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When Should You Buy Life Insurance?

There are many factors that determine when a person buys life insurance since each person's family and financial situations are unique. However, life insurance is there for everyone and in all stages of life as it secures much needed finances for your loved ones after your passing. But is there a best time to get life insurance? What do the experts say? In this article we consider when is the best time to get life insurance that is right for you. 

The Younger, The Better

It is a unanimous consensus among insurance brokers and agents that getting life insurance at a young age is a very good idea. First of all, you will pay lower premiums because you are young and healthy. As you age and decline in health, you may fail to qualify for or pay high insurance premiums for your life insurance policy. 

While most young people put off getting life insurance due to the financial stresses of paying for education, cars, mortgages etc, it is prudent to see a life insurance policy as an investment for the future. Stretched out over time, a young person pays little costs in comparison to the pay-out a life insurance coverage policy offers. 

Term Life Insurance

Term life insurance is insurance that guarantees a payment after your passing but only for a specific term. If you live over the stated term on your policy, you can either renew the policy, convert it to permanent life insurance, or simply terminate it. Term life insurance is a good option for parents as it can provide financial assistance to children as dependents in the event of an unexpected death. 

In essence, if your income is crucial to your family in making ends meet, then a term life insurance policy is a good investment that can give you peace of mind. Also, life insurance is a benefit to your loved ones if you have unsecured debt to your name, such as personal student loans and credit card debt.

Term Life lets you buy the most insurance for the lowest cost.  It is best for protecting your family for a specific purpose, for a fixed amount of time.  If you have children, you’ll want to have the financial resources to look after them until they have finished school and can start to work on their own.  No one knows, for sure, how long that will be but age 25 is a good rule of thumb.  If your child is a newborn, look for at least a 25 year term.  If they are 5, then that drops to a 20 year term policy.  The longer the term, the higher the annual premium.

Term life is also a much better option than mortgage insurance.  Its much more flexible and can be cheaper

Permanent Life Insurance

Many people benefit from permanent life insurance as its cash value grows over time and it is a tax-free payout to the beneficiaries upon one’s death. Getting permanent life insurance at a young age is indeed like an investment. You can use it for a first down-payment on a mortgage, or it can supplement your retirement income. 

Permanent Life Insurance is best where you need the protection for your entire life.  An example would be where you buy life insurance to cover the taxes from capital gains on a cottage.  When you die, your assets, such as a cottage, are deemed by the CRA to be sold, and any rise in the value since you first bought it are taxed as capital gains.  

You may want to leave it to your children, but they may have to sell it just to pay the taxes.  If you knew when you were going to die, you could plan to save enough money in your estate to pay those taxes.  Since we don’t know, life insurance provides resources to pay those taxes in case you pass tomorrow or you live to a ripe old age.

Clearly, it is better to get life insurance early on in your life. You can pay lower premiums and enjoy more financial benefits of life insurance as time goes on. If you would like more information about our life insurance coverage option, please contact us today and we will gladly help you.