Life insurance is seen as something that helps ensure the people you love are taken care of after you’re gone. Some life insurance products can also be used to accumulate wealth and as a tax planning tool. But when’s the optimal time to buy it? Everyone’s personal and financial situation is different, but looking at the milestones in your life might help you decide when you should get or adjust your insurance.
STARTING UNIVERSITY / COLLEGE OR GETTING YOUR FIRST LOAN
Post-secondary education comes with a big price tag, and as a result, students may take out a loan or line of credit to help with the cost. “Most students don’t think about life insurance at all until they’re asked if they want to add it to their line of credit,” says Steve Santoro, certified financial planner and president of Santoro Financial Group. “If mom or dad co-signed for the loan, you probably want some protection so they’re not on the hook for paying back the loan if something were to happen to you.” Buying insurance at a young age also has the added benefit of premium payments that are generally much lower than purchasing at older ages.
STARTING A JOB
If a new job offers group life insurance, that’s a great benefit that often covers one to three times your salary. “You’ll want to understand what happens to your coverage if you leave your job and balance your group insurance coverage with life insurance owned by you,” says Mr. Santoro.
BUYING A HOME
If you’re living by yourself and don’t have anyone relying on you to make mortgage payments, life insurance might not be a priority. Once you’re living with someone, sharing debt and expenses, it’s often a good time to start thinking about it.
Banks and lenders may offer insurance as an add-on to the mortgage; however, Mr. Santoro says there are benefits to getting a personal policy. “Make sure your life insurance is attached to you – not your bank or lender. If you pay off your line of credit or mortgage, that coverage is gone.”
If you didn’t get insurance if you were living together, getting married might also be a good time to think about it. “While getting married doesn’t in and of itself increase the need for insurance, the more committed you are to someone, the more likely you are to get insurance to protect them,” says Mr. Santoro.
STARTING A FAMILY
When you start a family, life insurance becomes critical. If something happened to you, you’d want to know your family was financially taken care of. Having coverage can help your spouse afford time off work, help pay for extra child care and not be worried about finances in their time of grief. It can also help eliminate debt like a mortgage or help provide contributions towards an RESP for your child.
Having a child is also a time when parents or grandparents might take out a permanent life insurance policy for the child. At that age, it’s more about gifting them an asset for later in life, and it also helps ensure they will have insurance coverage in the future.
You can’t look at insurance as a siloed product. Work with someone who can look at everything holistically – mortgage, investments, insurance, family cash flow, business and tax planning – and provide you with a well-rounded financial plan.— Steve Santoro, certified financial planner and president of Santoro Financial Group
OTHER LIFESTYLE CHANGES
Having more children or going from your starter home to your forever home is a good time to look at your coverage. Mr. Santoro says, “Anytime there’s a lifestyle change that increases your debt or the cashflow needed to maintain that lifestyle, you should revisit your coverage needs.”
Buying more property like a cottage or starting a business could also warrant more coverage or even a permanent policy. “Term insurance is for temporary needs like covering your loan or mortgage or protecting your children when they’re young. Permanent insurance is for permanent needs, such as estate planning or as a long-term savings and tax strategy.”
While there are certain milestones that can typically trigger a need to get life insurance, there’s no one-size-fits-all insurance and financial plan – talk to your adviser. Mr. Santoro says, “You can’t look at insurance as a siloed product. Work with someone who can look at everything holistically – mortgage, investments, insurance, family cash flow, business and tax planning – and provide you with a well-rounded financial plan.”
For more information about life insurance, visit canadalife.com.
Produced by Randall Anthony Communications. The Globe’s editorial department was not involved in its creation.