Recession, stock market crash, a global pandemic — in his nearly 30-year career in insurance, Louis Lavoie has seen it all.
Although every crisis passes, there are some things that don’t change:
- you can never predict the future and
- there’s always a need to protect the people you care about after you’re gone.
And the sooner you make plans to protect them, the better. Here’s why.
Imagine a couple with three children and each parent earning $50,000 per year. Then disaster strikes: one parent dies.
“The drop in income is drastic. But life goes on, and so do electricity bills, school expenses, clothes shopping, groceries, etc. Living expenses don’t drop by half when a parent dies,” points out Lavoie, Insurance Sales Director at Sun Life.
That’s where having good life insurance coverage offers a helping hand. Insurance provides financial security to those you’ve left behind who’ve depended on you — your spouse, your children, and/or partners.
How does insurance help the people closest to you? The tax-free proceeds your beneficiaries will receive from your life insurance will make up for the loss of income and will pay off any outstanding debts after you die.
What happens if you buy life insurance at a young age?
If you want the peace of mind that comes with having life insurance, you first need to prove to the insurance company that you are “insurable.” That means you need to answer the insurance company’s questions about your health so it can properly assess your insurance application. Otherwise, you run the risk of your application being declined or of paying a higher premium.*
(*Premiums refer to the monthly or annual fees you pay to have insurance.)
By taking out life insurance when you’re young, you have a better chance of qualifying for guaranteed insurability.
Your life insurance premium often depends on your age, lifestyle habits, medical history and current state of health. If you’re a healthy person in your 20s, you’re more likely to fall under a low health-risk category. This means you’re more likely to get a lower premium.
“It’s never too soon to buy insurance,” insists Lavoie. “You’ll be more likely to pay a standard premium when you’re still young and healthy.”
Parents can even take out life insurance on their newborn. “This type of temporary life insurance — like other term life insurance plans — can be converted to a permanent insurance plan when the child reaches adulthood,” he says. “At that point, there’s usually no requirement to provide additional medical information."
- Term life vs permanent life insurance: What you need to know
- Is term life insurance right for you?
- Is permanent life insurance right for you?
What happens if you buy life insurance later in life?
As you get older, your circumstances and needs will change. The obligations you had when you were 20 are different when you’re 30, 40 or 50 years old.
At this point, you may have a career, own a home and have a partner or kids. It’s not just a matter of whether you’re insurable or not, you also want to protect your loved ones, pay your taxes and cover your debts should you pass away.
“It’s not too late to buy life insurance – even in your fifties,” Louis Lavoie adds.
Think about life at that stage. Some people run their own business. Some people are homeowners. Others have accumulated personal wealth and have investment portfolios.
Now think about what happens after you die. Some things become taxable after death, such as capital gains on property. This means the loved ones or beneficiaries who inherit your estate could be left with a sizable tax bill on their hands.
In the end, it always comes down to the same question: what do you want to leave to your survivors?
“The older you get, the more wealth you acquire and the greater the tax impacts will be. Permanent life insurance can cover these expenses, no matter when you pass away,” Lavoie says.
With life insurance, it’s important to remember that the tax-free death benefit* bypasses the estate. This means your beneficiaries will receive the benefit directly.
(*The death benefit refers to money given to your beneficiaries after you die. The exact amount of money they receives depends on how much coverage you bought.)
Your beneficiaries can then use that money any way they wish. For example, they can use it to pay:
- tax bills,
- mortgage or rent,
- the cost of childcare,
- tuition fees,
- living expenses, and
- just about anything they want or need.
Talk to an advisor to learn more about your insurance options
An advisor can analyze your needs and suggest the right type of insurance plan to suit your age, needs, goals and budget. A 2019 Sun Life survey showed that 87% of Canadians who work with an advisor say they’ve gained valuable advice.
“Our role is to look carefully at your current situation. We want to help people make informed decisions so they feel in control of their life, health and wealth. Buying life insurance is a loving and generous thing you can do for your loved ones. And that’s a good thing at any age,” concludes the Sun Life Quebec Insurance Sales Director.
- Most advisors now offer virtual services and provide consultations by phone or video chat. Find an advisor today.
The information presented in this document is for general information only. Sun Life does not provide legal, accounting, taxation or other professional advice to advisors or their Clients. Before you act on any of the information contained in this guide, please get advice from qualified professionals. Tax and accounting professionals, along with your advisor, can thoroughly examine your situation and provide you with the best insurance and tax planning option suited to your needs.