Whether you’re in your 20’s and starting a new career, in your 30’s thinking of starting a family, watching your children grow in your 40’s, or thinking about what retirement might look like in your 50’s and beyond, there are two things that you should think about:
- Your loved ones that rely on you for care and financial support.
- The impact your death may have on their life in those areas.
Although the future may be unpredictable, life insurance helps ensure that you can protect your loved ones, no matter what happens. Proper life insurance coverage provides you with peace of mind, knowing that you will not be leaving your loved ones in a difficult financial circumstance if you pass away.
Life insurance is a key component of any financial plan, and there are many different reasons why someone would want to purchase life insurance. Every person’s situation is different, but there are some commonalities to when people start to consider the importance of putting proper life insurance protection in place.
Here is a list of 7 of the most common reasons people purchase life insurance:
Provide income for your partner, children and dependents.
As mentioned earlier, there are people in your life that you care about, some of which rely on your income to support their needs. The obvious examples of this would be your spouse or children. How would they be financially impacted if you were to pass away? The likely answer is that they would experience a significant financial impact, at an already difficult time. You may also have others that rely on your income, such as parents, siblings, or adult children. Life insurance can be used to replace your income to ensure the financial impact on your loved ones is minimized.
Pay off your debts, loans and mortgage.
One of the most common reasons for purchasing life insurance is to ensure that your debt is not being left to your family. Meeting payment requirements at a reduced income can be difficult, and may result in your loved ones having to make significant changes to their lifestyle. It is all too common to see houses being sold at inopportune times as a result of unaffordable mortgage payments, or being forced to sell a home or cottage because of a death. Doing so may result in delays that require taking on additional debt, or selling your home for lower than market price. There could even be tax implications that could reduce the amount of funds your loved ones receive.
Cover burial and funeral expenses.
Reducing the financial burden on loved ones is also important at the time of passing. Funeral and burial expenses can add up quickly with a traditional service being upwards of $13,000 and cremation and memorial services being over $8,0001. This trend is only going to continue to rise. The sudden cost of funeral and other final expenses can be difficult to fund, especially after losing an income provider for the family. Even relying on bank accounts or properties of the deceased to provide funding may be risky. It takes time for assets to pass through the estate, so the funeral bills may be due long before you receive access to any assets.
Post secondary tuition and other expenses for your children.
With the cost of tuition for post-secondary education across Canada continuing to rise, saving for a child’s education is a significant expense for parents that are looking to provide financial support for their child. The average cost of tuition for an undergraduate program is over $6,600 per year with students taking an average of about 4.5 years to complete their program1. Tuition costs continue to rise and post secondary education and graduate programs continue to rise in enrolment. This cost doesn’t even factor in the cost of a meal plan or living expenses that may be incurred if the school is away from home. Ensuring that your children can pursue their educational goals is a significant financial undertaking. You can protect that dream with life insurance coverage.
Even if you don’t expect your child to attend post-secondary education, or they are self-funding it, there may be other reasons you want to increase your life insurance coverage to provide them with some support. This may include helping them with the down payment on their first house, providing support for future grandchildren, helping them pay for a future wedding, or anything else they may be passionate about.
Covering estate taxes.
For many people, one of the largest financial costs resulting from death is the taxes owed upon filing an individual’s final tax return. If you have a retirements savings account, multiple properties, a business, or any items of significant value, implementing a proper estate plan is critical. Life insurance is a key component that ensures that taxes are covered without leaving the burden to your family at time of death. Our team of professionals can assist you in protecting your potential tax needs, which may even involve an estimate from your accountant, in more complicated circumstances. Not including funds to cover estate taxes and fees can result in the assets that you hoped would go to your loved ones, being sold off to cover the cost. It is extremely important, especially as your estate grows larger and more complex.
Locking in at lower premium rates.
If you are young and healthy, you may feel that you don’t really need life insurance at this point in your life, but purchasing life insurance while you are young and healthy can save you a LOT of money in premiums over the long run. Insurance premiums are based on the likelihood of the insurance company having to payout the benefit – meaning premiums are very low if you are young and healthy. By purchasing life insurance at a younger age, you will be able to lock in the lowest rates available to you, for the entire term of your policy. Once you have coverage in place, even if your health gets worse, you have the guarantee that you will be able to secure coverage once your initial policy term expires.
To protect your insurability in case of a decline in health.
Another long-term benefit for people that may NOT feel that they require life insurance at the time of writing this is that taking out a policy will protect your insurability. This means that if you develop or are diagnosed with health conditions that may prevent you from getting insurance, you already have some in place that will ensure you are covered. Protecting your insurability with life insurance is a very important benefit to purchasing a policy. Even term insurance provides this benefit as you can convert to longer term coverages and even permanent insurance, without additional medical underwriting or even concern for your current health.
Planning for your life insurance needs is always the best approach, after all, the day that you need life insurance is a day too late. Our team of licensed professionals at Hometown Life Insurance are here to assist you with your life insurance needs. We help our clients by completing an insurance review to understand your needs, then recommend some options to suit your needs. Our clients appreciate our approach to insurance because it allows them to be in control, while allowing our team to do the work for you. Putting off life insurance doesn’t make it any less important, so we recommend thinking about protecting yourself and your family by taking the first step. Contact our Hometown Life team and we will be happy to discuss how you can get started today!
What are your next steps?
Our Hometown Life team has licensed professionals that are here to assist you in evaluating your own life insurance needs. Spending just a few minutes chatting with us will help you identify the amount of insurance you need and the cost of putting that insurance in place. Your life insurance should be tailored to meet your unique needs, and we have the expertise to help you do just that!
