When is the best time to get life insurance?

One question that we get asked frequently here at Acumen Insurance Group is, ‘When is the best time to get life insurance?’ And while there is no wrong or right time to purchase life insurance, depending on your circumstances, there may be times when doing so is more advantageous.

In today’s blog, we’ll provide some insight into the best times to purchase life insurance and how it can help you at various stages of life. But before we delve into that, let’s spend some time reviewing what life insurance is, what it covers and the types of coverage available.

What exactly is life insurance? 

Life insurance, simply, is designed to help your loved one's deal with the financial impact of your death. It’s a contract with an insurer that guarantees a lump-sum tax-free payout (also known as the death benefit) in exchange for paying a premium. 

What does it cover? 

Following the death of a spouse, partner or family member, life insurance policies can help provide coverage for many of the costs, including:

  • Funeral and final expenses: Did you know that families can spend up to $10,000 on funeral expenses alone? A life insurance policy can help with this as well as provide cash for emergencies, probate court costs and legal fees.
  • Mortgage and rent: Life insurance coverage will supplement expenses associated with mortgage and rental payments for survivors.
  • Education costs: Life insurance can help you plan for your children’s future by providing each child with $6,000 to $10,000 (per year) towards post-secondary education.
  • Survivor’s income: Your surviving family members may require supplementary income to offset lost wages, childcare costs, and other common living expenses – life insurance can help! 

What are the main types of life insurance? 

In Canada, there are two main types of life insurance: Term and permanent. Term life insurance covers a policyholder for a specified period of time, providing coverage for a set number of years, or until you reach a certain age. On the other hand, permanent life insurance is a policy that you maintain for the rest of your life – unless you choose to cancel the policy.

Common Types of Life Insurance: Term, Whole & Universal Life Insurance 

At Acumen, we offer a variety of life insurance policies designed to protect your family from unexpected situations, including term life insurance, whole life insurance, and universal life insurance. 

Term life insurance, also known as pure life insurance, is a type of death benefit that pays the heirs of the policyholder throughout a specified period, like 10 or 20 years. Once the term expires, the policyholder can either choose to renew it for another term, convert the policy to permanent coverage, or allow the term life insurance policy to lapse. 

Whole life insurance is a type of permanent life insurance that provides death benefit coverage for the life of the insured. In exchange for level, regularly due premium payments, whole life insurance guarantees payment of a death benefit while also including a savings component in which cash value may accumulate. These savings are referred to as the “cash value,” and may accumulate interest on a tax-deferred basis. 

Universal life (UL) insurance is a subtype of permanent life insurance. It has an investment savings element and low premiums, similar to those of term life insurance. Most universal life insurance policies contain a flexible-premium option, but some require a single premium (single lump premium) or fixed premiums (schedule fixed premiums)

When should you purchase a life insurance policy? 

The answer to this question often varies from person to person, depending on their financial circumstances and personal goals. However, there are certain points in life when purchasing life insurance is particularly beneficial. 

When you’re young and healthy

You might think that life insurance isn’t something you need to worry about when you’re young and healthy, but there are many reasons to consider purchasing coverage sooner rather than later.

Your 20s and 30s are full of change. You’re likely finishing school, starting your career, buying your first home, or starting a family. Life insurance can provide you with financial security for the life you’re working hard to create.

Purchasing life insurance at a young age is also more affordable. This is because your monthly or annual premium depends on your:

  • Age
  • Assigned sex at birth
  • Lifestyle habits
  • Medical history
  • Current state of health

Thus, if you’re a healthy 20-year-old, you would likely fall under a low health-risk category and be able to lock in a reasonable premium for many years.

After getting married 

Life milestones like getting married can be a good time to assess whether you need life insurance.

After getting married, you and your spouse are likely to share your income and debts while making major decisions about your future. You’ll likely co-sign on a loan, like a mortgage, and both of you will become responsible for fulfilling the payments. Having life insurance can help provide your spouse with financial support to pay off your mortgage and other shared debts should you pass away.

After having children

Raising and educating a child is expensive. According to an article published by CTV News, raising a child on average costs roughly $15,560 a year. This is a lot of money, especially if something were to happen to you or your partner. A comprehensive life insurance policy can help ensure that your child and their future are provided for in the event that something happens to either of you. 

After purchasing a home 

Once you’ve purchased a home and ensured a mortgage, there’s one more thing you should do – get life insurance!

In the event of your death, life insurance can help surviving co-owners and loved ones pay off the mortgage and cover ongoing maintenance, utilities, and property taxes.

Is it ever too late to purchase life insurance? 

The answer to this question is a resounding no. Sure, buying life insurance when you’re young and healthy often results in lower premiums, but this doesn’t mean that you should hold off on purchasing a policy because you’re in your 50s.

The best time to purchase life insurance is whenever you need it, regardless of your age or health status. If you’re in your 50s or 60s and are looking to buy coverage, there are a number of options available.

Although it will cost considerably more since insurance premiums increase as we age, there are still several reasons why considering life insurance at a later stage in life might be right for you:

You have dependents 

If you have people who depend on you financially a life insurance plan is crucial. It serves as an income replacement tool, providing your spouse and/or partner with the means to cover any monthly payments, mortgage bills, and education expenses.

Even if you don’t have a partner or spouse, life insurance can prove beneficial for supporting a parent or close relative. If you’re having a hard time deciding whether life insurance would make sense for your situation, think about what would happen to your dependent if they were to suddenly lose you and the support you provide. 

You have debts others may inherit 

When you pass away, lenders collect what is owed from your estate. However, if a spouse, parent, or sibling is listed as a co-borrower or co-signer, they will inherit your debt. Purchasing a life insurance policy later in life can ensure that your loved ones aren’t left with any overwhelming debt. 

You want to leave an inheritance to your loved ones 

Life insurance is a great way to leave an inheritance for your children or grandchildren as they won’t have to pay income tax on the cash sum they receive. 

You want to save for your retirement 

Permanent life insurance policies provide a built-in investment component. Over time this cash value will grow, typically at a fixed rate, and could be used to support you during retirement.

In addition to serving as a tax-free retirement income, permanent life insurance can also support your investments. While alive, policyholders are able to withdraw or borrow from their cash value account and use the money to make other investments. However, keep in mind, that doing so could reduce your policy’s death benefit. 

You want to take care of funeral costs

With the average funeral costing several thousands of dollars, planning for these final expenses is never a bad idea. It will save your loved ones from facing additional anguish during an already stressful time. 

3 reasons why you shouldn’t wait to buy life insurance

While it’s never too late to purchase a life insurance policy, there are several disadvantages to waiting:

More expensive premiums 

Life insurance pricing depends on several factors, including the policyholder’s age and health, both of which decline as time goes on. Thus, waiting to purchase coverage, could result in more expensive premiums. 

Increased chance of being denied a policy 

The longer you wait to get life insurance, the greater your risk of getting sick and developing certain health conditions that can make obtaining a policy more difficult and expensive. In fact, some insurance companies in Canada may choose to deny you a policy if you suffer from the following health conditions: asthma, cancer, diabetes, heart, or lung conditions, and more. 

Leaving loved ones unprotected

Life is full of unexpected twists and turns. Holding off on purchasing a life insurance policy could put your dependents at great risk. Ensure your loved ones are protected and financially secure from the unexpected by purchasing life insurance sooner rather than later. 

What to consider before purchasing life insurance 

Purchasing life insurance is a good idea at any age but doing so can often feel overwhelming.

To help get you started, we’ve compiled a list of things you should consider when shopping around for coverage:

How much coverage do you need? 

To find the policy that best suits you, it’s important to consider how much coverage you’ll need.

To do so, calculate the expenses your family is likely to incur after your death, including one-time expenses like funeral costs, as well as ongoing costs like mortgage and car payments. You should also consider future expenses like funeral costs and financing your child’s post-secondary education.

Another way to calculate how much life insurance you will require is by multiplying your annual salary by the number of years left until your retirement. For instance, if a 45-year-old currently makes $40,000 a year, they will need around 800,000(20 x $40,000) in life insurance.

According to financial experts, a good rule of thumb is to purchase 6 to 10 times your annual income. For example, if your salary is $50,000 a year, you might want to consider opting for $500,000 in coverage. If you have children, it’s recommended that you add an additional $100,000 in coverage per child.

Do you require any add-on coverage? 

At Acumen Insurance, we have access to a distribution network that provides us with competitive rates and a multitude of options that can give you increased protection. As such, the following policies can be added to your life insurance plan:

  • Mortgage Protection Insurance: Ensures that your family will be able to stay in their home if you or your partner dies before your mortgage is paid off.
  • Quick Issue Critical Illness Insurance: This add-on protects you and your family following any life-threatening illnesses. The plan pays a tax-free lump sum living benefit that can be used to offset the cost of managing your illness and recovery, without impacting your savings, retirement plan or lifestyle.
  • Funding for Business Buy and Sell Agreements: With this policy add-on, surviving shareholders are guaranteed sufficient funds to purchase the deceased’s shares and obtain full value for the deceased’s business interest.
  • Children’s Plans: A child’s insurability (i.e., their health) can change quickly and unexpectedly. Find peace of mind with guaranteed life insurance for your child. 

Life is unpredictable – ensure your loved ones are protected 

You never know what tomorrow will bring. Ensure your loved ones are protected with comprehensive life insurance.

At Acumen Insurance, we’re here to help you protect your loved ones from life’s unexpected events. We believe that everyone deserves the peace of mind that comes with knowing they have a plan in place to protect their family in the face of an unexpected tragedy.

Our insurance brokers have access to a variety of life insurance options designed to give your family financial security and support, now and in the future. We’ll spend time assessing your family’s needs, including the number of income earners and dependents to ensure that your life insurance policy can help maintain the living standard that your family deserves.

To get started or to request insurance quotes, contact us today!