Canadians are skipping life insurance, and it’s mostly because they think it’s too expensive, a new report shows.
Almost half of Canadians (42 per cent) don’t have life insurance or aren’t sure if they do, and 49 per cent have no plans to purchase any in the next five years, a new survey by insurance firm PolicyMe and Angus Reid said on Wednesday.
And Canadians with children, too, are skipping life insurance, PolicyMe CEO Andrew Ostro said.
“The biggest barrier is affordability. Our recent report found that one in three Canadians without coverage (34 per cent) say it’s too expensive, and that jumps to 42 per cent among households with children,” Ostro said.
Life insurance premiums in Canada can range anywhere between $15 and $300, depending on the policy. For a non-smoker with $500,000 in coverage for a 20-year term policy, the monthly rate would be $33.27 for a 40-year-old woman and $44.96 for a 40-year-old man, according to one estimate.
One in 10 (10 per cent) say high living costs have delayed their insurance plans, while 27 per cent believe they don’t need life insurance, according to the survey.
Nearly two in three uninsured Canadians (65 per cent) say they are unlikely to get life insurance in the next five years.
In addition to cost, many Canadians simply don’t think of life insurance as something they need, Ostro said, while others (26 per cent) are discouraged by the litany of medical tests required to qualify.
“Canadians who have health concerns may not be aware that they can still qualify for life insurance,” said Michael Aziz, vice-president at Foresters Financial Canada, a global insurance company.
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But Ostro said not having life insurance can risk the financial security of your family.
“Our survey found that one in four Canadians isn’t confident their families would be financially secure if they were to pass away unexpectedly. This lack of confidence often reflects the reality of living paycheque to paycheque, carrying high debt loads, or managing rising household costs with little room for savings,” he said.
If you have any dependents at all, it may be unwise to skip insurance altogether, Aziz said.
“If anyone relies on your financial contribution to the family, the consequences of not having life insurance can be dire — loss of the family home, relocation and bankruptcy, to name a few,” he said.
Certified financial planner Jason Evans said life insurance is “critical for families with kids.”
He added that it is best to buy life insurance when you are young and healthy.
“If a parent develops a serious health condition, they may not be able to qualify or may face much higher premiums. Buying coverage while healthy helps make sure the protection is in place when it is needed most,” he said.
Another reason Canadians don’t get life insurance is that around one in five Canadians (21 per cent) believe insurers only pay out half of claims or less, the PolicyMe survey said.
“In reality, the life insurance payout rate in Canada is closer to 99 per cent. That disconnect points to a trust problem. Insurers need to be more transparent about how often claims are paid and clearer about the process overall,” Ostro said.
While the cost of living might be delaying the insurance buying decision for many Canadians, Ostro said premiums could get costlier the longer you wait.
“On average, premiums increase by about eight per cent each year you get older. For families under financial strain, that means delaying can make coverage even harder to afford in the future,” he said.
For someone worried about the cost of insurance premiums, understanding the difference between term life and whole life insurance may be beneficial.
Term life insurance is, simply put, a policy that only covers you for a set period of time. This could be 10, 20 or 30 years. A whole life policy, as the name suggests, covers you for life.
If you outlive the period of the policy and your coverage ends, your beneficiaries won’t receive any money. While it does not provide the comprehensive coverage of a whole life policy, the premiums can be a fraction of the cost.
“Whole life, while it includes investment and cash value features, often comes with premiums that are several times higher. For those looking to protect their dependents at the most affordable price, choosing the right product is key,” Ostro said.
While term insurance may not be entirely comprehensive, Evans said it is better than no coverage at all.
“Starting with a small policy is better than having no coverage at all. Coverage can be increased later as finances improve. Some employers offer group life insurance, though it has limitations and usually isn’t enough on its own,” he said.
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