This section will describe different types of insurance products and how to figure out how much insurance you really need.

Life Insurance

Life Insurance is often overlooked by the average Canadian which is a big mistake as it plays fundamental role in risk management. Life Insurance offers protection to families in the event of an untimely death of a family member. Countless families are suffering due to their lack of financial resources upon the death of a primary wage earner. Many people do not yet understand about how life insurance works and how much protection they need. Besides protection, life insurance can also be used to accumulate retirement savings, preserve one's estate, transfer wealth to children and play a role in business succession planning. Here are the basics that everyone should know about life insurance.

1) Term Insurance - This is insurance coverage over a fixed period of time such as 5 years, 10 years, 20 years etc. If you buy a 5 year term coverage for example, you will pay the same amount of money over 5 years for Life insurance coverage. After the end of the term, your coverage will end. You can purchase term life insurance up to age 75, however it would be prohibitively expensive as you grow older as there is higher risk for the insurance company.

2) Whole Life Insurance - This is a permanent life insurance that covers you until age 100. You pay a fixed amount of money over a fixed time period for this lifetime coverage. Whole Life has a cash value component where the insurance company invests your money on your behalf. The reason why there is a cash value is because you are paying more into the policy then the minimal cost of insurance. As the cash value grows you have the option to withdraw the money or take out the money as a policy loan.

3) Universal Life Insurance - This is another example of a permanent life insurance that covers you until age 100. Unlike, whole life, Universal Life insurance offers flexible payment terms and gives the owner of the policy autonomy to change their monthly payments, modify the face value and control where they invest their money. Universal life combines the protection of life insurance with tax deferred growth of investments. How this works is that your monthly payments are split into a portion for the cost of the insurance and a portion to be invested in a wide range of investment products.

How Much Insurance do you need?

The amount of insurance depends on the level of responsibility of the life insured. You want to have enough insurance to cover for your debts, mortgage and provide for your children's education. If you would like to provide an amount to replace your income, then a good rule of thumb would be 10 times your current income. The logic here is that if you provide $50,000 a year to your family, an insurance policy of $500,000 will provide the $50,000 for 10 years.

More detailed articles to follow………stay tuned.