There are clear advantages to taking out life insurance at a young age: you can get permanent life insurance at lower premiums when you’re younger, and those premiums typically won’t increase as you age. This can save you a considerable amount of money in the long run. Also, by taking out life insurance when you’re young, you’ll minimize the chances of being turned down due to an existing health condition.
Younger people, however, are less likely to have life insurance than their older counterparts and are less aware of when they should take out life insurance. We take a look at five of the most popular milestones when you should consider taking out life insurance.
1. Getting married/starting a common-law relationship
Many young people feel that they don’t need life insurance because, if they die, there’s no one left behind who relies on them for their income.
This situation changes radically the moment you get married or begin a serious common-law relationship. All of a sudden, someone else’s financial security is at stake if you were to die. No one wants to think of their loved ones struggling financially, if they were to die, so it makes sense that this particular milestone would prompt a lot of people to buy life insurance.
2. Having a baby
If getting married doesn’t prompt you to buy life insurance, having a baby might. You now have at least two other people who rely on your income for their financial security, plus you have a whole other array of potential expenses to pay for, including:
- Childcare costs.
- Extracurricular activities.
- School supplies and clothing.
- Post-secondary education.
- Financial help to buy their first home.
One of the main benefits of life insurance is that it will help ensure that these costs are covered if you pass away.
3. Buying a home
After buying a home, most people want to ensure that, if they die, their spouse won’t be left having to pay a large mortgage by themselves. To prevent this, you could take out life insurance that will be enough to pay off the outstanding mortgage debt.
While mortgage life insurance is also available, it only pays off the balance of your mortgage and goes directly to your financial institution, not your beneficiary. The amount of your life insurance coverage doesn’t change, no matter how much you pay off your mortgage, and all the money goes directly to your beneficiary. Life insurance is also typically cheaper than mortgage life insurance.
4. Setting up a business
Being the owner of a company brings a whole new set of responsibilities. Not only is your family reliant on you to make a success of the business, but your employees also depend on you for their own income.
A life insurance policy can not only provide financial support for your family, but it can also protect your business partners and the business itself. It’s important to work out how much your business is worth, so you can take out adequate life insurance. This payout can help keep the company going after your death, either over the short term (to give your family members time to sell it) or over the long term (if they decide to keep it as a going concern).
5. When preparing your estate plan
As you approach retirement, you may feel that life insurance is no longer needed, given that you won’t have a salary to replace. If you have substantial retirement income in place, you may feel that life insurance would be a waste of money.
However, one of the lesser-known benefits of life insurance is that it can be a very valuable tool for estate planning. For example, it can help to maintain the value of your estate after you die. If your estate is likely to have a considerable tax bill after you’re gone (for example, because of the sale of a second home or taxable assets that have had significant capital gains), life insurance can cover the tax bill so your loved ones receive a bigger payout.
Another of the benefits of life insurance is that it can also help to make sure that your estate is divided up fairly. For example, let’s say that you have three children and want to leave them an equal amount in your will. However, your vacation home, which you want to keep in the family, is significantly more valuable than the total of your other assets. In this case, you can leave the home to one of your children and take out a life insurance policy that pays out a similar value to each remaining child, thus equalizing your gifts.
Also, life insurance payouts are tax free, so your children won’t have to worry about paying any tax when they receive this benefit.
How to get the right life insurance for you
If you’re wondering when to get life insurance, your IG Advisor can recommend the right time for you to get an insurance strategy. They’ll take into account every aspect of your financial plan, how your new milestone will impact it and the most appropriate life insurance to give you and your family the best protection.
If you’ve hit any of these milestones and still don’t have any life insurance, contact your IG Advisor to arrange an appointment to discuss the best options for you. If you don’t have an IG Advisor, you can find one here
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Consultant.
Insurance products and services distributed through I.G. Insurance Services Inc. (in Québec, a Financial Services Firm). Insurance license sponsored by The Canada Life Assurance Company (outside of Québec).
