sort through the issue (folding towels can wait):
Unless you are an immortal vampire, you’re going to die. Do you want to
leave anything to your loved ones?
No one wants to think about dying. But let’s just say for example that you
suffer a fatal allergic reaction to garlic; who would your sudden passing affect
You might want to consider getting coverage to settle your debts (your
mortgage for example), pay for your farewell party and maybe leave some money to
take care of your loved ones.
However, despite what anyone says, you might not even need life insurance.
“If you don’t have kids and you don’t have a spouse, then maybe it’s not
necessary,” says Sandi Martin, a 34-year-old fee-only financial planner. “If
nobody is depending on you for your income and you die, then what do you need to
The money you’d put to monthly insurance premiums might better serve you
invested in a tax-free savings account, for example.
Unless you have a crystal ball or a hot tub time machine, you will not
know when or if a life event will suddenly make you uninsurable or subject to
way higher premiums. If you don’t feel the need to leave your parents anything,
think ahead for a moment. Will you have a spouse and/or kids at some
If so, are you okay with the risk that you may not be as mega fit as you are
“If [people] want to buy it in 10 years, they do run the risk of no longer
being healthy,” says Alec Blundell, an assistant vice-president at Co-Operators
Life Insurance Company. “But I recognize that people in their 20s don’t like
thinking about those concepts and do put it off.
Last year, Rebekah Brinks, a 32-year-old supply teacher in Simcoe, Ont., was
diagnosed with ovarian cancer. They caught it early and the mother of two is
recovering. However, she laments that she was unable to get the kind of life
insurance coverage that she wanted for her family; so she’s going to wait until
she’s been cancer-free for five years and apply again.
“I was healthy too and there was no [history] of ovarian cancer in my family.
It was a bizarre thing that came out of nowhere,” she says. “So for the next
five years, if anything happens, that’s a burden that my husband has to deal
The earlier you buy, the cheaper the monthly premiums will be and the longer
you’ll be able to lock them in at that price. Term premium rates increase in
increments, every 10 years for example.
For example, for a healthy, non-smoking 25-year-old, $250,000 worth of life
insurance coverage for a term of 25 years would cost $25.65 a month, Mr.
Blundell says. For a healthy, non-smoking 35-year-old, the same coverage would
be $34.20 a month.
Also, if you think one day that you might consider taking up extreme sports,
get life insurance long before you start. (Some insurers will ask if you have
any intention of participating in hazardous activity in the next two years.)
Your daring hobbies could ratchet up your monthly premiums. “Life insurance is
not automatic. You do have to qualify for it. Your qualification and cost are
going to depend what type of risk you are,” Mr. Minor says.
Unless your parents are the Kardashians, you might not receive a big
inheritance. Would your parents consider arranging for a life insurance policy,
having you pay the premiums and requesting that you be designated as the
(Whenever I mention this, my future mother-in-law thinks I’m conspiring to
murder her for money.) Be warned, however, the premiums on an older individual
are more costly.
“Last week, I settled a case with two brothers and their 60-year-old father,”
says Mark Halpern, a certified financial planner and president of illnessPROTECTION.com. “They
bought some insurance for the father. It was a small [universal life insurance]
policy for $100,000; but the brothers are paying the [$2,000 annual] premium
between the two of them…in order to inherit or have money to pay for final
Insurance is a good way to get tax-free dollars to beneficiaries, he added.
He gave the example of parents who bought a cottage for $100,000 and its value
has grown to $500,000.
“On their death, there’s going to be a $400,000 capital gain. There are going
to be taxes of $100,000. Unfortunately families either have to come up with that
money and it might not be liquid or available from the estate or they have to
borrow money. The saddest part is people actually have to sell the asset in
order to get the money to pay the taxes. That’s where life insurance is the most
cost-effective and flexible tool.”
Unless you are Superman, you’re not bulletproof. What if you got
injured or sick and were unable to work?
This is where disability insurance could help.
A small percentage of term life policies ever get paid out. However, people
have a much bigger chance of becoming injured, which is why disability insurance
tends to be pricier.
“You’re still in your 20s or 30s and you’ve had a bad accident. You’re off
work and you have no income or limited income but you still have financial
obligations because you have to pay your mortgage. It’s a big burden to take
on,” Mr. Minor says. “[Insurance] will help offset that burden and let you focus
on your rehabilitation or recovery.”
You’re five times more likely to suffer an illness before the age of 65 than
you are to die before 65. If you purchase a $100,000 critical illness policy
and you get cancer or suffer a stroke, for example, the insurance company will
pay you that amount to do with as you wish.