Mike Stocks, vice president of
insurance marketing at Empire Life
According to recent research, high consumer debt is contributing to unnecessary financial risk for millions of underinsured Canadians.
After declining throughout the first half of the 1980s, the ratio of household debt to personal income has continued to rise each year. Many families have now reached the point that debt repayment is squeezing other necessities out of the monthly budget, including life insurance, says Mike Stocks, vice president of insurance marketing at Empire Life.
He cites Life Insurance and Market Research Association (LIMRA) research that found that the percentage of Canadians who own life insurance policies declined to 43 per cent in 2013 from 55 per cent in 2006. According to LIMRA's annual report, "61 per cent of Canadians have no insurance or feel they are underinsured," he adds. "There are a number of contributing factors, but the rising debt loads are the most significant."
Given the challenges of debt repayment many households are facing, it's particularly important to recognize just how affordable life insurance can be, he stresses.
He points to the example of an average, 40-year-old female who doesn't smoke. Married with two children, she is just about to buy a new home with her husband. Their mortgage will be $250,000, which Statistics Canada reports is the average for Canadian families. For just $25.43 per month, she could have a 20-year, $250,000 life insurance policy.
"That's just a few dollars more than the cost of buying a Timmies coffee every workday," says Mr. Stocks. "It really boils down to your priorities – is your daily cup of coffee more important than leaving a legacy of financial security to your family if something unexpected happens to you?"
Life insurance is an essential element of a sound financial plan, and a financial adviser can help provide solutions and put a comprehensive plan in place, he says.
It's a common myth that professional financial advice is only for those who have accumulated significant assets to invest, but a number of studies have found that working with a financial adviser has a positive impact at every stage of life.
"There are many great advisers out there helping Canadians get their debt under control in simple ways, through strategies such as consolidating their credit card debt with their mortgage to get a lower overall rate," says Mr. Stocks. "They have many tools available to help people manage their cash flow and achieve all their financial goals."