1. Is Life Insurance For Me?
First off, do you NEED life insurance? No, you do not need any life insurance. Or critical illness insurance. Or disability insurance. Or most insurance. For BC drivers, though, you do need car insurance as it’s the law.
However, most of us have people who depend on us, financially and otherwise (partner, children, older parents, etc.). Our death would dramatically impact their life, but thankfully the likelihood of us dying early is low. As this is a high financial impact – low probability event, it is prudent to have insurance in place.
22 million Canadians have life insurance and the average insured BC household has coverage of roughly 5 times household income†.
However, 45% of Canadian households believe they do not have enough life insurance coverage‡. The most common obstacles identified are the perception that life insurance is too expensive or that it is not a priority.
The latest data from Statistics Canada states that the average 40 year old Canadian has a 0.1% chance of dying this year*. That means 1 out of every 1000 people, statistically, will die at this age.
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While it may seem a bit morbid, it’s important to know and make decisions based on the facts. Premature death is a low probability but very high impact event.
Fortunately, because the probability of death is low, the cost of coverage is also very low. The average 40 year old can get $1,000,000 of insurance coverage for 10 years for only $45 per month. With simple math, it would take more than 1,850 years to reach $1,000,000 if you were to self-insure by saving $45 monthly.
If you have no dependents today, that may change in the future. You may decide you want to “lock in” some coverage now at your current age and health.
Insurance premiums are lower the younger and healthier you are, as risk factors are coincidentally lower. We also face the risk of not being able to get insurance in the future due to health complications, hazardous work, or dangerous hobbies.
Coverage Through Work?
We don’t want you paying for coverage you don’t need. Our insurance checkup gives you the option of deducting what coverage you already have through work.
Unfortunately, most work plans only cover one or two times the amount of your annual salary. For most, this is insufficient coverage to support the surviving family. Make sure you look through your benefits book to find out exactly what coverage you have.
With work coverage, it is also important to consider how dependable that coverage is. Consider these 3 things for your situation:
- It is owned by your employer, not you, and so it stays with your employer
- The employer can add or remove coverage at their discretion
- If you are paying a portion of the premiums, they are typically only guaranteed to stay the same for 5 years, and will continue to increase every 5 years
† Source: Canadian Life and Health Insurance Association (CLHIA), Canadian Life and Health Insurance Facts, 2018 Edition.
‡ Source: LIMRA, Canadian Life Insurance Ownership, 2013.
* Source: Statistics Canada, Life Tables, Canada, Provinces and Territories 2014/2016, August 2018. Reproduced and distributed on an “as is” basis with the permission of Statistics Canada.