A BMO survey found that over 50 per cent of Canadians are worried that their death will jeopardize their family’s financial stability. Out of this group, 26 per cent are very concerned however, less than half – only around 43 per cent reported they have or plan to get life insurance in the next 12 months; and 31 per cent reported they didn’t have any life, disability, critical illness, long-term care, or travel insurance coverage. About the same proportion said they’re confident their current financial plans are sufficient to cover their insurance needs.
Below we’ll look at the most common reasons used by Canadians to not buy life insurance.
Top reasons not to buy life insurance policy
Although life insurance is a complex topic, 50 per cent of the Canadians surveyed reported they felt their understanding of life insurance products available at their stage in life was satisfactory, and 16 per cent felt their understanding was “very good.”
Reasons for avoiding it include:
1. I have life insurance through my job.Many Canadians have life insurance included with their benefit package at work. This is often the first time they ever deal with insurance so they don’t know that the $50,000 policy (or one that’s twice their salary) isn’t anywhere near enough coverage. When you take into account that it’s meant to cover the expenses for your loved ones if you pass away, it won’t last long. Additionally, if you quit your job or get fired, you usually can’t take your life insurance policy with you.
2. I’m strong and healthy!You’re active, eat healthy and your friends and family admire how down to earth you are. Every physical your doctor deems you as having perfect health. This is GREAT! But you’re not indestructible or immortal. It’s not even an issue of something happening to you (which it could) so much as you’re at the peak of your life so there’s no better time to get a life insurance policy to protect your family. If you’re suddenly diagnosed with a serious illness or undergo a significant injury it will be a lot harder to get any type of insurance policy, let alone life insurance.
3. I don’t have kids.Sure, children are a major reason why families get life insurance protection. But it’s not the only reason for needing life insurance. The life insurance payout is for anyone who’ll suffer a financial loss if you pass away – a sibling, parent(s), spouse, or life partner. A life insurance policy ensures that everyone precious to you, who relies (or could rely) on you financially is okay.
4. It’s too expensive.The cost of living for young families continues to rise. With monthly expenses such as day care, car payments, and student loans, a lot of money is paid out just to stay afloat. Due to this, many families lump life insurance in with extravagances, not “necessities”. But, the truth of the matter is life insurance isn’t as expensive as you might think, and it’s possible to get a good policy for less than a cup of coffee at Tim Horton’s. If money is tight now, what will happen to your family if you pass away unexpectedly?
5. Life insurance—it’s on my list … eventually.There’s no government restriction barring you from buying life insurance at a certain time. Someone you respect may have talked to you about how important insurance is, and it isn’t a pleasant topic, but you shouldn’t allow your “eventually” become your loved ones “if only.”
6. That’s that stuff for babies and old people, right?A lot people remember the Ed McMahon television commercials where he repeatedly advised their grandparents that they couldn’t be turned down for life insurance for any reason; and so they think life insurance is targeted to the senior demographic. Perhaps you received a permanent life insurance policy for your newborn in the mail with a sweet cherubic infant on the envelope. These insurance products are very specific to a targeted group —just as there are many insurance products for adults in their income earning years.
When it’s time to consider life insurance purchase?
The answer is – as early as possible. Take millenials, for example. They sign up for life insurance mostly because if they pass away, their life insurance policy can pay off their student loans, thus freeing their family from the financial burden. Many millennials have this attitude. They scarcely have a salary to replace, let alone children and/or a spouse to fall on hard financial times following their loss, but a life insurance policy is still a sound idea.
In order to benefit from life insurance, millennials don’t need to have kids. For example, if they are paying down a condo mortgage with their partner or spouse, they should both get a term insurance policy. This way, if one of them dies, the survivor won’t lose their home too.
Term life insurance for millennials is, as they say, “cheap like borscht.” Life insurance premiums for a 25-year-old female non-smoker would be $109 per year for a 20-year $100,000 policy; her male counterpart would pay $129 yearly in premiums.
Life insurance premiums increase every year, so it’s getting more expensive each year you wait. The premium isn’t significant if you’re in your 20s and 30s, but if a 25-year-old woman waits 10 years before buying a life insurance policy, her annual premium would go up by only $15 by the time she’s 35. Life insurance premiums rise steeply when clients reach their 40s.
After contemplating the logic of life insurance, it becomes clear that it’s an insurance product geared toward young people and is most beneficial for young parents. Millennials have more variables to consider – they’re in the early stages of their lifetime earnings expectations (and as a result have more earning potential than their older counterparts), they have a high relative debt level, and quite often their budget is focused on the cost of raising children. Young parents and young people in general have the most to lose financially if tragedy strikes.
Make sure you take your family’s needs into consideration when you buy life insurance in Canada – now, and in the future. What debts do you have? What lifestyle are you and your family used to living? How much money do your loved ones need to continue living this lifestyle? What’s your significant other’s earning potential? Could they go to work and earn sufficient income if you passed away? You should discuss these personal questions with a life insurance professional.
As your retirement gets closer, your financial vulnerability lessens along with the need for a six-digit life insurance policy payout.
Similarly, if you’re single, have no debt, and no one depends on your income for support, you don’t need a large life insurance policy at this point in your life.
Don’t give excuses. Take action.
Essentially, you should get life insurance when financial protection is required. You can judge this by considering if there is anyone who would be in financial distress if you passed away suddenly.