“I don’t need life insurance” Here is 10 reasons why you are wrong!

Consider how your loved ones would be affected if you died when thinking about the financial ramifications of your death. Just as with physical property, this is an aspect of personal protection against loss and damage that you should consider. Our most valuable asset is our life; we must protect it above everything else.

However, if you’re thinking about purchasing life insurance coverage, it’s critical to understand your alternatives and how they operate.

Purpose of life insurance coverage

Life insurance is almost certainly required if your family relies on your income, such as your children, spouse, parents, or siblings. As a result, any induvial that includes a family or has dependents that rely on his/her money to fulfill their financial demands must have adequate life insurance in place to ensure that dependents are taken care of if he/she dies prematurely.

What is life insurance, and how does it work?

You acquire a life insurance policy for a certain amount of money each month, which will be paid out to your beneficiaries when you pass away. The cost of life insurance will be determined depending on several factors, such as your health, age, gender, lifestyle, and the size of the death benefit. In most situations, especially with larger payout amounts, you will have to undergo a medical examination and/or financial underwriting.

Types of life insurance coverages

Two main types of life insurance are available in Canada, term life insurance and permanent life insurance.

Term life insurance

The premiums you pay for your life insurance policy will stay the same throughout the period (number of years) you purchased it. If you die before the end of your policy term, the insurer pays the beneficiary a pre-determined amount (face value of your life insurance policy) tax-free.

If you haven’t died by the policy’s expiration (which we hope is the case for you), no payment will be made to the beneficiaries. If you still require life insurance coverage when your policy expires, you can renew or convert it to a permanent life insurance plan.

Permanent life insurance

Permanently life coverage is a form of insurance that lasts as long as you pay the premiums, and it may provide both life insurance and an accumulation, much like an investment. Permanent life insurance policies, such as whole life insurance and universal life insurance, are more expensive than term life insurance.

However, if you pay the premiums and keep the policy in force, regardless of how many years since you purchased it, your loved ones will be paid a death benefit if you pass away. Customers may pay off their life insurance policy sooner by using a paid-up feature that allows them to do so. Permanent policies also allow policyholders to create cash value and savings within their life insurance plan.

Who should be your beneficiary?

In most situations, the spouse is named as the beneficiary. Your children should only be designated beneficiaries if they are over 18 years old, and you must set up a life insurance trust as the beneficiary and name a friend or family member as trustee. You can even designate an organization to receive your money. While naming a beneficiary, remember that correcting the spelling and relationship is crucial. You may change the names of your beneficiaries at any time unless you take advantage of features built into your life insurance policy that make it irreversible.

10 Reasons for having life insurance coverage

Now that you have discovered what life insurance is and learned about the different types of life insurance, it is time to discover why you need coverage. 

1. Debts and liabilities

You are probably in debt, whether it’s a mortgage, loan, or another kind of obligation that you are paying back. This might be your student loan, business loan, credit card, credit line, or automobile loan. If you have debts and liabilities to worry about, think about who will be responsible for them if anything goes wrong with you. If your bank balance does not currently cover the cost of your loans’ and obligations’ repayment and doesn’t leave much money for funeral costs, but you still need life insurance, then there is something very wrong with your finances.

2. Funeral expenses

Funeral expenses might amount to thousands of dollars. Your family will also have other estate costs to pay, such as probate and executor fees. The money from your life insurance may be used to pay these off. Funerals are a sensitive period for many people. It’s critical to set aside plenty of cash for final expenses so that your loved ones don’t have to cope with financial difficulties alongside the loss of a loved one.

Future life expenditures, such as children and other future living necessities

Take into account the future costs that your family would have to pay if your income were to cease. How will you manage on one salary or no salary if you have children? Even if they believe they can survive on what is in their bank account, have you factored in the increasing cost of living?

The annual cost of raising a child from birth to the age of 18 in Canada ranges from $10,000 to $15,000. If the kid plans to go to college or university, that’s an extra $100,000 to $152,000 for four years of schooling. Because all these expenses are increasing every year, life insurance is essential for every family with children.

3. Long-term estate planning needs

Many people are unaware of how much tax they will owe upon death. We’re talking about a significant sum of money, including probate, capital gain, and income taxes. Capital gains taxes at death or providing for the future needs of a dependent who is physically disabled are important aspects of long-term estate planning, and life insurance can help address these concerns. Make provisions for your family’s future and make sure your wealth, however big it may be, reaches the next generation completely and continues to grow.