Are you a recent grad in your 20s? Married with a mortgage in your 30s? Planning your estate in your 50s? Whatever your age, you likely have two things in common with people in every age group:
- There are people in your life whom you love.
- You can’t predict the future.
That’s where life insurance comes in. You can’t tell exactly when or how your life will end. But you can prepare for the possibility and help protect the people you love in the process. Having the right life insurance can give you the peace of mind. It’s the feeling of that comes with knowing the people you care about can have financial support after you die.
How life insurance can help you at any age
In this article we’ll answer 10 questions about how life insurance can help at different times of your life:
- Do you need life insurance in your 20s?
- What happens if you die in debt?
- What type of life insurance can you consider in your 20s?
- What type of life insurance do you need to consider in your 30s?
- Is your employer life insurance enough?
- If you have employer insurance, does that mean you don’t need your own individual life insurance?
- Is life insurance worth it in your 40s, 50s or 60s?
- What type of life insurance do you need when you’re middle-aged?
- How do you know what’s right for you?
- What can you do now?
Life insurance in your 20s and 30s
1. Do you need life insurance in your 20s?
You’re young and healthy, but chances are you already have some serious financial responsibilities. “Maybe you have student loans to pay off. Maybe you’ve got some credit card debt. Or you’re thinking of getting married,” says Paula MacMillan, a Sun Life Financial advisor in Winnipeg. “In any of these situations, it helps to have some coverage in the event of your death.”
2. What happens if you die in debt?
If your parents have co-signed any of your credit cards or loans, it’s on them to pay them off. If you own or rent a house with your spouse, they’ll have to pay rent or mortgage on one salary.
With life insurance, your family can use the death benefit* to help cover expenses they relied on you to pay.
(*The money paid to your loved ones when you die.)
“A lot of people don’t begin to think about life insurance until they’re in their 30s,” notes MacMillan. “But if you have someone who depends on you, it’s best to start considering it earlier on. You don’t want to leave them in a financially challenging situation later.”
3. What type of life insurance can you consider in your 20s?
Along with protecting your family, there’s another reason to buy life insurance at a young age: it can be more affordable.
Your life insurance premium – which is your monthly or annual fee – depends on your:
- assigned sex at birth,
- lifestyle habits,
- medical history and
- current state of health.
“If you’re a healthy individual in your 20s, you would fall under a low health-risk category. This means your premiums will be lower,” MacMillan explains.
Two of the most common kinds of life insurance are:
For 20-somethings who just started their careers, MacMillan recommends starting with term life, which provides temporary coverage and can be renewable. This could be every 10, 15, 20 or even 30 years, depending on the policy.
“Term life is much more affordable [than permanent] for young Canadians who are just starting out,” she says. “You’ll be able to buy a large amount of coverage at the lowest price.”
You could also get a small amount of permanent life insurance to go with your term policy. This is where your youth pays off.
While having some permanent coverage will cost you more, the younger you are the lower your premium will be. Permanent life insurance can offer more protection than term alone (more on this later). And, having some of it can help set up a financial foundation while you’re in your 20s.
4. What type of life insurance do you need to consider in your 30s?
As you get older, your financial situation will most likely change. When you reach your 30s, you may have:
- children to look after,
- a mortgage to carry, or
- added living expenses.
“The advice is more or less the same, though,” MacMillan says. “You still want to purchase as much life insurance coverage as you can afford.”
But, if you already have term life insurance, this is the time to consider changing your policy. “Most term life policies allow you to convert to permanent life insurance,” she says. “It’s more expensive, but permanent life offers lifelong protection from the financial impact of death.”
It also pays off. “A permanent life policy is set in terms of cost. Whereas with term life, your premium increases – sometimes drastically – every time you renew it,” MacMillan adds. The younger you are when you buy permanent life insurance, the lower the premium you’ll pay.
Permanent life insurance is more expensive than term when you first buy it. But the premium cost doesn’t typically increase as you get older. So, after a few term renewals, permanent insurance will end up costing you less.
5. Is your employer life insurance enough?
Many Canadians in their 30s have settled into a job with benefits, which may include life insurance. “I often encourage people to max out the insurance they have at work,” MacMillan advises. “Because up to a certain point there are no medical questions or requirements. And it’s less expensive because it’s in a group.”
6. Does this mean you don’t need your own individual life insurance?
“Having workplace insurance is great. But I always caution about how there’s less job security nowadays,” MacMillan says. “When you move from an employer, you leave behind the insurance they gave you. And hopefully the next one will have equal, similar or better coverage.”
Plus, there’s no law stating a Canadian employer must give you life insurance. “That’s why it’s best to think of your workplace insurance as a top-up to your own policy,” MacMillan suggests. “So no matter what happens at work you’ll have your own insurance to fall back on.”
Life insurance in your 40s, 50s, 60s and beyond
7. Is life insurance worth it at this point?
This depends on your insurance company and the policy you want to buy. Some insurers have policies with age limits that can range from 60 to 85. “The pricing won’t always be in your favour. If your health doesn’t impede your ability to buy life insurance, it may still be available if you need it,” MacMillan says.
8. What type of life insurance do you need when you’re middle-aged?
MacMillan recommends looking into permanent life insurance for these reasons:
- Depending on your policy, your insurance costs may not rise.
- The plan might let you pay for a limited time and then never again.
- It gives your family or other beneficiaries a tax-free payment after you die.
- Some permanent policies generate dividends. Here’s how you can use dividends:
- Increase the death benefit
- Cover your premium payments
- Take them out in cash
9. How do you know what’s right for you?
Insuring your life is a good idea at any age. And leaving your family with financial protection may be the most generous thing you could do for them. But how do you get started? When purchasing a policy, you need to look at:
- your current situation,
- your personal goals and
- what you can afford.
“Along with term and permanent, there are other types of life insurance that might be better for your goals” says MacMillan.
Another option to explore is to combine term and permanent life insurance. For example, you could buy a 30-year term policy. It would help protect your family over the life of your mortgage. You could also buy permanent insurance to keep you covered when the term policy expires. Death benefits from life insurance policies aren’t taxed as income and don’t form part of your estate.* This could help reduce the tax burden on your heirs.
(*As long as you name a beneficiary rather than letting the death benefit default to your estate).
10. What can you do now?
To get your life insurance in order, consider one of these 3 easy options:
- Use our life insurance calculator to see how much protection you may need.
- Apply for term life insurance online with Sun Life Go insurance: Get your personalized quote.
- Talk to a Sun Life Financial advisor who can:
- explain all your options,
- answer your questions and
- help you build life insurance into your overall plan.
Most advisors now offer to meet Clients virtually by video chat. Find an advisor today.
This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.