Life Insurance 101

Life insurance is a legal contract between you and the insurance company. The insurance company will insure your life if you pay your required premiums. If you die during the policy term, your beneficiaries will receive a tax-free payment based on the amount you purchased.

Why Consider Life Insurance?

You might think, why would I add another monthly expense to my budget for something that ‘might happen’?

Here’s why.

Life insurance protects your loved ones. If you have a young family, consider it protection for your spouse and growing children. Even if you don’t have children or they’re grown, your spouse or other beneficiaries can use the funds to pay off your debts, cover your burial expenses, pay your medical bills, and handle your estate taxes.

Who Needs Life Insurance?

Everyone needs life insurance because, at some point, everyone will die. It’s more important when you’re young and don’t have money set aside for burial and medical expenses, but most Canadians need some form of life insurance throughout their lifetime.

Common examples of who needs life insurance include the following:

Surviving spouses
Dependent children
Aging parents, dependent on you for financial support

Consider life insurance if you still have a mortgage, kids going to college, or anyone who depends on you financially, whether a spouse or aging relatives.

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Types of Life Insurance

Canadians have two main types of life insurance to consider:

Term life insurance – This insurance is good for a specific term, usually 10 – 30 years. If you die within that time, your loved ones receive the payout. Term life insurance is the most affordable option, especially for young families.
Permanent life insurance – Whole life insurance is the most common example of permanent life insurance. These policies last for your lifetime, offering a death benefit like term insurance and an investment component. However, the premiums on permanent life insurance are much higher and the investment component can be weak compared to other traditional strategies such as an RRSP.

Do you Ever Not Need Life Insurance?

Life insurance is always a good idea to cover your final expenses, such as your burial expenses, estate taxes, and medical bills.

However, if you’re in any of these situations, you may not need it or may not need as much insurance:

You have a lot of money saved and set aside for your final expenses, so your loved ones aren’t financially distressed when you die.
You are single and don’t have any dependents, and you don’t have any debt that has be co-signed by a family member.
Your children are grown and are no longer dependent on you, and your spouse is financially independent.

Final Thoughts

Life insurance is something everyone should consider, whether young or old. It’s a key component to financial planning and protecting your loved ones when you die. There are many life insurance options with different premiums and benefits. Get an instant quote today and see how affordable your life insurance can be.