Life insurance for mortals: How much is too much and how do we know?

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Talking about life insurance doesn’t exactly scream fun. Most of us don’t like to think about what happens when we die, and putting money away each month towards that eventuality can feel like a grim reminder of what we’d prefer to forget. For the more morbid among us, it might even feel like we’re willing it to happen. So, it’s understandable that many people choose to avoid the subject entirely. In fact, a recent survey shows that most Canadians don’t have any life insurance at all.1

But life insurance is important. So far, every human being on earth has died (Marilyn Monroe, Gandhi, etc.) and the odds are you will, too. That’s why it’s crucial to ease the financial burden on the people you love by putting plans in place—not that that makes it simple. Even for those of us who already have a policy, it’s normal for questions to arise, especially as changes like new jobs, new kids, and even the rising costs of inflation impact our financial footing. Are my premiums too high? Will my spouse be taken care of? Am I really going to die one day? 

WE SAT DOWN WITH LAWYERS FINANCIAL ADVISOR, DAVID HODGSON, FOR A QUICK REFRESHER ON WHAT YOU NEED TO KNOW ABOUT LIFE INSURANCE. 

Q: IN YOUR OPINION, ARE CANADIAN LAWYERS ADEQUATELY INSURED?

A: In my view, most lawyers have insurance but not the amount that meets all their needs. Part of that’s because people are unclear about what their needs are, which makes sense. We don’t know when we’re going to die, so we don’t know what our financial needs will be when the time comes.

People can put off getting or updating their life insurance because they don't like thinking about it, but I also think people, for the most part, have good intentions about wanting to deal with this stuff—they just get distracted. It's an easy thing to keep pushing back because we don’t have a set deadline. So, it’s my job to make sure that these things get done and people have a plan in place that will save their spouse or other family members a lot of trouble down the line. In my experience, people are always grateful once it’s done and taken care of.

Q: IS THERE SUCH A THING AS TOO MUCH INSURANCE?

A: It’s impossible to say. Someone who's “underinsured” today might just have to wait six months to be considered “over-insured.” Our needs are constantly changing, so policy values are never going to be 100% correct. And, because needs are so specific to each individual, it’s impossible to say, for example, “Look at this guy over there who pays X amount, I want to pay that, too.” You don’t know what his needs are compared to yours. So, you’ll only know if you’re over-or-underinsured when you sit down and go over your plan.

Q: IF OUR NEEDS ARE ALWAYS IN FLUX, HOW OFTEN SHOULD WE BE TALKING TO OUR INSURANCE ADVISOR?

A: It’s always a good idea to review your insurance policy if you have any questions. Generally, I like to check in with my clients every one to two years, but I also recommend clients get in touch every time they’ve gone through a life change, if they’ve got a new job that will pay some insurance premiums for them, for example, or the birth of a child. 

Q: WITH MANY CANADIANS WORRIED ABOUT INFLATION, ARE THEY AT RISK OF SPENDING TOO MUCH MONEY ON PREMIUMS THAT COULD BE BETTER USED TO OFFSET THE RISING COSTS OF THINGS LIKE GROCERIES OR GAS?

A: Like I said, it’s never a bad idea to schedule a phone call to review your life insurance plan, but in my view, honestly, if everything’s going up then your life insurance should as well. Think about why you have the policy in the first place. If you want it so that your kids’ tuition will be paid for, well, then those college fees are going up due to inflation as well, so what you actually need is more insurance, not less, and that means a larger policy that will cover that increased cost. 

Q: IS THERE ANYTHING YOU WISH CANADIAN LAWYERS KNEW ABOUT LIFE INSURANCE? 

A: Most people are surprised about how cheap life insurance is. I think sometimes people avoid setting up a plan because they really don’t have any idea how low the actual costs are. They’re worried that if they come in for a meeting, we’ll try to sell them something, but we won’t. We give out options and information based on each individual’s or family’s needs. You decide what to do with it. But I really do find that the majority of people don’t realize how cost-effective these plans can be.

WE CAN HELP 

We get it: Life insurance isn’t fun. And baked into every policy is the even less fun reminder of our own mortality. But remember, while what life insurance is for can feel scary, who your policy looks after–their homework on the counter, their shoes by the door– is what it’s really all about. Talk to your local Lawyers Financial advisor about the plan that’s right for you.

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Source: 1. Insurance Business Canada, “How many Canadians have life insurance? Survey reveals all,” February 7, 2022. The article cites a recent survey by Goose Insurance that suggests that only 48% of Canadians have life insurance.