Life insurance provides financial security for your family in the event of your death. It can also finance funeral expenses, and cover debts, as well as additional obligations. If you have children or a spouse, life insurance can help to provide for their financial needs if you were to die unexpectedly, including contributing to their education, housing, and other expenses. If you die while in debt (with, for example, a mortgage or car loan), life insurance can help to ensure that your debt is paid off. This could save your family from having to shoulder your debt.
For business owners, life insurance can help protect your business in the event of your death, supplying funds to help your business continue operating. For high-income earners, it can help to ensure that your loved ones maintain their standard of living.
It’s important to note that life insurance is not a one-size-fits-all solution. The amount and type of life insurance you’ll need depends on your individual situation.
Types of life insurance
- Mortgage life insurance pays off your mortgage if you die.
- Term life insurance provides coverage for a set period of time, such as 10 or 20 years. Term life insurance is typically more flexible and affordable than mortgage life insurance, but it does not build cash value.
- Whole (or Permanent) life insurance provides coverage for your entire life. It builds cash value over time, which can be used for retirement savings or paying for college.
- Universal life insurance is a mixture of term life insurance and whole life insurance. It covers your entire life, but you have more flexibility in how you handle your premiums and cash value.
Do I need life insurance if…
I have no debt
Whether or not you need life insurance as a Canadian with no debt depends on your individual state of affairs. If you have dependents, life insurance can help to provide for their financial needs. Even if you don’t have dependents, life insurance can help to cover your final expenses, such as funeral costs.
Other things to consider when making your decision: your financial commitments, income, capital gains and other tax implications on death, the state of your health and how much you can afford to pay for life insurance.
I have no dependents
You may not need life insurance if you have no dependents or debt. However, there are still some arguments for why you might want to think about purchasing it. For example, life insurance can help to: 1) Pay for your funeral expenses. 2) Leave a legacy to your loved ones. 3) Mitigate tax implications on investments or estate taxes.
I’m over 50 or 60
Yes, you may still need life insurance if you are over 50 or 60 years old. Life insurance can help to provide financial security for your family and loved ones.
Here are some reasons why you might want to consider getting life insurance if you are over 50:
- You have dependents who rely on your income.
- You have outstanding debts, such as a mortgage or car loan.
- You want to leave a legacy to your loved ones.
I have mortgage insurance
Whether you need life insurance if you have mortgage insurance depends on your particular situation. Here is a summary of the key differences between mortgage life insurance and term life insurance:
| Feature | Mortgage Life Insurance | Term Life Insurance |
|---|---|---|
| Purpose | To pay off mortgage debt in the event of the policyholder’s death | Financial protection for the policyholder’s family in the event of their death |
| Death benefit | Goes directly to the mortgage lender | Goes to the policyholder’s beneficiary, who can use it for any purpose |
| Premiums | Level premiums throughout the policy term | Level premiums for a specified period of time, then increase thereafter |
| Coverage | Can only be purchased to match the amount of the mortgage debt | Can be purchased for any amount |
| Flexibility | Very little flexibility; cannot be changed or canceled | More flexibility; can be changed or canceled at any time |
| Cost | Typically less expensive | Usually more expensive of the two |
Life Insurance Questions?
If you are unsure whether or not you need life insurance, it’s a good idea to speak with a financial advisor. They can help you assess your individual needs and recommend the right type and amount of life insurance for you. It’s essential to compare rates from different insurers. You should also make sure that you understand the terms and conditions of the policy before purchasing. Contact one of our life insurance specialists.