Why Life Insurance is Essential for Young Families

Life insurance is a critical component of financial planning for families with young children. While it’s a topic that many prefer to avoid, the reality is that life insurance provides the financial security and peace of mind needed to protect your loved ones in the event of an untimely death. In today’s economic climate, this protection is more important than ever.
Fortunately, most Canadians do have some form of life insurance. In 2023, Canadians bought more life insurance than ever before, with new policies bringing in $1.86 billion in annual premiums. This 4% increase from the previous year marks the highest sales recorded since the survey began in 1993, showing that more people recognize the importance of life insurance to protect their families.
But the bad news is that many do not have the right coverage for their lifestyle and needs. And when asked about why they were uninsured, nearly half reported that they believed life insurance was too expensive.

 
Providing Financial Security for Your Family

As a parent, your top priority is the well-being of your children. Life insurance is your way of promising that even if you’re not there to provide for them, your family’s financial needs will be met. 
The loss of a parent can have a significant impact on a family’s income, making it difficult to cover day-to-day expenses, mortgage payments, or even your children’s education. A life insurance policy provides a financial safety net, helping your family maintain their standard of living during a challenging time.

Covering Final Expenses and Debts

In addition to providing income replacement, life insurance can cover the costs associated with a funeral, outstanding medical bills, and any existing debts, such as a mortgage or car loan. Without life insurance, these expenses could burden your surviving family members, potentially leading to financial hardship.

Young Families Can Lock in Great Insurance Rates

Purchasing life insurance while you're young allows you to secure lower premiums that remain constant throughout the duration of your policy unless you adjust your coverage. By locking in these rates early, you can significantly reduce the total amount you'll spend on life insurance over your lifetime. The rates you get in your 20s and 30s are unbeatable, making it a smart move to buy early.
In addition to age, your health is crucial in determining your premiums. Securing life insurance before any health issues like high cholesterol or high blood pressure arise enables you to lock in affordable premiums that could last for decades.

Build Credit

Choosing a permanent life insurance policy also helps you build financial credit. As the cash value of your policy grows, you gain the option to borrow against it. The earlier you start, the more time your policy has to increase in value, providing you with a valuable financial asset down the line.

Benefit from Multiple Policy Discounts  

If you already have other insurance policies like auto or home insurance, adding life insurance could increase the discount on those policies. This bundling could save you money on your overall insurance costs, making life insurance an even more attractive option. By considering life insurance now, you're not just preparing for the future - you're making a financially savvy choice that could pay off for years to come.

Different Coverage Options for Different Needs

There are several types of life insurance policies available in Canada, and choosing the right one depends on your family’s needs and financial goals.

• Term Life Insurance: This is a popular choice for young families because it provides coverage for a specific period, such as 10, 20, or 30 years. It’s usually more affordable and is designed to cover you during the years when your children are growing up and financial obligations are highest.
• Whole Life Insurance: This type of policy provides coverage for your entire life and includes a savings component, which can accumulate cash value over time. While whole life insurance is more expensive than term insurance, it offers lifelong protection and can be used as a financial tool for estate planning.
• Universal Life Insurance: Similar to whole life insurance, universal life insurance offers lifelong coverage and a savings component. However, it also provides more flexibility, allowing you to adjust your premium payments and coverage amounts over time.

 

Determining the Right Amount of Coverage

Choosing the right amount of life insurance coverage can be challenging, but there are a few factors to consider:

• Income Replacement: A general rule of thumb is to purchase a policy that provides coverage equal to 5 to 10 times your annual income. This ensures that your family has enough funds to cover living expenses for several years.
• Debt and Expenses: Consider any outstanding debts, such as your mortgage, car loans, and credit card balances, as well as future expenses like your children’s education. Your life insurance should be sufficient to pay off these debts and cover these costs.
• Family Needs: Every family’s situation is unique. Consider any special circumstances, such as a child with special needs or a spouse who may require long-term care. These factors can influence the amount of coverage you need.

 

Tips for Finding the Right Policy

• Start Early: The younger and healthier you are, the lower your premiums will be. It’s advisable to purchase life insurance as soon as you start a family to lock in affordable rates.
• Work with a Financial Advisor: A financial advisor can help you navigate the various options available and determine the best policy for your family’s needs.
• Review Your Policy Regularly: As your family grows and your financial situation changes, it’s essential to review your life insurance policy periodically to ensure it still meets your needs.

 

How to Find the Best Life Insurance Policy

Life insurance is an essential part of securing your family’s future. For young families in Canada, it offers peace of mind by providing financial protection during life’s most challenging moments. To learn more about the different life insurance options available to you, request a quote online or contact a BIG life insurance broker. Your broker will provide an overview of the best options for your situation so that you can create your family’s financial plan with confidence.