Life Insurance – Term or Perm

After having baby, need to get three things in order.

1. RESP

2. Life insurance

3. Will and Power of Attorney

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RESP – follow Canadian Capitalists advice:

http://www.canadiancapitalist.com/investing-in-td-e-series-funds-for-your-resp/

Lots of financial planners or bankers want us to switch out of index funds because they said it’s too risky.

But after talking to my financial planner friend who left the industry, he said it’s fine. Since time is on our son because we started investing when our son was just born. We have time to recoup the money if the market is down. Besides, we have 20% CESG – guaranteed money from the government.

Then I read the Wealthy Barber and it reconfirmed index fund is the way to go.

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2. Life insurance to take care of $ in case anything happens – mortgage, living expenses, funeral cost, eduation.

Now should we get Term or Whole life? Again wealthy Barber recommend Term, just like Tim here:

http://www.forbes.com/sites/timmaurer/2013/05/03/term-vs-perm-life-insurance-in-90-seconds/

Because Whole life has a savings component to it and there are lots other investments more effective than this.

Also, treat insurance and investment separate is sound advice.

So we’ve got 20 Term which is up for renewal when our son is 23. By then, he should be able to take care of himself?!

If we want to help him out more financially, we probably need to give him some real estate or business with passive income.

How about life insurance for children? I heard from someone that kids have low premium and it’s good idea to buy them whole life and pay off in 20 years. Then they have insurance forever.

After doing some calculations based on the article here:

http://lsminsurance.ca/life-insurance-canada/2009/12/whole-insurance-2

Five-year-old Boy – $100.00/month – 20 pay coverage. = $100x12x20 = $24,000 investments

After 60 years at 65, it has cash value of $411,258.

Usually a online financial calculator, the return is around 4.8-4.9%. After inflation it’s not very much.

Example from the above website:

The following is a list of three of Canada’s leading Whole Life insurance carriers for children
Five-year-old Boy – $100.00/month – 20 pay coverage.
Company Plan
Initial Coverage
Death Benefits/age65
Cash-Value at age65
Assumption Life $68,290 $412,898 $157,253
Empire Life $69,480 $687,868 $348,648
Canada Life $77,362 $668,600 $411,258

 (Each of the above plans provides fixed premiums guaranteed to never increase, lifetime protection and the policies are fully paid up at the end of 20 years.)

This kind of answers if we should switch to whole life after the term insurance is up. Like the Wealthy Barber author said only if you have extra money and you have maxed out other better investment vehicles.

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3. Now I just have to get a will in place and organize all our financial documents in one place and make copies for other people

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other insurance:

Critical illness – no for now – pretty healthy, no history of critical illness in family

Disability – yes – not expensive from TD Bank, although not in high risk jobs…

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