Protecting your most valuable asset: Because life can change at any moment

Published June 9, 2021
 Dad and little girl in the pool

Mark and Susan were married for 15 years with one daughter. Susan was a stay-at-home mom and Mark was the family's main source of income. The couple only owned a life insurance policy for Mark because they believed that Susan didn't require protection since she didn't earn income. Their financial advisor recommended a life insurance policy for Susan because if an unexpected event were to happen to Susan, Mark would likely not be able to leave his job to stay at home to care for their daughter.

Mark and Susan agreed and purchased life insurance on the recommendation of their financial advisor

Unfortunately, some years later the financial advisor learned that Susan died in a car accident; Mark also suffered injuries in the accident, lost his income due to a disability, and needed to stay home with their daughter.

Mark realized the value of the insurance in that it continued to provide the opportunity to keep a roof over their daughter's head. With that money, their daughter was also able to attend college and accomplish her goals. While he still misses his wife dearly, Mark thanked his advisor, "Buying an insurance policy was the best thing I did in my life."

Life insurance for each life stage

When it comes to insurance, your needs at each life stage could be very different and can be affected by events that happen throughout your life. The following are some common insurance needs that exist at different life stages and the solutions that may play a role in helping you build a solid financial strategy.

The foundation of your financial strategy should include plans to protect your family financially, which includes having an appropriate amount and type of insurance. Preparing your financial strategy for unexpected events, like a life-altering illness or injury or untimely death, could better position you to reach your long-term goals.

Young professionals

Jack and his fiancée Kelly are both age 27. They live in a rented apartment and are planning to buy their first home together within the next couple of months. They are beginning to establish their investment and savings plans, but are also still paying student loans and other debts. As such, they have very little disposable income.

Jack and Kelly want to make sure that, if either of them were to die, the surviving spouse wouldn't be left with the burden of the mortgage payments.

The potential solution:

In a situation like this, term insurance may be the best solution. First, note that the mortgage is a temporary risk, as it will eventually be paid, typically within a 20 to 25 year timeframe. Furthermore, term insurance is generally more affordable, especially for those who are young and healthy. As Jack and Kelly are young, this would allow them to acquire the coverage they need, at a price they can afford.

Family matters

Nick and Amanda are both age 40, and have a 5-year old child, Dana. Both Nick and Amanda have a modest amount of life insurance through their employer group plans, but feel that this is insufficient to meet their needs.

The couple recognizes the need to protect their family’s lifestyle and want to make sure that if either spouse dies, the other can continue to live comfortably. In particular, they want to make sure that Dana isn’t financially disadvantaged, and that the surviving spouse can raise Dana properly. A key consideration is therefore ensuring there are adequate resources available to cover the cost of Dana’s postsecondary education, as well as her extracurricular activities and other interests in the meantime.

The potential solution:

In this case, the most suitable product may be a term life insurance policy. The key risk in this case — securing Dana’s future and education — is limited in scope. Typically, in about 20 years, we would expect that Dana will be finished school and will no longer be dependent on Nick and Amanda.

Business owner

Paula is a successful business owner of a manufacturing firm. The firm makes electrical components for solar panels, and has about 50 employees. One employee in particular, Richard, is a brilliant engineer, and leads all product development for the firm. Richard has been with Paula and the firm since the company was formed, and is absolutely critical to the day-to-day operations and ongoing success of the firm.

Paula recognizes that, in the event of Richard’s death, the success and survival of the firm would be in jeopardy.

The potential solution:

With not only her own livelihood at stake, but the careers of 50 other employees as well, Paula wants to protect against this risk. In this case, the business can purchase life insurance on Richard’s life. This type of strategy is known as key person life insurance. If Richard dies, the firm would receive the life insurance proceeds, which can then be used in a number of ways – For example, to help the business survive by recruiting and training a suitable replacement, subsidizing lost revenue, or covering overhead expenses until the company gets back on its feet.

Estate planning

One of life’s greatest pleasures is spending time at the cottage with family and friends. Ken and Judith purchased their cottage several decades ago, and cherish memories of endless summer days, barbeques and swimming at the lake. They eventually want to transfer the cottage to their adult children, but the significant capital gain and resulting tax liability pose a major hurdle to overcome.

For Ken and Judith, the thought of losing the family cottage is unbearable. Yet, without enough cash available to pay the capital gains, and other taxes owing at their death, Ken and Judith's heirs may have no reasonable options other than to sell the cottage to create liquidity to pay the taxes owed by Ken and Judith’s estate.

The potential solution:

Life insurance can help Ken and Judith make sure the family cottage stays in the family. The use of life insurance, and permanent life insurance in particular, may be the most cost-effective way to ensure sufficient funds are available to pay taxes owing at death. Note that the life insurance proceeds are paid out entirely tax-free, and the funds become available upon death, which is exactly when the tax bill hits.

Whatever stage you are at in life, talk to your Edward Jones advisor to help ensure you protect the assets and lifestyle you've worked hard to create.

The scenarios presented are hypothetical and not meant to provide any specific recommendations. These illustrations are meant to help you understand the different insurance solutions available to you. Speak to your Edward Jones advisor to determine the appropriate insurance solution for your specific situation.

Insurance and annuities are offered by Edward Jones Insurance Agency (except in Quebec). In Quebec, insurance and annuities are offered by Edward Jones Insurance Agency (Quebec) Inc