Do I Need Life Insurance? A Look at When and Why You Should Buy

Aug 8, 2019
min read

Don’t ignore life insurance. Choosing the right coverage is easier than you might expect. Also, the sooner you get it, the cheaper it will be. According to Ipsos-Reid, over 70% of Canadians have life insurance, so we’re not asking if you need life insurance, but rather when do you need it?

When do you need life insurance?

Life insurance isn't a product you buy for yourself. It's a product you buy to leave something behind for your loved ones to ensure you have no debts left to pay, your income continues to support them, and potentially to support the future costs of education.

Life insurance is needed when you have dependents, and it’s not exclusive to being a parent.

The first time you should consider buying life insurance is after marriage, or just before it. If you've moved in with a life partner, you want to protect them from financial turbulence. Together, you can afford a higher rent or mortgage, car payments, and other monthly expenses like home insurance. However, if something unfortunate was to occur, the financial burden is left to your significant other. It’s in these moments that life insurance comes to the rescue to cover those costs.

The next time you need life insurance is when you have kids. If you die, your income is no longer available to support them. Having that piece of mind knowing that you’ve insured their future will continue without you, will go a long way. Once they graduate and get a job, it's an excellent time to review your life insurance needs and decide if you still want to continue with the monthly payments.

Finally, if you're supporting ageing parents, think about keeping your life insurance policy active for the same reasons already mentioned. If they're in a home, and relying on you to pay the bills, then life insurance will cover the costs if you're no longer around.

What type of life insurance should I buy?

In general, the decision is term vs. whole life policies. While their names may vary (as will the fine print in each), these two are where you'll start; they are your first decision.

Whole life insurance is a product you'll pay for your entire life. Once you die, if you've continued to pay into it, your dependents will receive the money. You decide what the payout will be when you go, and the monthly premiums will never change throughout your life.

Term life insurance gets its name from the length of time in which you'll pay for life insurance. For instance, if you have toddlers, you may want term 20, or life insurance for 20 years. In other words, you want your children to have their expenses paid for until they graduate. It also means, within those 20 years, if you die, your spouse can continue living in the same house and afford the same lifestyle to which they've become accustomed.

Term life insurance is often cheaper than whole life since there is no guaranteed payout and it’s during a time when there is less risk to your life.

How much either will cost, however, will vary greatly by how much life insurance you need.

How much life insurance do I need?

The rule of thumb is to follow the DIME formula: Debts, Income, Mortgage, and Education. If you take any debts you have, add in how many years of income you'd need to replace, partner those with the amount remaining on your mortgage, and finally throw in what it would cost to get your kids through university - that's how much you need.

Whole life insurance is a product you'll pay for your entire life. Once you die, if you've continued to pay into it, your dependents will receive the money. You decide what the payout will be when you go, and the monthly premiums will never change throughout your life.

Let’s say there is $3,000 of credit card debt, you make $50,000 per year, you have $250,000 left on your mortgage, and it’ll cost about $50,000 to send your only child off to school. With a term 20 policy, that’s $1,353,000 worth of life insurance.

A few dos and don’ts

  • Don't count on a life insurance policy offered through work to be enough coverage. Often, if there is a policy in place, it may only be two years worth of income replacement.
  • Do shop around for life insurance quotes from different providers online to make sure you’re getting the best price and value for your needs.
  • Don't lie on the application forms - if you need to make a claim, you don't want to be denied for misrepresentation of facts.
  • Do pay the bills on time. A missed payment could result in a policy cancellation. You'd then need to reapply for coverage, and your rates would be higher since you'd be older.


You need life insurance. Once it's set up, make your regular payments, and hopefully, you never have to use it. However, knowing your loved ones will be cared for after your passing is worth the money. Whether you shop online or prefer to speak with a broker in person, find the right life insurance coverage to meet your needs, when you need it.

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