How to Ensure Your Loved Ones Get an Immediate Cash Infusion With Life Insurance (And Why It Matters)

Simon Huften

Simon Huften is the President of Life Insurance Canada.com Inc.

No one plans for an untimely death, that is why we call it untimely. However, you can plan ahead for the possibility. Many professionals, especially primary earners in their household, make arrangements to ensure that their spouse, children, or other close household relatives are taken care of in the event of their death. We accept a certain amount of risk every time we drive a vehicle, cross the road, or even take a breath. There is always some remote chance that one day will be your last – and it’s important to consider where that might leave your loved ones financially. So how do you ensure your loved ones get an immediate cash infusion with life insurance?

Having a life insurance policy in place that can quickly provide your family with financial support after your death can save your family from stress and fear in the midst of an already tragic situation. If your income is necessary to sustaining your family, or if your demise might incur bills they cannot afford, a life insurance policy is the natural solution. 

In This Article:

• Immediate Expenses After the Death of a Spouse or Parent
• Non-Liquid Wealth Takes Time Your Family Might Not Have
• How Life Insurance Can Send Your Family Immediate Financial Support
• Taking Care Of Your Family with Life Insurance Canada

Immediate Expenses After the Death of a Spouse or Parent

There is no denying that when someone passes away in the family, those left behind will suffer. Not just grief, but also the expenses of death and loss of income. What if you are in the hospital for a few days, weeks, or months before death How much does a funeral cost? These are things few people like to linger on, but your family would have to face nonetheless should your time come.

Consider the expenses that are typically faced by a family immediately after a spouse or parent passes away.

Ancillary Medical Expenses

While medical bills are not a direct concern in Canada, there are many expenses related to the ill health and loss of a loved one. Your surviving family may lose time at work, may face expenses like meals, hotels. and parking at the hospital, or increased child care expenses based on the circumstances of your loss. These costs add an undue financial burden to the household when combined with lost income from both your death and time loved ones spend away from work as a result.

Funeral Arrangements

Funeral arrangements are an expense that no one can escape. If your family wishes to hold a ceremony and lay you to rest, there will be costs. Setting up your funeral arrangements ahead of time can create some savings, but only some. Your family will likely need to pay for the ceremony, casket, plot of land, headstone, and often expenses that are difficult to foresee.

Living Expenses

Morbid expenses aside, your family will also need to keep on living. They will need to keep buying groceries, making mortgage or rent payments, and paying for utilities or fuel. If you have children, they will have school expenses. If you have debts they will need to be maintained. All this might have been fine with two or more incomes in the family, but with your income removed, will your family be financially stable?

Non-Liquid Wealth Takes Time Your Family Might Not Have

With the exception of money left in a shared account, the wealth you left your family may be difficult to access after your death. Even things owned jointly do not become liquid funds overnight. Your family might find themselves struggling financially long before illiquid assets become available to ease their fear of financial loss after your death.

Probate Can Take Over a Year

The first thing to remember is that, no matter what your will says, probate can take over a year to execute. While some estates are handled in a matter of days, it is also possible that any number of disputes or obstacles can prevent your family from receiving what you left for them for months and sometimes well over a year after your death.

Investments Take Time to Cash Out

Shared investments are a good way to store family funds, but are not always accessible when unexpected tragedy strikes. It takes time for investments to be cashed out and turned back into household funds.

Illiquid Assets Take Time to Sell

Illiquid assets like the house, cars, property, or business inventory takes time to sell. Your family is likely also not well-versed in the procedures to sell non-liquid assets quickly or efficeintly to meet their financial needs, and may be resistant if assets have sentimental value related to you once you are gone. It may not be enough to keep the mortgage paid on your family home in time.

Taxes Can Reduce The Amount Your Family Really Has

Cashing out assets can also provide less support than you realize. Selling investments or property for a profit can result in an income tax which reduces the overall amount that your family will gain from accessing these emergency estate funds. This can mean you are leaving your family with less than it may seem, especially in terms of getting by in the first year after your potential death.

How Life Insurance Can Send Your Family Immediate Financial Support

The reason so many people build a life insurance policy is because they are built to step in where other financial safety nets may fall short. There are several ways that life insurance is designed to help your family with financial stability when they might need it most.

Life Insurance Death Benefits are Paid Quickly

First and most importantly, life insurance policies often pay out in less than 60 days, and sometimes as few as 14 days after the demise of the policyholder. If there are no complications to investigate regarding your death, your family can receive the benefit quickly, equipping them with the financial resources they need  before any new bills become due, and certainly before their financial situation without you could become dire.

Life Insurance Provides a Lump Sum or Monthly Income of Liquid Cash

Unlike other wealth that you might leave behind, a life insurance death benefit is paid in liquid cash – immediately spendable on the things that matter most like groceries, mortgage payments, and your funeral service. You can choose to leave your family a lump sum or arrange to take care of them over time with an annuity – a monthly payment to cover expenses that is protected from theft or misuse.

Life Support Death Benefits are Not Taxed

Lastly, life insurance death benefits in Canada are generally not taxable. This means that the income you send to your family after your death is not subject to income tax, capital gains tax, or any other tax that might reduce what you have planned for them to have. Because of this fact life insurance is the best way to transfer your income directly to your family without income taxes in between.

Taking Care Of Your Family with Life Insurance Canada

Life Insurance Canada works with our clients and industry-leading insurance companies to build policies that take care of families. We know that every family and every policy will be unique, and we will work with you to design the right policy to take care of your family’s expenses just in case you can’t be there for them at some point in the future. A life insurance death benefit can save your family from financial hardship, worry, and fear should the worst happen, so you can potentially rest in peace knowing they will be safe, able to pay bills and cover expenses even after your love and support are gone.

Contact us today to find out more or to start building a custom life insurance policy to take care of your family.