I am divorced, 52, mother of 4 grown children, moving into the next chapter of my life. I currently live with my fiance (together 7 yrs, 14 years my junior) and we are starting to build a home. I have RRSPs of $93,000 and my ex pays me spousal support of $16,800 per year. I contribute towards RRSPs biweekly, but still worry about retirement and leaving a little something to my children. My fiance and I are working on a will and prenup and I would like for him to not worry about the house and property if I should die before him. Should we get a life insurance policy on ourselves or even for just myself?
Asked by Anonymous, Winnipeg, MB
It is good that you are working on wills and a prenuptial agreement as you move into this next chapter of your life. From the information you have given, I have a few more questions that would need to be answered in order to give you basic insurance advice. It's also important to note that you should speak with a local insurance advisor in your province and go through a needs analysis process, so she/he understands your complete story.
At this time, I can provide broad answers to your questions. You don't mention a mortgage or whether you or your fiance have existing personal insurance or insurance through work? This would be important to know.
Insurance can have several functions - debt protection, income continuation, or estate preservation.
Term life insurance is good for debt protection and income continuation and is usually the least expensive of all options. The good thing about term insurance is that it is renewable and convertible so you can change it to permanent life insurance in the future if required. If you have a mortgage and it is in both your names, the least amount of insurance you should both have would be the amount of the mortgage. Individual life insurance has many features that creditor insurance through your lending institution doesn't offer, so it is usually the better option for debt/mortgage protection.
If you die first, you mention that you would like to make sure your fiance and your children are taken care of. Term insurance could be used for income continuation or you could look at permanent insurance to take care of those needs. Permanent can be more costly, but you have it until you die and the cost remains fixed. As such, it is good for estate planning purposes.
There is the option of getting some term insurance as well as permanent life insurance in one policy, to combine both needs. Getting a policy for which both your fiance and yourself are insured is also an option.
My recommendation is to meet with an insurance broker in your province to do a proper insurance needs analysis which will give you the best information to ensure that you, your fiance and your children are properly taken care of in the event of your death.
Insurance options discussed are based on Ontario rules and guidelines. Please check with an insurance broker in your province for your specific needs.