Every day, we protect ourselves and our loved ones in various ways as we go about our day-to-day activities, and yet life can take a sudden turn at any time. If you have recently updated or are considering updating your will and estate plan, it may also be time to review your life insurance coverage.
Who should consider life insurance?
If your family members would need financial support after you die or if they would be negatively impacted by paying your last expenses and outstanding debts, then you may need life insurance. The following are a few of the different reasons why people purchase life insurance, who it can benefit and who it can protect.
Most people who are single believe that they do not require life insurance because no one is financially dependent on them; however, there are some exceptions. For example, some individuals may support elderly parents, while others may carry large amounts of debt, such as student, business or family loans. An additional reason to purchase insurance early is the cost savings from buying coverage at a younger age.
Married or common-law couples
Today, many couples need both incomes to maintain their standard of living, to meet ongoing expenses and to reach their long-term financial goals. A common issue young couples face is not having adequate protection on the outstanding mortgage of their family home. Owning your own life insurance policy often provides more flexibility and lower costs versus buying creditor mortgage insurance from a lender such as a bank.
Couples planning to have children
While many couples wait until they have children to consider their life insurance needs, it is important to note that changes in your overall health may affect your eligibility to purchase coverage in the future. For example, many companies will not offer women preferred rates during pregnancy. By putting off this important foundation of financial planning, many young parents can be exposed to unnecessary risks because they have not had sufficient time to build the wealth needed to withstand the loss of a partner.
The roles performed by a stay-at-home parent can vary from an academic advisor and dietitian to an event planner, nurse and program manager. It has been estimated that a stay-at-home parent’s role, based on the work that he or she does on average, is worth an annual “salary” of $162,581.1 Yet many families with a stay-at-home parent do not have adequate financial protection to cover the added expenses they would face in the event of the loss of this extremely important family member.
It is often easy to overlook the importance of having insurance coverage as a single parent. As the primary caregiver and income earner of the family, it is important to review your insurance needs to ensure adequate coverage for your family’s financial future. In addition to life insurance, obtaining insurance products to provide income protection in the event of a disability or critical illness is also extremely important, particularly for single parents when there is no secondary income to fall back on.
Retirement portfolios can be strained or depleted faster than expected in the event of unforeseen health care costs, long-term care expenses or even premature death. The end result may mean the surviving spouse needs additional capital to supplement their ongoing retirement income, future care or medical costs. Other issues to consider are certain types of retirement income, such as Old Age Security, Canada Pension Plan or private pension benefits, which may be greatly reduced or lost when one’s partner passes on. Life insurance can guarantee a source of tax-free funds, without delay or the need for probate, to replace lost government benefits or pension income.
In addition to the various concerns mentioned above, many business owners have additional insurance needs, such as key person insurance, business loan protection, buy-sell funding or funding capital gains tax on a business upon death. Business owners have unique circumstances that need to be carefully reviewed to avoid double or even triple taxation on death.
The fact is, most people need life insurance. As you move through the different stages in your life, your insurance needs will change. Life insurance should serve as the foundation of a family’s financial security and be an integral part of any financial plan. Regardless of your age, marital status or whether you have children, take a moment to consider how life insurance might fit into your financial plans.
Odlum Brown Financial Services Limited (OBFSL), a wholly owned subsidiary of Odlum Brown Limited, can offer Odlum Brown clients a variety of coverage options from many of Canada’s top insurance companies tailored to suit their individual needs. Our licensed professionals are here to help you assess your position and then implement customized recommendations to meet your individual circumstances and needs. For more information, please contact your Odlum Brown Investment Advisor or Portfolio Manager.
1 “Moms: we know you’re worth it.” Salary.com, 2018, salary.com/articles/stay-at-home-mom.
Life Happens™ (formerly the LIFE Foundation) is a U.S. non-profit organization dedicated to helping consumers make smart insurance decisions. More information can be found at lifehappens.org.
Odlum Brown Financial Services Limited is a wholly owned subsidiary of Odlum Brown Limited, offering life insurance products, retirement, estate and financial planning exclusively to Odlum Brown clients.