeds can effectively buy you time to get healthy again, without any financial constraints. A qualified insurance professional can help you decide whether this special kind of insurance is appropriate for your unique financial situation.<\/p>\n

You even have the option to have all the premiums for the CII policy returned to you at a future date, known as return of premium (ROP). You could elect this to happen at age 65, when you plan to retire and eliminate your mortgage. This way, you have a financial contingency in case of a critical illness, with the insurance payments returned to you if you stay healthy. With this strategy, you are covered and can use the tax-free ROP to help fund your retirement.<\/p>\n

Now that\u2019s what I call a real financial win-win.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Thie Convery<\/a>, R.F.P., CFP, CIM, FMA, FCSI, is a wealth advisor in Dundas, Ontario. This article was first published in the Hamilton Spectator on June 8, 2022<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

With critical illness insurance, you receive a tax-free lump-sum if you are diagnosed with a listed critical illness.<\/p>\n","protected":false},"author":1,"featured_media":3835,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22,43],"tags":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/posts\/3830"}],"collection":[{"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/comments?post=3830"}],"version-history":[{"count":6,"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/posts\/3830\/revisions"}],"predecessor-version":[{"id":3837,"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/posts\/3830\/revisions\/3837"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/media\/3835"}],"wp:attachment":[{"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/media?parent=3830"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/categories?post=3830"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.iafp.ca\/planners\/wp-json\/wp\/v2\/tags?post=3830"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}