I recently came across a bank study (from BMO) suggesting Canadians feel that they need an average of $265,607 in life insurance coverage paid out upon their death to ensure that funeral expenses and debt are covered.
This amount, however, varied depending on a client’s personal situation. For instance:
- those who are married/common law with children say they need an average of $320,974;
- those who are married/common law without children say they need an average of $290,962;
- single individuals (without children) say they need an average of $186,629; and
- those who are single with children say they need an average of $106,517.
These numbers and their correlation prove to me that statistics based on averages are in many cases useless and don’t deserve to be called research.
However, it does show that many people tend to focus on making sure that their family is supported financially if they were to die. What many forget is, that it’s also important to take into account that illnesses and accidents can happen as well. These types of unexpected, critical events can put a tremendous amount of financial stress on both, the affected individuals themselves and their families.
Additional findings include:
- 65% believe that developing a critical illness or becoming disabled as a result of an accident would have a significant financial impact on their or their family’s standard of living;
- 55% believe it would take fewer than six months for them to start feeling financially strained if they became seriously ill or were disabled;
- 38% would feel financially strained within three months; and
- 16% of Canadians have purchased life, critical illness and disability insurance.
Most insurance policies are designed as a safety net. We don’t really like paying for them because we only benefit if something bad happens. Many people try to avoid them and don’t understand the need until something actually happens. At that point there is a risk of being uninsurable or very steep premiums. It is very important that you have a safety net in place. A good advisor will help you to determine which policies you need, the amount you need, and prioritize the needs while working within your budget.
Falk Hampel is an insurance advisor with R.J. Rau & Associates in Sarnia. He can be reached by e-mail: [email protected] or phone: (519) 466-0243