How would your family fare without you?
Contingency planning for families
Mary Ann J. Lara, CIM, FCSI, CGA, CFP
When was the last time you took a few moments to think about how your family's lifestyle would be affected by losing you? Not only does your family depend on you for love and emotional support, but the fact of the matter is, they also rely on your continued earnings to provide for their daily living needs. This is why it is critical you maintain
sufficient life insurance coverage. In the event of your death, life insurance proceeds can be used to eliminate debt, provide a home free and clear of mortgage payments, guarantee funds for a child's education and to replace the income you generate today that maintains your family's lifestyle.
How much is enough?
A common rule of thumb suggests you should maintain life insurance coverage equal to ten times your income. Still, you'd be well advised to complete a thorough needs analysis with the assistance of a financial planner. An estate needs analysis will determine precisely how much money would be needed to produce a steady income for your family's ongoing needs and how you'd choose to address mortgage and other debt obligations like post-secondary schooling for your kids, and other goals in the event
of your death. If you're a stay-at-home parent, don't assume your lack of income means you have no need for life insurance as replacing your dedication with professional child care and domestic help can be costly.
Going beyond life insurance
At the same time, do not overlook the financial toll a disability would take on your family. U.S. figures show 48 per cent of all mortgage foreclosures are caused by a disability-induced loss of earning power.* Appropriately-designed disability insurance can fill the void in the event you lose your ability to work or should you have no choice but to accept a lower paying job. Critical illness insurance usually pays a lump sum to you should you be diagnosed as having a specified life-altering medical condition such as a heart attack or stroke, or if you are diagnosed with a life threatening disease like cancer. Ensure your Will is updated regularly, making sure you specify whom you'd like to take care of your children in the event you and your spouse should die simultaneously. This should be discussed with your designated guardian(s) before your choice is formalized in your Will and provisions should be made to ensure funding is available to allow your guardian to carry out his/her responsibilities. Also, make sure you appoint an executor (liquidator in Quebec). This is the person who will act on your behalf to settle your personal affairs, including the financial aspects of your estate. Seek the advice of a financial planner to ensure you that you have done all you can to look after the needs of your family in the event of an unforeseen circumstance.
*U.S.Housing and Home Finance Agency
Mary Ann J. Lara, CIM, FCSI, CGA, CFP is a financial planner with Investors Group Financial Services Inc., you can call her at 416-292-7229 ext. 557 or write to her at firstname.lastname@example.org
Last revision on January 29, 2008