Do young Canadians need life insurance?
There can be a “very high temporary insurance need” for younger Canadians, said Andrea Thompson, a certified financial planner at Modern Cents, in an interview. That’s because mortgage debt and lost income earning potential over their lifetime creates a need to protect their family’s financial interests.
While life insurance often doesn’t take priority for a carefree 20-something-year-old, it can help protect families and co-signers from incurring that debt suddenly if the young person dies unexpectedly.
“Life insurance is mostly for legacy, taxes and loved ones,” said Jeffrey Talor, director of sales at Canwise Life Insurance Services. “You want to make sure that your family is not exposed in the event of your passing.”
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What are the benefits of getting life insurance when you’re young?
There are a lot of benefits to purchasing life insurance when young, Talor said. Age is an important factor in locking in a lower premium for the coming decades.Down the road, Talor said, if their health deteriorates and a person already owns life insurance, the premium will not change until the term ends.
The policy is calculated by age, among other factors, Talor said. Fewer medical requirements and lower mortality rates for those in their 20s make it easier and cheaper to buy life insurance.
What type of life insurance should you buy?
“Between 20 to 30, we’re noticing it’s the best rate band and between 30 to 40, there is a bit of an increase, then 40 to 50, it’s becoming somewhat pricey,” Talor said. He says a lack of education on the benefits of life insurance also dissuades young Canadians. “We think it’s so expensive to buy insurance,” he said. ”It’s not that expensive to buy term insurance, it’s about a dollar or $2 a day.”
Term life insurance covers the policyholder for a set period, such as 10 or 20 years, and the premiums do not change throughout the length of the term. Permanent life insurance can come with more expensive premiums because it covers you for your entire life. While the premiums can be higher, they are also fixed. Some permanent life insurance policies also have a cash value feature, where a portion of the premiums goes toward building a cash value over time which the consumer can use or borrow from.
The individual could use the cash value portion as collateral for loans, Talor said.
