9 Reasons You Need Life Insurance More Than You Think

True or false: Life insurance is about financially benefitting from somebody’s death.

If your gut reaction is to say “true,” you’re not alone. Life insurance is probably one of the most misunderstood products out there.

That’s why, for Life Insurance Awareness Month, we’re going to dispel one of the biggest myths around.

So… is life insurance about financially benefitting from somebody’s death? The answer is a great big resounding FALSE.

The fact is, there are rules around how much life insurance coverage you can get, so using it as a ‘get rich’ scheme really isn’t realistic. Here’s why: Just say Bob applies for $5 million in coverage, but he has an annual household income of $50,000 and very few assets to his name. In this case, his application would be denied. The most an insurance organization is going to let Bob consider is 10x his salary + the value of his assets (e.g., home, investments, etc.). This is how life insurers keep those with ulterior motives from taking advantage.

Now that we’ve dispelled this myth, we’d like to tell you the 9 reasons why you need life insurance more than you think.

1. If you are a homeowner with a family, life insurance can save your partner and children from having to sell the family home if you depend on two incomes to pay the mortgage. And how many people can afford a home on a single salary these days? Very few. #thanksinflation
2. During a time of big – traumatic – change for your little ones, life insurance can help ensure everything else in their life remains consistent. Not having to downsize means your children get to stay in the home they love, the neighborhood they know, and the school where all of their friends go.
3. Speaking of children, the right life insurance policy for a child can nicely complement an RESP. That’s because whole life insurance can act like an investment that your kids can dip into* in the future to pay for tuition. But unlike an RESP, they can choose to use the money for something else, like a car, a trip, or a wedding – because your child won’t be penalized financially if they use it to pay for something other than their education.
4. Once they’re all grown up, that investment portion could even be accessed to help your child pay for a down payment on a home. And the way things are going, it looks like our kids will need all the help they can get!
5. If your beneficiaries are looking for the security of a second income to pay the bills each month, they can choose to re-invest the money they receive into a Single Premium Annuity**, giving them the flexibility to receive the money in regular payments – just like a salary.
6. Your beneficiaries could also choose to place any money they don’t need right away into a Guaranteed Interest Annuity, growing their inheritance in a low-risk investment that is similar to a GIC. This can be helpful for short-term goals, like saving for a child’s post-secondary education or taking the kids on that family vacation you had always dreamed of.
7. In the event your beneficiaries do not want to receive their inheritance in the mail, they can request an e-transfer or have your advisor hand deliver a cheque to their home. The advisor can also lend a sympathetic ear, and can direct your grieving family members to a free counselling benefit available through Serenia Life***. Yes, there’s a softer side to being a life insurance advisor – a good advisor is typically as caring and compassionate as they are financially savvy.
8. Life insurance can be your loved one’s safety net during a time in history where salaries aren’t keeping up with inflation, young adults can barely afford a down payment (or their mortgage), and everyone is a bit more risk averse when it comes to their finances in general. The last thing you want in the current economic climate is to leave your family to fend for themselves in the event of your untimely death. We are seeing more and more heartbreaking GoFundMe campaigns triggered by the death of a spouse. No mourning family should have to deal with this sort of financial stress on top of losing a loved one.
9. It’s another way to show your loved ones how much you love them. (We’re not joking.) Any cohabitating couple will tell you that there are times when we feel like our partner is taking us for granted. While the stressors of everyday life – parenting, bills, inflation – can sometimes get in the way of those lovely little romantic gestures, there are other, more practical ways to show we care. And getting life insurance to protect your family’s financial future is a biggie.

Here’s the truth: Life insurance isn’t about your loved ones getting rich off your death. It’s simply about them having enough money to pay off debt, afford their living expenses, and continue to live the life you had imagined for your family. And this may be the most important reason of all.

*Cash values are accessible via a withdrawal, policy loan, or surrender. These may be subject to taxation and a tax slip may be issued. Accessing the cash value of the policy will reduce the available cash surrender value and death benefit.

**The death benefit must be over $7,500 to qualify.

***The total amount paid through Serenia Life’s Bereavement Counselling Benefit is $1,000, regardless of the number of beneficiaries.