The one certainty of life …is death! Therefore, if someone depends on you financially, then chances are you should have life insurance.
Life insurance provides “tax-free” cash to your family after your death. This cash (known as the death benefit) replaces your income and helps your family with the daily living expenses, mortgage payments and college savings.
Most people need life insurance. To figure out if you need life insurance, ask yourself this question. “If you died tomorrow, how would your loved ones fare financially?”
Would they have the money to pay for your final expenses (e.g., funeral costs, medical bills, taxes, debts, lawyers fees, etc.)? Would they be able to meet ongoing living expenses like the rent or mortgage, food, clothing, transportation costs, healthcare, etc? What about long-range financial goals? Without your contribution to the household, would your surviving spouse be able to save enough money to put the kids through college or retire comfortably?
The truth is, it’s always a struggle when you lose someone you love. But your emotional struggles don’t need to be compounded by financial difficulties. Life insurance helps make sure that the people you care about will be provided for financially, even if you’re not there to care for them yourself.
To help you understand how life insurance might apply to your particular situation, below we’ve outlined a number of different scenarios below. So whether you’re young or old, married or single, have children or don’t, take a moment to consider how life insurance might fit into your financial plans.
Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain the same standard of living on your spouse’s income alone? Probably not. Life insurance makes sure that your plans for the future don’t die when you do.
You’re a Single Parent:
As a single parent, you’re the caregiver, breadwinner, cook, chauffeur, and so much more. Yet 50% of single parents have no life insurance at all! Many with coverage say they need more. With so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children’s financial future.
You’re a Stay-At-Home Parent:
Just because you don’t bring home a “pay-cheque” doesn’t mean you don’t make a financial contribution to your family. The fact is childcare, transportation, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often severely underestimated. Some surveys have estimated the value of these services at over $40,000 per year. Could your spouse afford to pay someone for these services? With life insurance, your family can afford to make the choice that best preserves their quality of life.
Your Kids Are Self-supporting and Your Mortgage is Paid Off:
As the years go by, you may feel that you no longer need life insurance. But just because the kids are through college and the mortgage is paid off doesn’t necessarily mean that Canada Pension, Old Age Security and your savings will take care of whatever lies ahead. If you died today, your spouse will still be faced with daily living expenses. What if your spouse outlives you by 10, or even 30 years, which is certainly possible today? Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?
Did you know that depending on the size of your estate, your heirs could be hit with probate fees and capital gains tax after you die. Life Insurance will allow your love ones to take care of the taxes, funeral costs, and other debts without having to hastily liquidate other assets, often at a fraction of their true value.
You’re a Small Business Owner:
Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, one of your fellow owners, or perhaps a key employee, died tomorrow? Life insurance can help in a number of ways. For instance, a life insurance policy can be structured to fund a “buy-sell” agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the money. To protect a business in case of the death of a key employee, “key person insurance,” payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.
Most single people don’t need life insurance because no one depends on them financially; however they will still have some form of final expenses or funeral costs. Also, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them. If you’re in these types of situations, you should own life insurance because you wouldn’t want your loved ones to be burdened financially in the event of your premature death.