I’m Going to Die One Day! Better Plan Now

Sorry, I don’t usually use that tone of voice here, because death is obviously a serious subject – one that not many people like to talk about. Seriously, who wants to even think about the fact that their time is limited, let alone actually talk about it? Not you? Yea, me neither! Unfortunately, it’s a fact of life. I’ve said many times that I’ll be lucky if I get 85 years on this planet, so I want to make the most of them. With nearly 30 down, that means I’ve probably lived at least one-third of my life already (whoa). And while I may be healthy today, there’s nothing saying I won’t get sick or die at a young (or younger than I’d like) age. (The rainbow picture is meant to brighten up this morbid post… is it working? lol) To prepare for what may come, I decided to finally research and get the right insurance policies in place. Here’s what I bought:

Life Insurance 

The decision to buy life insurance wasn’t an easy one to make. For starters, let me tell you: everyone has an opinion about this type of insurance – and I can see why. You really only need life insurance if you have people (or property) who rely on your income. I have no property and no debt, and also no partner or kids, so if I died today, no one would be affected by the loss of my income. I also have an Emergency Fund that could probably pay for my funeral and any taxes on my investments. So yea… technically, I don’t need life insurance right now!

Why did I buy it then? Two reasons: 1) I’m young, so premiums are much cheaper now than they would be if I waited another 10 or 20 years to get it. 2) To prepare for the “what ifs”. Some of the “what ifs” I factored in: What if I got sick in 10-20 years and my premiums skyrocketed? What if I happened to get married and/or have a kid in a couple years and wanted that extra bit of security for my family? What if I bought a home in a couple more years? (Mortgage protection insurance does not interest me!) I have no idea where life will take me, but I’m comfortable paying a little bit each month now to help whoever I leave behind.

Once I made the decision to buy, I was then faced with more decisions. For starters, did I want term or permanent? With term life insurance, you’re only covered for a limited period of time (5-30 years), and when the policy runs up you need to decide if you want to renew or not. The bonus with term is monthly premiums are cheap. With permanent life insurance, you only pay premiums (expensive ones) for 15-20 years, then you’re covered for the rest of your life (or age 100). Then, on top of your death benefit, some of your money goes into a sort of savings account (cash value) which you could pull from in the future.

If you decide to get permanent life insurance, you then need to decide if you want to get whole life insurance or universal life insurance. I won’t bother explaining the differences between the two, but if you’re interested there’s a good post on Investopedia. I sat through 3 lengthy appointments (90+ mins) with 3 different insurance brokers, and each of them almost sold me on the idea of whole and universal. If you look at it as another investment, it could be ok. And the quotes I got were all reasonable. However, Dan Bortolotti came to my rescue with this story he wrote for MoneySense, and I realized it wasn’t right for me.

In the end, I chose a term life insurance policy of $250,000 that’s good for the next 30 years (age 59). Why did I decide on $250,000? I tried to still think in terms of what single Cait would need, because getting anything more would just feel weird (especially if I never had kids lol). If I bought a condo on my own, it would probably be in the $250-275,000 price range, so the bank would want the amount of my mortgage to be backed by either life or mortgage protection insurance. (Man, the things I learn working at RateHub.ca!) I’d rather have life insurance on my side, so a $250,000 term policy felt right.

The beauty of any term life insurance policy is that you can always buy more when you need it. So if I got married and we bought a house for $500,000, I could buy a second policy for $250,000, for a total of $500,000. But $250,000 is more than enough for now. (And at $24.30/month, I can’t complain.)

Critical Illness Insurance

Critical illness insurance was a lot easier to research, understand and make a decision on, because it serves one purpose: to help you financially, if you get sick. For example, if I found out I had cancer, or I had a heart attack or a stroke (the list goes on), and I had to take time off, my critical illness insurance policy would give me a lump sum of cash to help support me while I couldn’t work (up to age 70). I opted for a $100,000 policy. I chose this amount because I can only hope my annual salary will continue to increase with my age, and I wanted enough to cover at least one year off work.

The difference between life and critical illness insurance is that one helps other people (life) while the other helps you (critical illness). I, personally, am never going to get the $250,000 I’m insured for. If I get sick, however, I can cash in on my $100,000 critical illness insurance policy. And if I never get sick? Well, I decided to pay a couple extra bucks each month so I can get all my money back (after my 70th birthday). Critical illness insurance isn’t cheap (I’m paying $74.07/month until age 70) but I like knowing that I’ll get every penny back one day ($36,000+) – as long as I don’t get sick, that is.

If you don’t currently have either of these insurance policies, but are considering getting one or both, my one piece of advice is this: shop around! Like I said above, I met with 3 different insurance brokers, before finally finding one I liked. And it wasn’t just about trying to find the cheapest premiums (I went with ones that were mid-range!). I researched the insurance companies they represented, the products they were selling me, and then I took how I felt about them into account. The broker I ended up choosing was friendly, not pushy, showed a genuine interest… and he even told me products I should skip altogether!

After doing lots of research on my own, and going to 3 appointments with 3 brokers, I finally made 1 final appointment with my broker on Monday and applied for both policies. While I was there, I remembered my tenant insurance was about to expire, so I renewed that with him too – and my monthly rate went from $38 down to just $24! I paid $288 for the year, so I don’t even have to think about that now.

And with that, I’ve crossed off all my financial goals for the month! The final step in all of this “what if” planning I’m doing is to finally get a Will / Power of Attorney drawn up with a lawyer. But my budget has kindly asked that I wait until January, to do that…

Do you have life insurance and/or critical illness insurance?

Flickr: rwangsa