A 2010 TD Insurance Risky Business Poll revealed that 31% of Canadians didn’t have life insurance.
Of those, 40% said they didn’t need it, 23% said they probably should think about getting life insurance, and 23% said they didn’t think they could afford.
1500 people were surveyed, and of the total almost a third worried they didn’t have adequate protection under their existing policy.
It’s no surprise there are such widely differing opinions of why people don’t need life insurance. Life insurance is not exactly an easy topic to broach with so many different policies, companies, and individual circumstances to take into account.
Furthermore, a 30 year old won’t approach life insurance the same way a 50 year old would, so it’s difficult to generalize about what works for some people, and doesn’t work for others.
Which is why you should consult an insurance professional – someone who’s willing to give you the facts without trying to push a policy that may not fit your particular needs.
But it certainly pays to be an educated consumer, which is why I’ve compiled a list of why you need life insurance.
1. A Hedge Against the Unknown: Donald Rumsfield famously said that there are known knowns (things we know that we know) known unknowns (things we know that we don’t know, but can come to expect) and uknown unknowns (things we don’t know exist, and can’t expect to know them until we experience them.) Life insurance takes care of the last two, and helps you protect the ones you love.
2. Income Replacement: If you’re a spouse or a parent and you support a family with your income, life insurance can protect your family from the loss of income in the event of your premature death. This is the most common reason people purchase life insurnace: if you have dependants, you want to protect them should something happen to you.
3. Debt Payment: On top of the emotional toll of your passing, debt can be an almost unbearable burden as your dependants are required to pay off your debts. If you pass away and hold outstanding debts, life insurance can pay them off. Debts can include mortgages, car payments, and credit cards.
4. Final Expenses: Why you die, there are a number of expenses that need to be covered. Life insurance can take care of these expenses, such as funeral and other administrative expenses.
5. Supplement your Retirement: Annuities put a certain amount of money into a life insurance investment product, and in return you get a guaranteed stream of income month after month.
6. Education Funding: The death of a parent sometimes means that the education of a child or the quality of that child’s education, is compromised. Insurance can mean giving a child access to good quality day care or university level education.
7. Business Continuation: If you own a business, life insurance can help with the transfer of business ownership in the event of your death – this means the insurance can provide the funds necessary to continue the business and cover any losses incurred by your death.
8. Tax Liability: Life insurance policies can cover tax liabilities in the event of your death. This means that the policy can cover government estate taxes that could otherwise reduce your heirs’ inheritance.
9. Maximize your Pension: Sometimes when you retire you are given the option to receive a higher pension in exchange for allowing the pension to stop when you pass away. With a life insurance plan, you can eliminate the need for an after-death pension, letting you to select the higher-pension option.
10. Charitable Giving: Life insurance policies can provide a way for you to make much larger gift donations than you might have thought possible – plus, if you name a charity as the beneficiary of a plan, your annual or monthly premiums are deemed as charitable donations and qualify for tax receipts.
11. Equalizing Inheritance: Life insurance can help provide funds to ensure each child receives an equal share of their parents’ assets.
12. Increase your Credit: In some cases life insurance is considered a financial asset, which can help increase your credit and assist you in getting a loan.
13. Peace of Mind: This one’s related to #1 – covering the known unknowns and unknown unknowns can be relieving, and can let you concentrate on more pressing things in life, like family, work, and play without having to worry about the uncertainties in life.