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Protecting your wealth

The more you have, the more you have to protect.

You've achieved much in your life. A beautiful home, children who are well established, a healthy portfolio. People often assume the need for insurance decreases after their kids grow up. But that's not necessarily true. The need for protection doesn't lessen as you get older; in some cases, it may become greater. Here are four reasons why.

1. Your standard of living is higher.

The reality is that for most people, financial security lies in their ability to earn an income. So protecting future income should be the cornerstone of any financial plan. This is why life and disability insurance are so important.

You may be at the peak of your earning years – has your insurance coverage kept pace? If not, your family might experience a significant drop in cash flow if you were to pass away or be unable to work for an extended period. This would have not only an immediate impact on your family's lifestyle, but could also affect your financial progress towards longer-term goals, such as retirement.

2. Health risks increase with age.

It's an unfortunate fact of life that as you get older and reach your peak earning years, you also face a growing risk of contracting a chronic or age-related health problem. Two types of insurance can offer you some important financial protection:

  • Critical illness insurance is designed to pay you a one-time, no-strings-attached lump sum in the event that you experience a heart attack, stroke, life-threatening cancer, or other serious illness covered by the terms of your policy.
  • Long-term care coverage provides financial support if you need care in your home or in a long-term care facility.

3. Your investments are vulnerable.

Many investments carry some degree of risk. There's always a chance that market forces will reduce the value of your assets at any time.

When you're young with many years of investing ahead of you, you can wait out market downswings and even use the volatility to "buy low". But recovering from a bear market when you're older isn't as easy. Time now works against you, reducing the opportunity to recoup your losses.

Annuities and segregated funds are long-term investments that are held within an insurance contract. They have many advantages and may be a suitable option for your diversified investment portfolio, to provide a dependable source of retirement income that's virtually risk-free. There are numerous types and options to consider, so it's best to speak with an insurance advisor to make sure your decisions are well-aligned with your overall financial plan.

Life insurance can also be an effective means of shielding your wealth when real estate or investment markets tumble. By purchasing a policy large enough to cover the fair market value of your assets today, you can insure your estate against the risk of market losses tomorrow. You can be confident about leaving your legacy intact for your family or favourite charity.

4. Your estate has tax liabilities.

You've worked hard to build your assets. Your RRSP and other savings have grown. Moreover, you may have a recreational or rental property, or perhaps started or expanded a business.

As you acquire more assets and as they appreciate in value, the potential capital gains tax exposure that arises at death also increases. Sufficient insurance coverage will ensure that the tax burden won't fall on your family.

These are just a few examples of how your insurance needs can increase as you get older and move past your "young family" years. Professional advice from your financial advisor can help you determine the protection you need for both your family and your assets.

†Insurance services provided by BlueShore Wealth.