Life Insurance Canada – 7 Reasons You Need Coverage NOW

Life Insurance Canada: 7 Reasons You Need Coverage TODAY

1. You Have Debt & Dependents

This is why most people search for Life Insurance in Canada – income replacement.

The thing is, if you have debt, it doesn’t disappear when you die. It attaches to your estate and the people you owe money to get paid off before your loved ones see a dime.

If you’re a savvy investor, this is not a big deal. Maybe you have substantial savings to cover a worst-case scenario.

…but most of us aren’t in this space. AT ALL!

Even if we have savings, they are quickly devoured, and bills pile up quickly. What is the best way to avoid this situation?

Life insurance. Term products allow you to purchase substantial face amounts (ie. $500,000 – $2,000,000) when you’re most vulnerable for periods of 10, 20,or even 30 years.

The best news? It’s very affordable, especially if you buy coverage when you are young and healthy. So, if you’re getting married, having a baby, or buying a family home, check out some rates now!

Sample Rates for Healthy Men & Women in Their 30’s

Age

$500,000

$1,000,000

30 Year Old Male

$30.87

$54.99

30 Year Old Female

$22.50

$38.79

40 Year Old Male

$45.23

$85.59

40 Year Old Female

$33.53

$60.84

*Quotes above are for RBC Term 20, monthly, Standard Health Class, non-smoker. Your rates may differ depending on your unique circumstances. Sep 2024.

Wow! The rates are very fair, especially compared to the daily $6 latte you get from Starbucks.

Most people are rated standard, although you may get better rates is you are in terrific shape and don’t have a family history of serious illness.

2. A Child with Special Needs

If you have a child with special needs, you know just how important planning is. You may be Googling Life Insurance Canada to see how to use it to help provide funds after your death.

I think this is one of the scariest things to consider for any parent – but it’s even worse for those who have adult children with specineeds that continue after your death.

How can you provide for someone if you are no longer here?

Trusts provide a vehicle for achieving these goals. They are complicated instruments and should be approached with care.

It’s possible to set up a trust for your disabled child that is funded by life insurance proceeds when you pass away.

Be sure to work with a financial planner or lawyer in this area.

Please note—for most people, we recommend term coverage. It’s incredibly affordable and covers you during your most vulnerable periods. However, when it comes to trusts for a dependent child with special needs, permanent insurance is the only way to go.

“Special Needs Trusts, also known as supplemental needs trusts, can be incorporated into your estate plan to hold any funds or property you want to leave to your disabled child without jeopardizing your child’s public assistance benefits. The are discretionary spendthrift trusts [which means the beneficiary’s creditors can’t reach the trust assets] intended to supplement, but not replace, any public benefits the trust beneficiary receives such as SSI, Medicaid & other governmental programs.”5 Things Every Parent Must Do To Protect Their Special Needs Child, MyPinkLawyer.com

3. Student Debt

Huh? Yep, if you are looking for Life Insurance, maybe you’re covering a student loan and want some protection…

…just in case something happens.

Many parents help their children co-sign debt for continued education, understanding that their children will pay the balance when they get a job.

But what happens if the child dies? The debt doesn’t vanish – this is why many parents taking on this sort of responsibility get life insurance coverage to ensure they don’t get stuck with a bill they can’t afford in their later years.

The good news is that you can use term coverage to achieve this goal, and this type of life insurance is very affordable in your 20s and 30s.

For example, a 20-year term policy for a relatively healthy 20-year-old Female will cost about $14 monthly for $250K of coverage!

Wow, now that’s so cheap for what it offers.

4. To Equalize Inheritances

The world is changing. Divorce used to be the exception – and now it’s increasingly more common. People even jokingly refer to first marriages as “starter” marriages.

This means that the family dynamic is changing, too.

Second marriages often result in stepchildren and additional children with new partners, creating a tiered system.

Many blended families use life insurance to avoid inequitable situations and protect their children from being on the short end of the stick.

For example, maybe you’ve earmarked your eldest child to take over the your business but want to ensure your other kiddo doesn’t get the short end of the stick.

You take out a $250K policy to assure a future payout to the child who does not inherit the family business. Of course, you need to use a permanent policy to achieve this goal.

5. Business Interests

Entrepreneurs use life insurance for a variety of reasons.

• Key Person Insurance: First and foremost, life insurance can cover “key people” in a company. Let’s say you launch a business with some partners and provide an invaluable service. For example, you are a talented graphic designer who is integral to the online magazine you run. What happens if you die? Will the business collapse? A life insurance policy may ensure the continuation of your company’s and your replacement’s insurance. It provides your partners with funds to cover the recruitment process and the loss of your skills for some time.
• Cover Loans: Life insurance can also cover loans acquired to expand the business. Banks often require loan applicants to take out a life insurance policy to cover money extended as credit, protecting their interests.
• To Fund a Buy-Sell Agreement: This agreement allows the surviving business owner to purchase the interests of a partner who dies. The policy provides the funds needed for this transaction so the business doesn’t get broken up or end up in the wrong hands. To do this, each partner takes out a policy to guard against their death. Then, they execute a buy-sell agreement.
• Create Benefits Packages to Incentivize Employees: Benefits are worth a lot of money. Businesses often create benefits packages to entice top-level people to work for their organization. A good life insurance policy is usually part of this tactic.

6. To Guarantee Future Insurability

Life insurance for children is one of those topics that tends to polarize people. Some believe it’s a truly despicable thing, while others see it as a way for insurers to capitalize on people’s love for their kids.

Well, I could not disagree more. I think this is an opportunity my wife and I missed with my stepson, who has ADHD.

If you buy life insurance for your newborn or child, you can lock in future insurability for them.

YEP. You heard me right.

There are a few ways you can achieve this goal:

• You can take out a term policy for your kiddo. If you do this, it can be renewed or converted to a permanent policy without evidence of insurability. Please read your policy because they aren’t all the same.
• Buy a Child Term Rider when you take out your coverage. This typically assures insurability to ages 21-25, allowing your 20-something child to buy their coverage without evidence of insurability.
• Take out a small, 20-Pay, Whole Life Policy with guaranteed insurability rider. I think this may be the best option as you’ll still have something to show for the money you’ve invested in the policy, regardless of whether insurability rider needed.

These options work out well for people who have a child who is diagnosed with a medical problem or disability that will cause issues for them in the future when it comes to insurability.

7. Final Expenses

This is one of the best uses for permanent life insurance. It’s a way of making sure family isn’t burdened with your end of life expenses.

Many of us avoid these issues until we are older OR have a medical condition crop up.

If I could change one thing, it would be people’s avoidance of the impermanence of life. The best time to plan an estate is when you are young and healthy. Life insurance is a fraction of the cost at this juncture, AND you have plenty of time to save for your burial and final taxes.

If you are one of those who waited too long, there’s hope.

The reality is, most people do not think about final expenses when they are younger. Fortunately, Small, affordable whole life policies are available for people in their later years, to take care of these costs.