Life Insurance Is More Than a Policy: It’s Part of Your Family’s Financial Plan
September is Life Insurance Awareness Month, making it a timely opportunity to have a conversation many families tend to postpone.
We spend years planning for the things we hope to achieve: buying a home, raising a family, advancing our careers, educating our children, travelling, building wealth and eventually enjoying retirement.
But a complete financial plan should also consider a difficult question:
What happens financially to the people you love if life doesn’t go according to plan?
That is where life insurance can play an important role.
Life insurance is about financial protection
At its core, life insurance is designed to help reduce the financial impact your death could have on the people who depend on you.
In Canada, life insurance generally provides a one-time, tax-free death benefit to the beneficiaries named on the policy. Depending on a family’s circumstances, that money could help replace income, provide for children or other dependants, cover debts or funeral expenses, and help a family maintain financial stability.
This is why the conversation around life insurance should go beyond simply asking:
“Do I have life insurance?”
A better question may be:
“Does the coverage I have reflect the needs of the people who depend on me?”
Having coverage and having enough coverage are different conversations
Some Canadians have life insurance through their employer and may assume that means their protection needs have been completely addressed.
Employer coverage can be a valuable part of a financial protection strategy. But every household is different.
Consider your mortgage or rent, outstanding debts, income, children, education plans, everyday household expenses and the people who rely on you financially.
The purpose isn’t to arrive at a universal amount of insurance that everyone should have. There isn’t one.
Instead, the goal is to understand what financial responsibilities would remain and what resources your family would have available to meet them.
Your life changes. Your financial plan should be reviewed too.
Think about how different your life may be today compared with five or ten years ago.
Perhaps you got married. Had children. Bought a home. Started a business. Changed careers. Took on new financial responsibilities. Or maybe some of those responsibilities have decreased.
Your financial protection needs can change along with your life.
Beneficiary designations are another important consideration. The Financial Consumer Agency of Canada recommends reviewing beneficiary designations periodically and updating them when necessary.
That makes reviewing your life insurance part of a broader financial-planning conversation—not simply something you purchase once and never think about again.
Life insurance isn’t one-size-fits-all
Different types of life insurance are designed to serve different purposes.
Term insurance generally provides coverage for a specified period, while permanent life insurance is designed to provide lifetime coverage while the policy remains in effect. Permanent policies also commonly build cash value, although features vary by policy.
The question, therefore, shouldn’t simply be, “Which type is better?”
It should be:
“What am I trying to protect, and what type of coverage is appropriate for my needs, priorities and financial situation?”
Use Life Insurance Awareness Month to start the conversation
You don’t need to know everything about insurance before speaking with a financial professional.
Start with questions.
What coverage do I currently have? What does my policy actually provide? Who are my beneficiaries? Have my circumstances changed since I purchased my coverage? And does my current protection still align with my family’s needs?
Life Insurance Awareness Month is a reminder not to make assumptions about your financial protection.
Get informed. Ask questions. Understand what you have.
At ELES Financial Services Ltd., we help individuals and families understand the options available to them, what those options are designed to do, and how they may fit into their overall financial plan.
Helping families create wealth one step at a time.