For some Canadians, applying for life insurance seems like an overwhelming process that reminds them of their mortality. The truth is that comparing life insurance can be as easy as a few clicks, and it’s hard to put a price on the financial security and peace of mind these policies offer.
Despite your reason for having or not having life insurance, you’ve probably wondered, “is life insurance worth it, and when should I consider it?”
Some may believe the hard and fast answer to these questions is you should have life insurance and get it as soon as possible. However, your financial status, assets, and beneficiaries affect whether life insurance should be a primary concern. If you’re wondering whether you should invest in life insurance, keep reading to learn about the factors to consider.
In this article
Who Should Have Life Insurance?
Life insurance keeps a policyholder’s loved ones safe after their death. It works as a second income that almost replaces the earnings brought in by the person who passed away, which allows the family to keep up with all financial obligations. This death benefit helps pay for anything from groceries, gas bills, and other daily expenses to debt, mortgage, and furthering children’s education.
If you feel your spouse, children, or other dependents may need financial support after your death, applying for life insurance is a must. A life insurance payout provides your beneficiaries with the appropriate funds that outweigh your monthly premium costs.
Some specific examples of who might need life insurance include the following:
- Employed parents or breadwinners can give peace of mind to young children or unemployed or low-wage spouses who may need additional assistance after their passing.
- Stay-at-home spouses play a major role in the upkeep of the family and home as a whole. They typically take on most of the cleaning, cooking, driving, educating, shopping and many more responsibilities for the household. Should the stay-at-home spouse pass, there could potentially be major costs associated with all of these roles. A life insurance policy will assist with these types of finances after their death.
- Caregivers who nurture one or more elderly or disabled family members need life insurance to plan for the future, guaranteeing those who need care receive it in case of an accident.
- Single individuals with debt surpassing their savings may need to cover their bases so their financial burdens don’t fall on their next of kin. Insurance helps pay for all credit card and other outstanding debts, as well as end-of-life expenses like burial costs.
- Homeowners need life insurance to help protect their largest investment and keep their family residents in charge of the estate, especially if their home still has a mortgage. Similarly, business owners must ensure their beneficiaries have the funds to keep the company afloat.
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Who Can Probably Afford to Hold Out on Life Insurance?
However, is life insurance worth it if your situation doesn’t fall under any of the above categories? If you have plentiful savings, these can replace life insurance for those you leave behind. So, while insurance companies still recommend a policy, it’s not vital to your family’s well-being.
You’ll know your savings are enough to support your loved ones without the added advantage of life insurance death benefits if you can check off all the boxes below:
- You have little to no debt: Your savings outweigh your debt, which includes any car, credit card, and mortgage payments.
- You have enough for post-death expenses: Your savings covers all costs for funeral services, flowers, and other burial arrangements.
- Your family can continue as they are: Your savings help your surviving family members remain on track with all bills and other expenses with one less income available to them.
- Your family can afford future added expenses: If your family needs to hire a regular tutor, plan for a wedding or another unexpected funeral or medical expenses, or has children that will later go off to university or secondary school, they will need financial protection. If you leave them with hefty savings, they can use it as their own savings to help in these cases.
Types of Life Insurance Coverage to Consider
If you decide obtaining life insurance is the appropriate path for you, the next important question is which type of life insurance best fits your situation. For instance, while some policies offer short-term coverage to help policyholders and their families through temporarily uncertain or difficult times, others provide permanent coverage. Do your research to find the best choice for you. Let’s break down some common types of life insurance.
Term Life Insurance
Term life insurance is temporary life insurance that remains active for a set time before expiring. Usually, this time frame lasts between 10 to 30 years and only pays out if the insured dies within this period. Otherwise, if the insured lives beyond the policy’s expiration date, their death benefits become null and void.
A term policy is the most popular since it serves many benefits not available with other types of life insurance.
For one, most Canadian residents only view life insurance as a necessity as long as they have dependents like underage children. The policyholder then determines how long it’ll take for their children to grow into adulthood and obtain steady jobs. They then apply for a policy that’ll expire when the beneficiaries would no longer depend on the death benefits.
Temporary life insurance is a good choice for policyholders who expect their financial status to change within the coming decades. For instance, if you plan to pay off most or all of your debts or mortgage expenses before your policy ends or are focused on growing your savings, you may not need full life insurance.
Whole Life Insurance
Whole life insurance is permanent life insurance that lasts until the policyholder’s death. However, since the policy never expires, it guarantees a payout, making the application process more complicated. You’ll have to undergo a complete medical examination and answer insurance questions thoroughly.
This permanent life insurance also comes with higher premiums that may cost as much as five times that of term life insurance, making it a less popular form of life insurance for the average Canadian household.
However, while many wonder, “is life insurance worth it?” due to the high premium payments of whole life insurance, others appreciate this policy’s stability. As long as you pay your fixed monthly premiums, your policy remains valid and promises at least the minimum death benefits. You also get cash value you may borrow against as a loan during your lifetime.
Universal Life Insurance
Many Canadians also wonder if life insurance is worth it with a universal policy. Universal life insurance is another long-term life insurance that provides flexible rather than fixed policies. Not only will you have a say in how much you pay with monthly premiums or when you pay them (within reason), but you can also alter your policy as your life situation changes.
For example, if you were in good financial standing when you took out the policy but now need to put a child through college, you may need to upgrade your insurance to cover these added expenses in case of your death. Unfortunately, premiums also fluctuate, so you’ll pay more if you increase your death benefits. Premium costs decrease if you lower your death benefits.
When Should You Apply for Insurance?
Most Canadians don’t consider obtaining life insurance until they have dependents, whether a spouse or one or more children, since a policyholder’s primary concern is protecting their family in case of a tragedy. However, there are many benefits associated with early application.
If you decide to purchase life insurance in your young adulthood, you can receive a lower premium, especially if you choose term or whole life insurance. The insurance company locks in your rates for the duration of your policy, so they won’t go up as you age or if you become ill. As long as you pay your premiums on time, you don’t have to worry about losing your coverage.
You’ll also have guaranteed lower premiums since you’ll have fewer ailments that could prevent you from obtaining the coverage you need. Adults 50 and up are more likely to suffer from life-threatening physical injuries like a stroke, heart attack, or diabetes, which cause insurance premiums to go up. Even having recovered from those illnesses, insurers would still in most cases quote you based on having a pre-existing condition.
Saving on premiums also makes paying for insurance easier as you eventually purchase a home with a mortgage and start a family or even a business.
More Reasons Why Life Insurance is Worth It
Let’s discuss the benefits of working with a Life Insurance broker.
Compare Life Insurance Quotes to Find the Right Policy for You!
Insurance policies are not all equal, meaning what works for one person may not fit your lifestyle or budget. What’s more, finding the perfect fit may mean scouring dozens of policies from different insurance companies, which may leave you wondering, “is life insurance worth it?” Instead of getting stuck, trust us to find you custom quotes based on your unique situation.
The Alliance Income Services Corporation team in Canada merges an interactive, user-friendly digital platform with the physical world to find insurance policies within your budget with death benefits to protect your loved ones. No matter the type of insurance you’re looking for, we scour top insurers like Assumption Life, Manulife, and RBC Insurance to find you the best. Fill out our quote form and start with a free quote today!