But wait… you don’t get it ‘til you die?

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Episode Transcript

Hi! Welcome back to The Kinder Way Podcast. Today I’m going to talk about something that might initially sound a little crude… but if you’ve ever spoken with a financial advisor who told you that life insurance should be a part of your financial planning toolbox, you might have wondered: How does this ACTUALLY work if you only get it once you die?

First of all, you are so right to wonder that. I mean, when I think “financial planning,” I think of something that’s going to impact my life… while I’m around to see it.

I’m going to let you in on a little secret: While the main purpose of life insurance is – yes – to protect your loved ones financially after you die, life insurance does actually come with what people in the industry call “living benefits.”

Who knew… right?!

The type of living benefits you can – well – benefit from are dependent on what type of life insurance you get: the temporary or permanent kind. Let’s start by talking about the permanent kind – that’s what I got for my son BECAUSE of how he can benefit from it while he’s still alive and kicking. (Literally!)

If you tuned in to Episode 1, you might remember that I told you we got him a 20-pay whole life policy a few years ago. Here’s all you really need to know about that: the 20-pay part means we only need to make payments for 20 years – but he’s covered for life – and the “whole life” part means two things:

ONE – it comes with an investment component whose value will grow over his lifetime. And TWO – he’ll have life insurance coverage for his – you guessed it! … his whole life – even if he’s diagnosed with a health condition when he’s older OR if he decides to take on a risky hobby or job, even. (In all honesty, I would NOT be surprised if he ends up taking up skydiving one day… he is seriously the complete opposite of risk averse!)

Anyway, back to that investment component I mentioned – I think I said he could potentially access around $90K at age 40 in episode 1? – That’s money he could access to help with a down payment on a home if he wanted… But he also could dip into it when he’s younger or older, it really just depends on what his needs are.

But there you go – that’s a very clear benefit that will help him out financially while he’s alive. It’s like having your very own savings account, with a pretty great rate of return, and being able to borrow from yourself in the future. The really cool part is pay it back on his own timeline if he wants (certainly not like borrowing from the bank) OR he doesn’t have to pay it back at all – but if he chooses not to pay it back, that means his beneficiaries won’t get the money that he took from the policy.

And no, that’s not necessarily a bad thing. Keep in mind, that his base coverage is guaranteed as long as the payments continue to be made. So…. if he has 50,000 in coverage plus, let’s say, $90,000 in cash that he takes out when he’s 40… and never pays back… his beneficiaries will still get the original $50K . Which, is kind of like a win-win, in my opinion!

Just a side note: If “beneficiaries” is a new word for anyone listening, it’s really just the official term for the people who will receive the money from a life insurance policy after the insured person passes away. So that could be your spouse, your children, other loved ones, or even a charity that means a lot to you. It’s really up to you who you choose.

Okay, now let’s talk about the other type of life insurance – the temporary kind, called  term life insurance – since that’s what both my husband and I have. This one is a little different because there’s no investment component, which means there’s no money within the policy that we can access while we’re both still alive.

BUT. The way I see it, my husband, son, and I are a family unit. If I were to die suddenly, I wouldn’t want our financial plan to fall apart because my financial contribution to our household was suddenly gone.

In that sense, and because both my husband and I have a policy, I still consider term life insurance to be a financial planning tool while I’m alive. Mainly because my husband and I know that we’d still be able to afford our mortgage if the other one were to pass away. And that really is the whole point of getting this type of coverage. For us, it’s mortgage protection. For you, it might be paying off your student debt, a business loan, or simply having enough income to raise your kids on your own.

I don’t know about you, but that feels like a living benefit to me.

A final thing that I don’t think many people know, but that I really quite love about life insurance is this well-kept secret: Most life insurers in Canada offer what’s sometimes referred to as a Compassionate Assistance benefit – meaning: if you have life insurance and you’re diagnosed with a terminal illness, you could withdraw up to 50% of your death benefit – tax-free – while you’re still alive. And yes, that would be taken from the money that’s going to your loved ones, but sometimes, there’s really no other choice.

Like, in cases where rare treatments or medications aren’t covered by your province… or you need to travel for medical purposes… or maybe you just want to take one last big trip with your loved ones before you die… I think it’s really great that that money is available to people who meet the conditions. Not to worry, Canadian life insurers don’t make you jump through a zillion hoops to access this living benefit. The reality is, that money will be paid out one way or another, so it really doesn’t benefit a life insurer to deny someone who is dying the money owed to them if they meet the criteria. They just want to make sure that you’re: (a) telling the truth about your diagnosis, and that you’ve (b) made use of the money in the investment portion of your policy first. That’s a really important  rule and it’s there to protect your family – or whoever you choose to receive your coverage after you’re gone.)

Okay, back to my family….

In our case, here’s how life insurance initially fit into our overall financial plan: We had been paying into our son’s RESP since he was a baby, but after speaking with our Serenia Life advisor, we realized we were contributing more than necessary if we wanted to make the most of the government matching program – basically: they’ll throw in a max of $500 a year on the first  $2,500 you contribute each year, so anything over that $2,500 is essentially   – “extra” money that could be put towards another investment, like our son’s life insurance policy. So that’s what we did! And now that means we know he’ll have a nice lump sum of money to put towards his post-secondary education thanks to his RESP, AND other money that he can when he really needs it, like for a down payment!

I keep coming back to this idea because it’s not news that many Boomers had to help their millennial children buy their first home – and I can’t imagine houses are going to be any more affordable in the future. So rather than worry that the money we’re putting aside for our European retirement– that’s the dream, anyway! – would instead need to be used to help our son purchase his first home, we’ve already got money put aside for this exact reason.

And while it’s true that you never really know what life will bring, I’m a planner – just ask my husband, he makes fun of me for my lists and spreadsheets all the time – and knowing my family is financially set up for the future just makes me feel a sense of calm in this crazy world of tariffs, inflation, and the affordability crisis. You ever hear how getting your finances in order can be a form of self care? That is SO me. Comment if you get it!

Alright, it’s time for me to sprinkle a little bit of kindness into the episode by sharing an act of kindness I observed lately. So here goes:

Every now and then, my son goes to “Forest School” – this a place where the kids get to experience lots of outdoor time and some outside-of-the-classroom learning that includes things like risky play. On one particular day – while they were using knives to carve wood (something he’s done several times without issue) – he wasn’t using the knife properly and it bounced up and hit him just above the eye. He was okay, other than the initial shock and needing some stiches, but the teacher on duty felt awful about it. Not only did he call us later to see if everything was okay, but a few days later, he personally visited our home to check on our son and to present him with the finished wooden design he had been working on… which the teacher had made extra special by carving his name into it. It was an unexpected act of kindness, and I was touched by his genuine concern for my child.

Do you have a moment of kindness to share? Drop it in the comments – we’d love to hear about it!

And don’t forget to tune in to our next episode where I share more industry secrets and tips to help Canadians like you (and me!) navigate this challenging financial landscape. Got a question you’d like me to cover in a future episode? Send me a note at podcast@serenialife.ca anytime. See you next time!