Do I Need Life Insurance?
The simplest, most concise answer to this question is: maybe. That goes to say that there is no simple, concise answer, as everyone’s situation is different. Below we’ve outlined some common situations in which life insurance is a good fit, as well as a couple of scenarios where it might not be required. Yes, we sell life insurance, but first and foremost, we’re dedicated to finding the right solutions for our clients’ unique situations. Let’s take a closer look at who should have life insurance.
You Might Need Life Insurance If… You Have Dependents
Dependents are anyone who relies on your income for support. This could mean children, a non-working spouse, aging parents, or disabled family members. If someone you love is supported by your income, consider how they will cope when it’s no longer there. Life insurance can pay for final expenses such as a funeral or estate taxes, but it can also serve as income replacement to help your family maintain the standard of living that they’ve become accustomed to. Whether your spouse works or not, consider how your death will affect them financially – will they be able to continue living in your family home? Will they be able to provide for postsecondary education for your children? Life insurance can make sure that your family can continue to live in the way you want them to. The affordable nature of term life insurance makes it most suitable for this need.
Even if you don’t currently have dependents, consider whether you will in the future. Remember that dependents aren’t necessarily a spouse or children – if your aging parents may end up living with you, they will rely at least in part on your income. Life insurance premium rates are based largely on the age and health of the life insured. It may be best to purchase a life policy when you’re young and healthy. In fact, it’s probably safe to say that life insurance will never be less expensive for you than it is right now.
You Might Need Life Insurance If… You Have Debt (Including a Mortgage)
Most Canadians have some kind of debt, whether it’s a mortgage, a car loan, credit cards, or a student loan. When deciding whether you need life insurance, it’s important to factor in how much money you owe to various sources, as debts become payable upon death. Unless you have enough assets to cover your outstanding debts, life insurance is a great way to ensure that your debts will be paid off. We believe that our clients should have enough life insurance coverage to pay off their debts when they pass away, including their mortgage. If you share a mortgage with your spouse, will they be able to take over the full payments if you were to die? How about a shared car loan, or a line of credit?
A life insurance policy can help to cover these debts so your surviving family can continue to live comfortably without having to worry about paying them off.
You Might Need Life Insurance If… You Want to Leave a Legacy
This could refer to many different scenarios which could all be funded by life insurance. Perhaps you want to leave money to your kids to help with a down payment on their first home. Maybe you want to fund your children’s postsecondary education. Or maybe you want to make a charitable donation to a cause that is close to your heart when you pass away. Life insurance can be used to leave money you wouldn’t otherwise have to your family or a registered charity. Whole life insurance or universal life insurance is primarily used for legacy type needs.
You Might Need Life Insurance If… You’re Self Employed
Business owners absolutely should have life insurance, and not only to keep the business afloat when they pass away. A business can face several issues when a death occurs, such as a loss of skills, creditor demands, family concerns, and tax implications.
Many businesses purchase “key person” insurance on people who are integral to the business. Their death may result in lower production or decreased quality of goods and services.
With respect to creditor demands, it’s important to note that many business loans are in the form of demand loans, for which the lender can demand repayment upon the death of a key business person.
Family concerns can also factor in to purchasing business insurance. For example, if a business owner has two children, only one child may want to continue on in the business – life insurance can help to equalize the estate so that the other child can also receive a sum comparable to the value of the business.
We believe that one of the most important reasons for a business owner to buy life insurance is to offset taxes that arise at death. When a business owner dies, he is considered to have sold all of his property for fair market value, unless he leaves his share of the business to his surviving spouse. This can result in large tax bills, which can be covered by life insurance rather than leaving the business owner’s family to sell off assets to cover these bills.
You Might Need Life Insurance If… You Have a High-Risk Job or Lifestyle
This almost goes without saying – if you lead a risky lifestyle, you should have life insurance to cover that risk. Some risky occupations include first responders, underground miners, airline pilots and flight attendants. Some high-risk hobbies include auto racing, skydiving, or rock climbing. Life insurance companies will inquire about your lifestyle and occupation when you’re applying for a policy and, just like your health, the higher a risk you present to the company, the higher your premium payments will be. However, it’s important to be honest about these things on your application, because if fraudulent information is provided, the insurance company may have the right to deny coverage if you pass away within the first two years of coverage.
So, Who Doesn’t Need Life Insurance?
If you don’t fit into any of the above categories, you may not need life insurance. It may come off as counterproductive for an insurance broker to say that their clients don’t need life insurance, but we at NorthWise are focused on meeting the needs of our clients, and we would never recommend a product that doesn’t suit your needs. For example, if you’re single with no dependents and you don’t ever plan to have any, you may not need life insurance. If you do have dependents, but you have enough in savings to cover all of your final expenses (including funeral costs, taxes, and debts) and to support your family after your death, you may not need life insurance. However, the very fact that you’re asking yourself whether you need it leads us to believe that it might be worth looking into.
We’d be glad to help you review your situation to see if life insurance coverage is the right fit for you. As licensed brokers, we have access to all of the major life insurance companies in Canada. This means we can help you make an informed decision and find the right product for you at the right price.
Send us a message, request a quote, or give us a call today so we can get started!
About the Author
Jordan Richardson, B.Sc, LLQP, QAFP™
Founder - NorthWise Insurance
Jordan was born in London, Ontario, but has lived all over the province, spanning from Windsor to Sudbury. He graduated with Honours, Bachelor of Science (B.Sc.) in 2013 from the University of Waterloo, and quickly pivoted away from science and to the financial services industry. Jordan acquired his Life Licence Qualification Program (LLQP) in 2014, and more recently obtained the Qualified Associate Planner (QAFP) certification. Jordan is currently one exam away from his Certified Financial Planning (CFP) designation, and the Chartered Life Underwriter (CLU) designation. With early success in the financial service industry, Jordan quickly was thrust into management roles, specializing in team building through creating great work culture, and in digital marketing strategies. These skills were utilized in the creation of NorthWise Insurance, where the goal is geared towards an omnichannel advice platform that offers a wide range of financial products, all available digitally.
Jordan is engaged, and has two beautiful daughters. He is the Chair of the Young Professionals Association (YPA) of Sudbury, and mentors a little brother in the Big Brothers, Big Sisters Program. When Jordan isn’t working or with his family, you can find him on the golf course or playing basketball.