Understanding Insurance: The Basics
At the most basic level, insurance is used as part of a complete financial plan to protect from risk, whether that is loss of life, health, or disability.
Here are the types of insurance and what they are used for:
Life Insurance
- Covers the life of one or more people in the event of loss of life of the insured.
- Life insurance is typically used to:
- Replace income
- Cover debts
- Insure future goals such as retirement
- Fund a tax liability, such as a cottage or investment capital gain
- Provide for or equalize the value in an estate
- Provide for a charitable bequest
Critical Illness Insurance
- Provides a lump sum payment if you are diagnosed with a critical illness such as cancer or heart disease, allowing you to focus on recovery
- Greater chance that we will have a critical health diagnosis and survive, due to medical advancement
- Provides funds to seek specialized treatments not covered by our health system
- Replaces income allowing you to focus on recovery
Disability Insurance
- Provides income when unexpected illness or accident leaves you unable to work
- Coverage is based on your earned income
- Usually has a waiting period from when you are disabled until when income starts
- Income from a personally owned policy is not taxable while income from a corporately owned policy such as a group plan typically is taxable
Long Term Care Insurance
- Helps you manage the risk of losing your independence due to an unexpected illness, chronic condition or dementia
- Provides a comprehensive income-style benefit to bridge the gap between our health system and other services you might wish to access
- Designed to help cover the cost of care services you need in any environment, whether at home or in a care facility
- Gives you more choice around the services you receive
Health Insurance
- Provides benefits for paramedical services, hospitalization, prescription drugs, dental, and vision
- Many people receive coverage through a group plan with their employer
- For those who are self employed, business owners or retirees without coverage, personal coverage can be obtained
- There is usually an annual cap on the amount that can be claimed
Travel Insurance
- Coverage for emergency medical expenses, but can also include baggage loss, trip cancellation and more
- Most credit cards offer some coverage but be careful of the details
- Personal purchased coverage typically gets you physician services, ambulance, hospitalization and prescription drugs
- Out of country medical services can reach 10’s or 100’s of thousands of dollars
Quick Reference For Insurance Product Types
