Everyone Asks This Question: Do I Need Life Insurance? YES You Do!

I get asked this question all the time. Do I need life insurance?

The answer is almost always the same – YES!

That is if you have an estate, business, debt, and/or dependents, which is most of the population.

Hey, if you are single (and intend to stay that way) and have no intention of having a family or owning a business or home, you can move on.

The truth is, for the most part, life insurance is for those who want to provide people they leave behind with some cash to navigate the financial loss of a salary. 

Sure, there are other reasons, like providing cash for funerals or trying to defray your tax burden, but for the most part, life insurance is used for income replacement.

So what would happen to you if your partner were to pass away and their financial contribution vanished? Chances are financial devastation. 

Let’s check out the reason YOU need life insurance TODAY.

You Need Life Insurance If You Have Dependents

If you’re asking yourself, “Do I need life insurance?” and you have dependent children, then the answer is a resounding YES.

Why? Because they depend on you to make their way in the world until they are 18. 

Food, clothing, transportation, activities, and education all cost money. What happens if you don’t come home one day?

Those checks that pay the mortgage, electricity, and vacations cease to exist. 

Sadly, those obligations don’t evaporate when you die. All debts have to be paid before your family receives a dime, and if you pass away without a will, things can get seriously delayed. 

Unfortunately, I know people who have died in the prime of their lives WITHOUT life insurance, and it’s created havoc.

While an early death isn’t commonplace, it does happen. 

So what would your family do if you didn’t come home one day?

The Situation Will Be Dire For Your Family If You’re the Primary Bread Winner

If you make the lion’s share of the cash, chances are your family will be financially devastated. Imagine the kind of money you need to replace the death of a primary breadwinner.

Let’s suppose you earn $40,000 per year by working a less demanding job to assist with the children. Despite having a four-day work week, your family cannot solely rely on your income.

Thankfully, your partner makes $100,000, which makes everything possible. One day, they are involved in an accident, and their salary disappears.

Will your family be able to keep their home, or will they have to move? Will they be able to make up for the shortfall with more work?

No one wants their families to have to confront questions like this. 

Our Rule of Thumb to Avoid This Sort of Situation is to Purchase 10 Times Your Gross Salary in Coverage

While this may sound like a lot of money, it isn’t. Remember that this cash will carry you and your family through many years of growth and change.

For example, let’s use the couple I mentioned above. In this case, I recommend that the partner earning $100K take out at least $1 million in coverage and the person earning less take out $400K.

What If One Partner is a Stay At Home Mom or Dad?

This is a terrific question because TIME is money. 

Stay-at-home parents are highly undervalued. They are indeed a gift; if you can have one parent stay at home, my hat is off to you.

Do NOT underestimate their contribution. Imagine if they passed away, what would happen? All of their responsibilities have now been passed on to you. 

School pick-up, activities, dinners, and even the cleaning and laundry. So, let’s imagine you have a high-powered job and need to put someone in that role. How much do you think this is going to cost? Well, I will tell you that it sets you back about $60k per year in Toronto. 

Your kids are 3 and 7, so you need help for at least 10 years. That’s $600K BEFORE you even consider anything else. OUCH.

You see? Life is costly.

Do I Need Life Insurance: YES, If You Have Debt!

Debt! Ugh, we all have it—or at least most of us. Sadly, it’s not extinguished when we die. It attaches to your estate and eats through the equity BEFORE your family gets a dime.

This is something you need to weigh when asking yourself this question: Do I need life insurance?

Life insurance is a terrific tool for people with huge mortgages, credit card debt, or loans. Of course, this is even more pressing if you have kids, but you should consider your situation even if you don’t.

Let’s say you live with someone you love but aren’t married. Can they afford to stay in the house without your contribution…

OR maybe you don’t own a home but are married (without kids) and don’t want to leave your wife or husband hanging with your credit card bills and final expenses. 

No matter how you slice it, debt is a drag on those you leave behind. Why not plan for it before you die?

You Need Life Insurance If You Have a Business

Whether you are married or not, owning a business comes with responsibilities. You must consider insurance if you have a partner or employees or want the company to continue with or without you.

YEP!

It can help your partner(s) keep the ship afloat while they look for your replacement, assure your employees retain their jobs, and alleviate any outstanding loans that could impact the business. 

Life insurance is a terrific tool that all business owners should be well versed in. 

“Using life insurance as a tool for business succession and/or retirement has a lot of advantages. Insurance premiums are often a tax deduction to the employer, and if your business is doing really well, employers are able to implement these strategies on top of other tax-favored vehicles like company retirement plans.”

As a financial planner, I recommend life insurance to people in 5 situations, Business Insider 

You Need Life Insurance If You Have a Child with Special Needs

If you have a child with special needs, you understand the power and importance of planning when you aren’t there. 

Most families have a limited period when they are responsible for children. For some, it’s 18 years, and for others, they take responsibility for their kids through university.  

Planning is entirely different when you have a child that is dependent until the day they die.

A great way to make sure children with special needs have enough resources after you pass away is to put a permanent policy in trust for them. 

This is a complicated tool, and I highly suggest working with a lawyer specializing in trusts to ensure you dot all your i’s and cross all your t’s.

You Need Life Insurance to Pay Final Expenses If You Don’t Want Your Family To Foot the Bill

Final expenses aren’t cheap. Did you know a funeral can cost up to $20k? 

Yep!

Of course, this event has all the bells and whistles—you can do it for much less. But even if you choose a cremation, it will still set you back a few grand.

This is why a lot of elderly people opt for final expense insurance.

It’s affordable and easy to qualify for. The best part? You don’t leave your loved ones holding the bag when you pass away.

If you read my blog, you know that the term works for most people most of the time (and yes, of course, there are exceptions—see children with special needs above). But final expense insurance is a permanent product and I love it!

You Need Life Insurance If You Have an Estate & Exhaust Your Tax Sheltering Options

If you ask the question, Do I Need Life Insurance, and you have an estate, the answer may be YES.

Life insurance is an excellent tool for those with expendable cash – especially if you’ve exhausted all your tax-sheltering strategies.

It’s also a way to help your loved ones avoid being hit by taxes when they inherit your property. Many people have lost family homes because of the unexpected tax burden they have to pay to retain it or something of value.

Call Policy Architects Today! We Can Help

I hope I answered some questions for those of you wondering, “Do I need life insurance?”.

The answer is yes if you have: 

• Debt
• Dependents
• A Child with Special Needs
• Business
• A Partner You Want to Protect
• Family You Don’t Want to Have to Pay Your Final Expenses
• Loved Ones You Want to Leave a Gift To
• A Cottage You Want to Pass On

Life insurance is a terrific tool that can be used in many ways. Depending on your needs, you can choose permanent or temporary coverage.

We can help you review all your options to find the BEST coverage for the cheapest rates. 

Call us at Policy Architects TODAY.