Does your Family Need Life Insurance? How to Know.

Here’s How to Find Out How Much Life Insurance Your Family Needs.

Many Canadian parents are unsure how much insurance their families should get. Here’s what you need to know before deciding:

Why is Life Insurance Important for Families?

There are a number of reasons why life insurance is important for families. Perhaps the most obvious reason is that life insurance can provide financial security in the event of your death.

That means, if you are the primary breadwinner for your family, having a life insurance policy in place can help to ensure that your family is taken care of financially if you die unexpectedly.

But in addition to providing your loved ones with a financial safety net, life insurance can also help to make sure your family can still pay the bills and maintain their standard of living. Not to mention, life insurance also can help your family pay off debts like a mortgage, and cover final expenses like funeral costs.

How to Determine How Much Life Insurance You Need

Figuring out how much coverage you need may seem like a daunting task, but there are some simple steps you can take to get an estimate of how much coverage would be right for your family.

One of the easiest ways to determine how much life insurance you need is to use a life insurance needs calculator. These online tools ask you for some basic information about your family and financial situation and then provide an estimate of the amount of coverage that would be appropriate for your situation.

Another way to estimate your life insurance needs is to consider your annual income and debts. A good rule of thumb is to purchase a policy that is worth 10-12 times your annual income.

So, if you earn $50,000 per year, you would need a policy with a death benefit of $500,000-$600,000.

This approach doesn’t take into account other factors such as whether or not you have children in college or outstanding debt, but it can give you a starting point for estimating your coverage needs. Oftentimes you may benefit from having a higher death benefit, such as if you have a large number of financial dependants, take care of aging parents, or have special needs children that will require financial support in case you pass away.

The Different Types Of Life Insurance Policies Available

There are two main types of Life Insurance policies available: term life insurance and whole life insurance.

Term Life Insurance

Term life Insurance provides coverage for a set period of time (usually 10-30 years). If you die during the term of the policy, the death benefit will be paid out to your beneficiaries.

If you live beyond the term of the policy, it will expire without paying out any benefits. With that said, you may have options to renew the term if you want to keep your coverage.

People often like term plans for their flexibility and affordability. With term insurance, you control how long you need coverage, and premiums are often much less expensive than whole life policies.

• • READ MORE: How to Save Money on your Term Life Insurance

Whole Life Insurance

Whole Life Insurance meanwhile provides lifetime coverage as long as premiums are paid on time. In addition to providing a death benefit, Whole Life Insurance also has a cash value component that grows over time.

On the other hand, withdrawing from your policy can seriously reduce the death benefit and/or decrease the policy’s cash value.

Not to mention, whole life policies are much more expensive and may only cover up to a certain age.

T100 Life Insurance (Term 100)

This exciting new policy combines the affordability of term insurance with the longevity of whole life insurance. 

With this plan, you get locked into an affordable rate for long-term coverage up to the age 100. Premiums are inexpensive compared to a whole life policy since these plans don’t accumulate a cash value.

Though that might not seem like welcome news at first, it’s important to note that the money you’ll save on a T100’s lower premiums negate much if not all of the cash value made by a whole life plan.

In other words, you still get great long lasting coverage, without needing to pay for the frills that won’t account to much for your family and loved ones anyway.

• • LEARN MORE: What is T100 Life Insurance? Term 100 Explained.

At the end of the day, all types of life insurance have advantages and disadvantages. That’s why you’ll want to know your family’s specific situation before you decide which type is best.

How To Choose The Right Policy For Your Family

Now that you know a bit more about life insurance and the different types of policies available, it’s time to start thinking about which policy is right for your family.

There are a few things you’ll want to keep in mind as you compare policies:

• Consider how long you need coverage for

Different policies cover different amounts of time, so it’s crucial to know how long you want protection for.

For example, if you only need coverage for a specific period of time (e.g., until your children are out of college, or until your mortgage is paid off), then term life insurance may be the best option.

As a rule of thumb, the shorter of a term you need covered, the more affordable coverage is.

• Think about how much coverage you need.

As mentioned earlier, one way to estimate your needs is to consider your annual income and purchase a policy that is worth 10-12 times your annual income. However, this approach doesn’t take into account other factors such as whether or not you have children in college or outstanding debt.

That means, you may want to use a life insurance needs calculator to get a more accurate estimate of how much coverage would be right for your family.

• Make sure to compare apples-to-apples when comparing policies from different insurers.

It’s important to compare similar types of policies (For example, Whole Life Vs Term Life ) to make sure that the policies have the same coverage period and benefit amounts.

Also, be aware of any differences in the policy conditions or exclusions that could make one policy better suited for your family than another.

• KEEP READING: Insurance for Parents: Why Your Kids Need You Protected

Conclusion

Hopefully this blog post has helped you to better understand whether or not your family needs life insurance and, if so, how to choose the right policy for your needs.

Remember, there is no one-size-fits-all answer to this question! The best way to determine if life insurance is right for your family is to carefully consider your unique circumstances and then make an informed decision.