It's Your Money  

Life insurance is a vital investment in your family's security

Importance of life insurance

In an ideal world, everyone would have ample life insurance coverage to protect their loved ones in the event of their passing. In reality however, financial constraints often make it challenging to prioritize insurance expenses over other competing needs.

When money is tight, ensuring you have adequate life insurance coverage becomes even more crucial. Here are some strategies to help you navigate this situation:

• Evaluate your needs—Before purchasing or adjusting your life insurance coverage, assess your current financial situation and your family's needs. Consider factors such as outstanding debts, mortgage payments, childcare costs, and the future lost income that you’re trying to replace. This evaluation will give you a clearer understanding of how much coverage is necessary to provide financial security for your loved ones.

• Understand your Options–Life insurance comes in various forms, including term life, whole life, and universal life policies. Term life insurance typically offers the most affordable premiums and provides coverage for a specific period, such as 10, 20, or 30 years. Whole life and universal life policies offer lifetime coverage but often come with higher premiums. You need to fully understand the differences between these options to choose the one that best suits your needs and budget.

• Shop around—Don't settle for the first life insurance policy you come across. Take the time to compare quotes from multiple insurance providers to find the most cost-effective option. Online comparison tools and insurance agents can help you explore different policies and premiums tailored to your budget.

• Adjust your coverage over time—Life insurance needs evolve as your circumstances change. While you may not be able to afford the optimal coverage now, you can adjust your policy as your financial situation improves. Start with a basic term policy that provides essential coverage now and increase it gradually as you can afford to do so.

• Avoid over-insuring—While having adequate coverage is essential, avoid purchasing more insurance than you need. Over-insuring can lead to unnecessarily high premiums, putting additional strain on your finances. Stick to the coverage amount that meets your family's needs without exceeding your budget.

• Take advantage of employer-sponsored coverage—Many employers offer group life insurance benefits as part of their employee benefits package. While these policies may not provide sufficient coverage on their own, they can serve as a valuable supplement to your existing coverage at little to no cost. Take advantage of these benefits if available.

• Maintain good health habits—Insurance premiums are often influenced by factors such as age, health, and lifestyle choices. While you may not be able to control all these factors, maintaining good health habits can help lower your premiums. Quitting smoking, maintaining a healthy weight, and staying active may qualify you for lower rates.

• Review and update regularly—Life changes such as marriage, the birth of a child or purchasing a home can significantly impact your insurance needs. Make it a habit to review your coverage annually or whenever a significant life event occurs. Updating your policy ensures that your coverage remains adequate as your circumstances evolve.

Adequate life insurance coverage is essential for protecting your loved ones' financial future, even when money is tight. By carefully evaluating your needs, exploring your options, and making informed decisions, you can secure the coverage you need within your budget.

Remember, life insurance is a vital investment in your family's security, so it's worth the effort to find a solution that works for you.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Brett Millard is vice-president and a member of the executive leadership team at FP Canada, the national professional body for the financial planning industry. A not-for-profit organization, FP Canada works in the public interest to foster better financial health for all Canadians by leading the advancement of professional financial planning in Canada. 

He has worked in the financial advice industry for more than 15 years and is designated as a chartered investment manager (CIM) and is a certified financial planner (CFP).

He has written a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges they face in every stage of life. Enhancing the financial literacy of Canadian consumers is a top priority for Brett and his ongoing efforts as a finance writer focus on that initiative. 

Please let Brett know if you have any topics you’d like him to cover in future columns ,or if you’d like a referral to a qualified CFP professional in your area, by emailing him at [email protected].


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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