Why Do You Need Life Insurance?

September 9, 2021

Many Canadians don’t think of purchasing a life insurance policy and aren’t even 100% sure what life insurance even is in the first place. There’s also a common misconception that life insurance coverage is just for older people, but that couldn’t be further from the truth.

We’re here to clear the air about everything to do with life insurance; why you need to buy life insurance, why you may need it even as someone under the age of 50, and everything in between.

What Is Life Insurance?

First thing’s first. Let’s talk about what it is and the different types of life insurance you can purchase. Yes, there is more than just one life insurance policy!

Essentially, life insurance is a type of policy agreement between you and an insurance company that, in the event of your death, will pay a lump sum (tax-free) to your beneficiaries (or loved ones). Life insurance premiums are typically paid by you to the insurance company monthly or annually. When your loved ones are given the money after your death, they can use it towards whatever they choose i.e. outstanding debts, medical bills, funeral costs, college funds, etc. However, before signing up for a life policy, you must know what type of life insurance you need first. There are two primary types of life insurance: permanent and term life insurance.

Ensure your family is thoroughly covered with life insurance.

Term Life Insurance

Term insurance is the most popular type because of the cost. You can choose the coverage that works best for you and your personal finances, therefore, the premiums you set (as well as payment consistency) are locked in place and cannot change. A term policy is typically anywhere from 10-20 years.

Permanent Life Insurance

Rather than just choosing when you think you need it most like with term policies, permanent insurance policies are more expensive because it provides lifelong coverage and may build cash value from the moment you sign up until you pass away. It combines a death benefit with a savings component, so in some instances, you can withdraw money to help pay for expenses if needed. What’s also beneficial is that you won’t pay any taxes on the policy growth for as long as the policy is in force. The cost will primarily depend on your age and current state of health.

But this is where things can get a bit confusing. There are various permanent policies to choose from depending on your insurance needs.

Whole Life Insurance

Whole life policies provide a set coverage amount during your entire life and when you die, a beneficiary will receive a lump sum. Again, these funds can be used to cover funeral expenses, any outstanding loans, or final expenses like a mortgage, car, college tuition, etc. Depending on your life insurance needs or goals, whole policies can be broken down into single premium, survivorship, modified premium, and more. A trusted broker will go over these options with you.

Universal Life Insurance

Universal insurance works very similarly to the one above, but it can actually come with a lot more flexibility in terms of the death benefit, the premiums you’ll pay each month or annually, and the savings that will accrue that can be withdrawn when needed. Basically, you can adjust anything when circumstances change.
Permanent life insurance is more flexible than term life insurance.

Key Person Insurance

This type of life insurance policy is for people who want to protect their business in the event of the key person’s death (such as a partner, investor, co-owner, or director). Premiums are covered by the business and when the key person dies, the business can take out the lump sum and use it to cover any cost associated with that key person’s role, like employee training or paying outstanding debts. The cost of the policy will be based on a few different factors such as age, health, and occupation.

Special Risk Life Insurance

Also referred to as high-risk life insurance, those who take part in dangerous sports or recreational activities or that have a serious health concern need life insurance in order to protect themselves while they’re on the job. Great examples are those who work in construction or with large farming equipment, or who have been diagnosed with an illness like AIDS, heart disease, or cancer.

The Benefits Of Investing In Life Insurance

As you’ve probably already gathered, the main reason people purchase a life insurance policy is to bring peace of mind to their family members after they die. Without these policies in place, you could unintentionally leave behind debt you didn’t intend to otherwise. Do you have student loans? Do you have outstanding payments on your credit cards? Possibly the largest benefit of investing in a policy is the fact that your children or other family members don’t have to be left with the burden of your unpaid debts. They are free to use the money they receive any way that they want.

You may end up finding excuses, like life insurance is too expensive or who needs life insurance if I’m healthy and in the best shape of my life? But ultimately, it’s never too late to get life insurance. You also don’t have to break the bank with said investment, especially when it comes to permanent life insurance plans which are, oftentimes, very flexible and, therefore, risk-free, they hold their value, and the lump sum payout is tax-free.

If you can’t decide which life insurance policy is best for you, work with an experienced insurance broker.

Which Life Insurance Policy Is Right For You?

If you’ve decided that you do want coverage, the next step is deciding which type of coverage. There are a few determining factors here. The first should be how long you’re hoping to have coverage in the first place which will also depend on your stage of life. The second will be which insurer you’re interested in and how much you’re willing to pay either per month or per year. This is a great opportunity to work with a professional insurance broker, like our brokers here at Shelter Bay, that can guide you in the right direction and answer all of your questions along the way.

Protect Your Children & Your Assets

Life insurance policies were made in order for you to be able to protect your family and loved ones in the event of your death. While it may be hard to think about even if you haven’t reached your golden years yet, it’s always best to plan ahead, especially in the event of a medical emergency or the unexpected. Our experienced and dedicated broker here at Shelter Bay can start working with you today to find the best policy for you and your family. Contact us by filling out a form or giving us a call.

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