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Insuring your life

August 14, 2017

What Your Family Should Know About Your Life Insurance Policy

You’ve protected your family by buying life insurance, but you’re not done yet — you have to share the details with them. Here's why.

Do you remember those “set it and forget it” rotisserie infomercials? While buying life insurance can have the same set it and forget it feel, there’s another important step to take after purchasing a life insurance policy before you can consider the job of protecting your family done: You need to share this important information with your beneficiary (your spouse, your children, a sibling, a business partner — whoever you’ve designated on your policy).

Why do you need life insurance?

Buying life insurance is one of the most unselfish things you can do. You purchase the policy and pay the premiums to ensure the people you love receive a benefit when you die. You intend to provide for them financially in your absence, to leave them a significant legacy or at least to help pay for your funeral. But if your beneficiaries don’t know they’re named on your policy, which life insurance company holds the policy or even how to file a claim, your good intentions won’t be realized.

Why you need to talk about life insurance

It’s vital to tell that person or persons not only that you’ve taken out a policy, but also which life insurance company is holding it. Without this critical knowledge, your beneficiary may not be able reach the insurer to submit a claim.

Millions of Canadians unknowingly have assets and money that are currently being held by insurance companies, banks and pension administrators – most of them are available for recovery. Or, their assets may have been turned over to a provincial government under unclaimed intangible property legislation. While the total value of these unclaimed assets remains unknown, financial experts suggest the numbers are staggeringly high.

How does this happen? It’s common for people to lose track of their assets or forget about paid-up life insurance policies. What’s more, people sometimes die without talking to their family or heirs about their finances.

Talking to your family about life insurance

Discussing life-and-death matters may be uncomfortable, but it’s important to leave your family members with clarity and order to prevent any confusion or issues.

To make this easier, the Canadian Life and Health Insurance Association, a voluntary association whose member companies comprise 99% of Canada’s life and health insurers, has produced Your Virtual Shoebox Guide, an interactive tool to help people keep track of important personal and family documents — everything from insurance policies, bank accounts, investments and mortgages to health records and will and estate information.

If you find it too difficult to broach this topic with your family, consider making your financial advisor part of the conversation. He or she could act as a facilitator, and could provide other resources to help you tackle the topic.

While buying life insurance isn’t anything like buying a rotisserie from the “set it and forget it” guy, people do often buy insurance policies and forget them. But by having open, honest and comprehensive conversations with your family regarding your estate plans, you can help ensure that everyone gets all benefits you have intended for them.

How much life insurance do you need? Try out our free-to-use life insurance calculator to get a sense of how much insurance you might need to protect your loved ones.

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