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Do I really need life insurance?


“In general, life insurance is most necessary if you have dependents who would be financially affected by your death,” says Lorne Marr, director of business development at Hub Financial and founder of LSM Insurance, an insurance broker in Markham, Ont. “Typically, life insurance is used as a way to pay off a large debt, such as a mortgage on a home that you want to leave to your heirs.” But technically it is not need life insurance. Unlike car insurance for drivers, it is not required by law in Canada.

Why You May Need Life Insurance

If you have a wife and children, ask yourself: what do you want to happen to them when you are gone? Chances are, you’d rather have them maintain their current lifestyle than deal with financial uncertainty or move away from home. (Read this MoneySense article to learn how life insurance works.)

If you have dependents, you will likely need a life insurance policy. This can help pay off debt obligations (such as mortgages, car loans and credit card bills), allow your dependents to stay in the family home and cover day-to-day living expenses. In addition, it can pay for future living expenses (for example, the cost of your children’s post-secondary education).

If you are single and no one actively depends on your income, a life insurance policy is still worth considering. A death benefit can be enough to pay off debts, cover unavoidable end-of-life costs (such as funeral arrangements) and provide financial support to your loved ones or favorite charities.

If you have a mortgage

A life insurance policy is not required for mortgage in Canada, but it is recommended. “It just makes sense to have it,” says Jason Roy, a financial security consultant and managing partner at Adkins Financial in Brantford, Ont. “Your mortgage is most people’s biggest expense and is usually taken out of the couple’s combined income. When something unforeseen happens, the last thing you want to do is make decisions because you’re strapped financially.”

If you are single and in debt

You may need insurance in this case, depending on your situation. A life needs analysis can help you decide by taking into account things like your age, outstanding debts, assets and savings. A needs analysis also takes into account any future plans to start a family, leave money or property to family members, or donate to charities.

Why You May Not Need Life Insurance

If you’re single, with no dependents or debt, and have enough savings and assets to cover all your end-of-life expenses, then this probably isn’t necessary. It’s the same if you have a family, but you’re financially set up to take good care of them (like a mortgage-free home, no debt, and lots of savings).

Still not sure? Here are more scripts

Retired, without dependents

Catherine is a single 70-year-old woman with a mortgage of about $115,000. With no dependents and living on a tight budget, she would prefer not to pay life insurance premiums.

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