Life Can Be Complicated, Insurance Can Be Simple

Most people can likely relate to what Confucius was thinking when he said: "Life is really simple, but we insist on making it complicated."

That can also be true when it comes to life insurance.

In fact, the financial lives of Canadians in the 21st century actually can be complicated. But the need for insurance is simple. Individuals and families alike should contemplate contingencies ranging from bumps in the economy to getting laid off to worse.

As financial consultant and author Sandra Foster says, "What would happen if your spouse or partner dies? Would the mortgage be paid? What will happen to your savings? Who will look after your children?"

Everyone should consider life insurance, says Ms. Foster, president of Headspring Consulting Inc. in Toronto. But while life insurance is one of the basic building blocks of financial planning, choosing the right type can be challenging in today's fast-changing Canadian economy.

Up to about 25 years ago, Canada's job market and demographics were all relatively predictable. Young people with postsecondary degrees expected to find career-building jobs that often came with built-in life insurance plans.

According to a study by the online job-search firm Workopolis, now "job-hopping is the new normal" for Canadians. It analyzed the job patterns of more than 7 million Canadians in its database and found that the average person who graduated from postsecondary school in 2002 will have held nearly four jobs by now, staying in each one 20 per cent less than graduates just a decade earlier.

The implications of a changing workforce – which is a little different for older workers, who are also switching jobs – are that people need to make their own financial choices more so than in the past.

"Most Canadians should consider having some term life insurance to make up for lost income in the event of their death," says Justin Bender, a portfolio manager at PWL Capital Inc. in Toronto. "Using insurance for estate planning can become more important as people age."

The recommended amount usually depends on a number of factors: the person's age, whether the person is married or has kids and liabilities, such as a mortgage.

Often there are additional factors, such as whether a person is an owner or a partner in a business, Mr. Bender adds. Family health history is also important. "Even if you do not have a family yet, you might want to buy insurance while you are healthy, so you have it in place," he explains.

Term insurance is a type of life insurance in which the buyer pays a set premium for a fixed term, say, 5, 10 or 20 years. Another choice is permanent insurance, which can have higher premiums but does not expire.

This content was produced by Randall Anthony Communications, in partnership with The Globe and Mail's advertising department. The Globe's editorial department was not involved in its creation.