Why You Need Insurance

There are far too many Canadians without adequate life insurance coverage. Some have the wrong type of insurance, some don’t have enough and others simply don’t have coverage at all. First of all, let me say that it’s not their fault as the information out there is questionable at best and many of those selling the insurance policies are not doing the average consumer any favours.

I have written about the needs for life insurance before – particularly strong for those with young families – but I wanted to expand on this subject a little more as the message still isn’t reaching those who need to hear it most.

I’ll start off with a quick story: A few years ago, my brother’s next door neighbour was killed in Calgary while driving his motorcycle. His wife had just given birth to their second child and he was the sole income earner for this young family of four. They had just moved into their brand new house that they bought after he landed his dream sales job making $125K per year. He had no life insurance. With no savings built up yet and the house fully mortgaged, his wife was left with a huge debt load and no money at all. With the housing market retracting, she had no choice but to claim bankruptcy and walk away from everything. She is currently living with her two young children in her parent’s basement and relying on them for financial assistance.

The young man from the story above was 26 years old when he died. $1 million of term life insurance would have cost him approximately $45-65 per month – well within his financial means at the time.

So the real question is why didn’t he have this insurance coverage? People have many different reasons for not setting up proper insurance but there are some common themes that keep reappearing:

One common reason we hear is the price – there is a huge misconception out there as to what it really costs. A recent study had respondents estimate what the cost was for a 30 year old to buy insurance and the average person estimated 3-4x the actual cost! My example above shows how affordable it can really be.

The second one we often hear is about the need to spend on other priorities – while many think that paying off debt, saving for retirement and even putting money aside for their child’s education take more priority, they are often very wrong. Life insurance is not a luxury, it’s a necessity.

The third, and often most common reason people don’t have insurance is that they simply haven’t gotten around to it – procrastination is often the #1 cause of financial failure. It’s amazing that so many people out there understand the importance of this insurance and yet they can’t “find the time” to get it set up. Take a look at your spouse and children tonight and decide if you can spare 1 hour of your time to ensure their financial stability.

There are many people who think they’re already covered because their employer’s group benefit plan provides a life insurance component. These plans almost always cover 1-2 times your annual salary which, I can pretty much guarantee, is not enough coverage. Take the time to sit down with a Certified Financial Planner to discuss how much coverage you should really have.

There are many ways to purchase life insurance in Canada but I strongly urge you to look at all of the options through an independent insurance advisor. There is no one company out there that does everything well so if you decide to purchase insurance through an agent of a bank or insurance company, it’s impossible to compare all the options and make sure you’re getting the one that’s best for you at the lowest price.

If you know someone who has a young family, I urge you to tear this article out and pass it along to them. If the unthinkable happens, at least they’ll know that the family they leave behind will be taken care of.

Insurance products provided through multiple insurance carriers.
Mutual funds products are offered through Investia Financial Services Inc.