Do Canadian teenagers need life insurance?
There could be a “great need for short-term insurance” among young Canadians, Andrea Thompson, a certified financial planner at Modern Cents, said in an interview. That’s because the mortgage and lost income during their lifetime creates a need to protect their family’s financial interests.
Although life insurance is usually not a priority for an unsuspecting 20-year-old, it can help protect families and co-signers from sudden debt if a young person dies unexpectedly.
“Life insurance is primarily for estates, taxes and loved ones,” said Jeffrey Talor, director of sales at Canwise Life Insurance Services.
“You want to make sure that your family is not exposed in the event that you pass away.”
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What are the benefits of getting life insurance at a young age?
There are many benefits to buying life insurance at a young age, Talor said. Age is a key factor in locking in a lower premium for decades to come. Down the road, Talor said, if their health deteriorates and someone already has life insurance, the premium won’t change until the end of time.
The policy is based on age, among other things, Talor said. Fewer medical needs and lower mortality rates for those in their 20s make it easier and cheaper to buy life insurance.
What type of life insurance should you buy?
“Between 20 to 30, we see that it is the best price band and between 30 to 40, there is a slight increase, then 40 to 50, it becomes a little more expensive,” said Talor. He says a lack of education about the benefits of life insurance is also ruining young Canadians. “We think it’s too expensive to buy insurance,” he said. “It’s not that expensive to buy long-term insurance, about a dollar or $2 a day.”
Term life insurance covers the policyholder for a fixed period of time, such as 10 or 20 years, and the premiums do not change during the term. Permanent life insurance can come with expensive premiums because it pays for your entire life. Although premiums can be high, they are also adjustable. Some whole life insurance policies also have a cash value feature, where a portion of the premiums go toward building a cash value over time that the buyer can use or borrow.
One can use part of the cash value as collateral for the loan, Talor said.
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