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Canadian Life Insurance Facts That You Should Know

When my family first arrived in Canada, securing a life insurance policy for me and my husband was one of the first things that I did as soon as we both got a job. I was even the one who contacted the insurance agent that I saw in the newspaper, she didn’t have to do a lot of explaining to us then, because I only have one relative here in Canada and we have 2 small kids that time, I thought that if something happens to us, the best thing that my husband can live behind is a sum of money that can provide for our children. 

As simple as that, had the insurance agents that I talked to explained to me what I knew now, I wouldn’t have to change my insurance policies a few times to get the right coverage. I could have saved a lot because I was 10 years younger then.

If you will ask me now, my simple explanation about life insurance would be – it is a security blanket for those who rely on you for financial support – such as spouse or children. Your insurance policy is their protection in case something happens to you. The tax-free death benefit that you’ll leave will help your loved-ones financially if they lose the income they depended on, it’ll help them live the life you planned for them. They will be able to pay any debts that you leave behind and payoff mortgage balance so they can have a safe place to live and your children can go to school without worrying about money.

For someone who just moved to Canada and have not decided on getting a life insurance or for someone who is considering of having one but can’t decide or for someone who thinks that their life insurance at work is enough, I’ve listed some life insurance facts that you can use as a guide in making an informed decision when it comes to your families’ financial well-being.

  • 4 in 10 Canadians have no life insurance. 44% of Canadians have no life insurance at all. The big number of unexpected deaths resulted to rising appreciation for insurance as an essential need, however, a lot of Canadians are still sidestepping insurance as a way to save money. It’s sad that many families are foregoing this safety net at this time of uncertainty. Insurance should be an important part of one’s financial planning. A simple question that you can ask yourself if you are one of those who don’t find value in having life insurance: If you die unexpectedly yesterday, would your spouse and your children be able to survive financially? (Source: 2020 EY Global Insurance Outlooks)
  • 62% of Canadians who have life insurance get it through their group benefits plan at work and a majority of them have no other coverage. According to Global News, 53% of those without additional life insurance coverage are between the ages of 30 and 50, a group most likely to have dependents and large liabilities, such as a mortgage. Most employer-provide life insurance benefit is usually worth between 1 to 2 times of the employee’s annual income, with an average amount of $55,000 to $110,000.00.  Should the employee relying on whatever life insurance offers in his job dies prematurely, chances are, the coverage will fall short.
  • As of 2021, 77% of Canadians are dangerously underinsured.  Without the income earner, these families will not be able to keep up with the cost of living for 2 or more years. (Source: PolicyMe.com).  Survey suggests that there is an overwhelming majority of Canadians with dependents that are underinsured and do not want to admit the severity of the situation.
  • The average life insurance protection per household in Canada is $442,000, approximately five times the average household income. (Source: Canadian Life & Health Insurance Association). The Financial Consumer Agency of Canada suggests that life insurance coverage should be seven and ten times 10 of the insured’s annual salary, which is in line with many industry practitioners’ recommendation of ten years of annual income coverage. et 91% of Canadians with dependents have coverage below this recommendation, with well over half of respondents (54%) having coverage of only two years or less of their annual salaries. A mere 22% had five years’ worth of coverage.  (Source: PolicyMe.com)

“An adequate amount of life insurance should be enough to: cover funeral expenses; pay off all your debts, including your mortgage; replace your income (ideally through to the planned retirement age) for spouse and any children you leave behind; and, if there are children in the picture, be enough to allocate for their education.”

– Rona Birenbaum (Toronto, Financial Planner)
  • Most people don’t consider getting life insurance until later, but the best time to get it is while you’re young. Though some of us have started to recognize the importance of life insurance, yet we still tend to delay getting it.  Most people will only think of life insurance until they have a mortgage and dependents or worst until something unfortunate happens. In the “insurance world,” the person’s insurability depends largely the age and health condition of the person to be insured.  Generally speaking, the older you are, or the more health problems you have, the higher your premiums will be.  When you are young and healthy, you wouldn’t see the use of having life insurance, but it is actually the time where you can benefit the most.  When you’re young and healthy, your insurance premium will be relatively more affordable.  If you decide to get your insurance at a later age, let’s say in your 40s rather than having in when you were in your 20s, it will be way more expensive (and complicated to be approved) the more time you delay getting it.
  • 80% of Canadians believe that life insurance rates are too expensive. While many people continue to avoid getting insurance because they see it as an additional expense which is also expensive for them, according to research by the Life Insurance and Market Research Association, it is still more expensive not to have insurance at all. (Source: Reviewlution).  The perception that life insurance is too costly may be partly due to the fact that there are some policyholders who were sold with an expensive policy which is not what they actually need. 
  • The 2019 Canadian Life insurance statistics revealed that 4 million Canadians or more than half of Canadians under the age of 35 say they are “likely” or “very likely” to buy life insurance. (Source: Limra.com), as more Canadians started to appreciate life insurance especially during the time of pandemic, this number may have increased since 2019.
  • The current life expectancy for Canada in 2021 is 82.66 years. (Sources: reviewlution.ca & macrotrends.net).  Canada is known to have one of the highest life expectancy in the world.  According to reports and researches, older Canadians (men and women), are continuing to see slightly better health outcomes each year.  While, the continuing improvement in medical research and advancements in technology and treatments have made the lives of those affected by medical conditions and diseases longer.
  • Females in most countries live longer than males. The difference in life expectancies for both genders has carried on for centuries, in Canada, males remained to have a lower life expectancy than females. (Source: canadapopulation.org) There is limited evidence as to why women tend live longer today than men, but many people believed that women live longer because they have a lower risk-bearing ratio than men. This extends to health, where women are arguably better at handling stress and paying attention to their health than men.  The use of cigarettes, alcohol and drugs which is more associated with men than women are another reason that may cause the disparity in life expectancy between males and females. With at least 17 years of retirement to look forward to, you need to ensure that your wealth accumulation, preservation and transfer strategies is planned out well.

More Canadians are considering of getting life insurance because of the “uncertain situation” that we are all in now, but the truth is, life insurance is really worth having no matter what situation we are in and what’s going on around the globe. Regardless, if you got yourself a permanent or term insurance when you were younger or when you were in your 50s, at the end of the day, the best insurance policy to have is that policy which is in place when you need it.

Cristina

Cristina

My family and close friends knew how passionate I am when it comes to writing. I find joy and unexplainable satisfaction in writing. I am able to say what I am thinking or how I feel best when I say it through a letter, a poem and now blog. Through the years, blogging has opened different doors for me. It provided me a space to share my journey and my life lessons, the failures and triumphs that I went through in transitioning to a new life outside my comfort zone and it allowed me to reach out to people outside my circle.

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Cup of Tyh

HI I’M CRISTINA!
Thanks for stopping by, as I make this space to be my superwoman wannabe diary, I want to share my life experiences as a mom, an immigrant, a financial advisor, a mortgage specialist and my life in general.

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