Original article appeared in CDSPI Edge newsletter vol. 18, no. 6, November/December 2001
By Susan Roberts, FLMI, ACS
To be fully effective, your insurance coverage should grow with you as you age. In this column, I’ll discuss some adjustments you may need to make to your insurance coverage in your peak earning years, generally between your mid-40s to early 50s.
As their practices mature, dentists in these middle years may find their assets increasing quite significantly. At this time, you should start thinking about acquiring a permanent life insurance plan such as Term 100 Life Insurance if you don’t already have this coverage.
This permanent insurance plan is ideal for covering financial obligations that will last your entire lifetime, even if you die at a very old age. So, for instance, if you have significant assets that you’d like to pass intact to your heirs, this type of insurance can provide the funds to pay capital gains and other income taxes due at your death — no matter when you die. This allows your heirs to enjoy the gifts, such as the family cottage, that you bequeath to them.
The Term 100 Life Insurance plan also offers joint coverage options so two people can be insured under one coverage certificate. Joint coverage is more economical than buying two separate policies in the same benefit amount. First to Die joint coverage is ideal to fund buy-sell arrangements between business partners. For spouses, Last to Die joint coverage is suitable for covering taxes deferred to the death of the last surviving spouse.
Looking at disability insurance, you’ll discover areas for potential insurance savings as you age.
Did you know that your risk of suffering a lengthy disability before retirement decreases dramatically by age 55? At that age, you only have a one in four (25%) chance of being disabled for more than three months. Compare that to when you’re age 35 and the risk of being disabled for three months or more is one in two (50%).*
As a result of this reduced risk, you may be able to discontinue some disability insurance options, allowing for premiums savings.
For example, the Cost of Living Adjustment Option, which provides a regular cost-of-living increase so disability benefits keep pace with inflation, is certainly worthwhile in your twenties and thirties when chances of a lengthy disability are much greater. However, by age 55 when your risk is lower, you may want to think about discontinuing this option to save some money on premiums, especially if you have built up other assets on which you can rely.
Likewise, there are also potential savings to be found by suspending the Own Occupation Option, which offers LTD income replacement benefits even if you are able to earn income from a new occupation. That’s because, while it’s not impossible, at age 55 or older it’s much less likely you’ll start a new occupation should you become disabled and aren’t able to pursue the same career you were engaged in immediately prior to becoming disabled.
To learn more about your life or disability insurance requirements in the middle years, or at any stage in your life or career, please call me.
* Source: Society of Actuaries, Commissioners Individual Disability Table
Susan Roberts is a licensed life insurance agent with CDSPI Advisory Services Inc. — A CDSPI Affiliate. For free insurance planning guidance, contact CDSPI Advisory Services Inc. at extension 5002. (Quebec and PEI residents call CDSPI for insurance plan information at extension 5000.)
The underwriter of the insurance plans referred to in this article is The Manufacturers Life Insurance Company (Manulife Financial).