Hi Nick,

I’m getting married this Christmas and my fiancé and I are supposed to meet with a few insurance agents and we wanted an idea of what would be most important for us at this point in time and possibly later on. I was wondering if you could give me some pointers.

Adrianne

Hi Adrianne,

Congratulations on you wedding plans :-) I pray that God continues to bless your union and your love for each other.

First: A health / medical plan that you can use for regular doctor's visits, dental, vision etc. If you don't have an employer plan as yet then get a plan for this need with both of you as husband and wife - you don’t need to be married officially to have this plan. It’s an annual or semi-annual payment.

Second: Term Life Insurance. This is if either partner dies the other can continue the plans and goals you set. Term life insurance is the cheapest type of life insurance so that you can buy more with less premium dollars. The only thing is that there is usually no saving built in the premium. Some companies offer savings with their term plans but my feelings are that you can save more effectively elsewhere – the objective of this plan is primarily for protection.

Quick Tip: The higher income spouse should carry more insurance mainly because if they pass away the financial impact will be greater especially if you have taken out a mortgage based on your joint incomes.

Tip: How to Use Insurance Proceeds

When one partner dies the money the insurance company pays could be used to make an investment to replace that lost income. So say one partner dies and their income was $5,000 per month – the insurance policy should pay out enough to say purchase a property (house or an apartment) to be rented out for the $5,000 per month. The price tag of that property would be the amount of insurance you need to buy – of course limited by what you could afford to pay in premiums monthly.

Third: Disability and Critical Illness - this is a plan that pays lump-sums in the event of the diagnosis of a critical illness or if the insured suffers a disability. The only challenge I have with this is the legal definitions used by different insurance companies to describe an illness or disability – it is not uncommon that two companies cover the same category of illness but in different ways.

Tip: My suggestion here is to get a sample contract from the agents of different companies and compare notes. Remember it is not all about price of premium it has a lot to do with what you will be paid when a claim is made.

Fourth: Insurance on children – Ask yourself this question: Which is more severe – the financial impact of the death of a child or a breadwinner parent? Focus your premium dollars on the one that is more severe.

Fifth: Retirement Plan (also called annuities, or pension plans) Some agents try to get you to buy this first as it is easy to approve and commissions are paid quickly - my recommendation is to focus on the insurance protection first then once that is in place you can start setting aside a little at a time for retirement until you can focus fully on that area.

If you have any further questions or need advice on today’s subject please email me at: This e-mail address is being protected from spambots. You need JavaScript enabled to view it or web me at: www.FinancialCoachingCentre.com