If you live in Vancouver, or if you know anything about Vancouver, you know all the good jokes. It is, after all, the most expensive city in North America to live in. Part of that is the incredibly high costs associated with day to day living. The real problem is Vancouverís absurdly high housing costs, nearly twice that of Toronto. And with high housing prices come extraordinarily high debt. With debt interest in risk over the next few years, Vancouver will face a credit crisis in the next few decades.
Thatís why itís more important than ever to invest in your future and your familyís future. Residents of Vancouver face greater financial risk than anywhere else in Canada should something happen to them. It can be argued that everyone benefits from a life insurance plan, Vancouver residents can benefit more simply due to the inherent risk of carrying higher debt. Having not only an insurance policy as a buffer against debt, but also as a contingency to protect your familyís income is extremely valuable.
Vancouver residents have a few options to consider when it comes to life insurance as debt protection. Mortgage life insurance is one option to consider. Designed specifically for protection against mortgage default, it can provide a lump sum payment to your mortgage balance if you die. This can offset the worst of Vancouverite debt, by providing considerable repayment options. However, mortgage life insurance does not provide a lump sum payment to the policy holder, rather their financial institution. This may settle outstanding mortgage debt, but its value will decrease inversely proportional to a rising cost of living, so it simply cannot substitute as a long term investment.
Whole or permanent life insurance policies, plans with cash accumulation values, are also another option to consider. Vancouver has a high cost of living that is constantly on the rise. Investment options with long term benefits and immediate protection may answer both the problem of income replacement and of debt protection. Most permanent life insurance policies accumulate cash value, which can be borrowed against.
This can give your life insurance policy some liquidity during your lifetime, so you have some borrowing power in case your financial situation worsens. However, while whole life insurance offers the option to borrow against your policy, it can be extremely risky to do so as you may lose coverage. The cash accumulation is a useful feature, but the high cost of whole policies means it may not work as a short term solution for Vancouver residents seeking life insurance.
Perhaps the best solution is simply to invest in a quality term life insurance policy, and forgo the circuitous investment packaging.
Term life insurance is a relatively cheap, transparent option that offers guaranteed protection if something happens to you. Term may be the best option for life insurance among Vancouverites who have less disposable capital, or cannot undertake risky investments. It offers no lifetime benefit, but it can be easily designed to remain cheap and still pay off debts if you die.
The truth is that high debt will invariably restrict everyoneís options for planning for the future. However, this doesnít mean that planning is a lost cause or waste. Vancouverís high cost of living and high inclination towards debt requires even more forethought and understanding of your life insurance options. The last thing life insurance should do is break the bank or create further risk for you and your family. For Vancouver residents, the best way to secure your debt is to understand the risks of various life insurance policies and, more importantly, to understand the risk of not being covered at all.