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Understanding Insurance: The Basics Thumbnail

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 

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