Providing long term security for you and your family means:

 

Planning for the day the policy will actually be used.

 

You purchase a life insurance policy today, to protect for an unexpected event today, and for tomorrow.  That is very important.  When planning for life insurance protection that is meant to last your lifetime, for instance for Final Expenses, or for Capital Gains Taxes, you need to take the impact of inflation into your planning.

 

Why is this important?

 

Because life insurance can be difficult to acquire in the future.  Unlike buying a fridge or a car, or even growing into larger homes, buying  life insurance depends on your state of health.  And the older we get, the more likely we will develop health issues.  Which means it can be difficult to purchase new insurance along the way – even though inflation increases your insurance needs.

 

For example – let’s look at Final Expenses.

 

Final expenses are items such as funerals, final medical bills, perhaps accountant bills related to wrapping up an estate, and those last bills related to living, such as the last hydro, credit cards, household bills that continue a month or so after a person dies, but the pension income such as CPP has stopped on the day one dies.

 

Lets assume you are about 50 – 55 with a final expense bill in today’s dollars of:   $25,000.
Those same expenses in 25 years would cost:   $46,000
35 years would cost:   $60,000

 

Assuming 2.5% inflation (CPI for 1985 – 2010 was 2.48% average) see Bank of Canada link in my Facts and Stuff page.

 

What if you decided to purchase a $25,000 life insurance policy to cover your final expenses?  Well, that would cover them for today, but that same $25,000 policy would only cover $14,000 in 25 years and $11,000 in 35 years –  of those very same expenses. In other words, just when you had planned to actually use the policy, it would not cover what you had intended it to cover.

 

Your policy needs to be able to be there for you today
and take you into your future.

 

So in the above example, taking inflation into your planning, and acquiring a policy of $60,000, for your final expenses –  would be a much better decision. Your expenses would be covered even with inflation considered.

 

And this would give you long lasting peace of mind.

Best Jane

Disclaimer – Everyone is different.  So please seek professional advice about your personal situation.  These blog posts are meant to be helpful as generalities, and your personal situation needs to be addressed individually by professionals.  Best Jane.