It's Your Money  

Insure your spouse

Do you have insurance on your car?

I don’t mean the basic liability insurance that is required by law but instead the additional optional collision insurance that will repair or replace your vehicle if it is damaged.

My bet is that if your car is worth more than $10,000 you probably do. And why wouldn’t you?

Can you imagine the financial hit your family would take if your brand new $30,000 or more care was wrecked and you were left on the hook?

What does that collision insurance cost you on an annual basis? Let’s assume a median age, vehicle price and driving history and estimate it will cost you around $600 a year for the collision portion of your car insurance.

People will happily pay this $600 each year to insure the risk of losing a portion or the entire value of their car. Something that according to my rough calculations with ICBC statistics, you have a one in three per cent chance of claiming on in a given year.

Let’s switch gears and consider the financial burden to your family if your spouse passes away. Your spouse earns $80,000 per year and ignoring inflation, let’s assume they will earn that same amount for the next 15 years until they retire.

Your family relies on that income to survive and 15 years of $80,000 equals $1.2 million. Have you really stopped to consider what would happen if your spouse doesn’t earn that money over the next 15 years?

A 45-year-old in Canada has a four to five per cent chance of dying prematurely.

To insure this risk, a $1 million, 10-year-term life insurance policy on a 45-year-old male would cost as little as $980 per year and a 45-year-old female’s plan would only cost around $670 per year.

Yet, there are many Canadians who don’t have life insurance.

Let that sink in for a minute, there are far more Canadians paying $600 per year to insure a $30-50,000 risk of losing their car than there are willing to pay $600-1,000 per year to insure a $1 million loss…

Quite simply, it doesn’t make any sense. So why are so many people avoiding life insurance?

The most common reasons are a lack of understanding, feeling that they don’t have time to set it up and the fear of a complex underwriting process to get approved.

Well one little piece of good news in this pandemic is that insurance companies have made some major (but temporary) changes to their application process.

The entire process can now be done digitally and can be done in very little time. Furthermore, most major insurers are waiving medical underwriting requirements for a limited time as they are avoiding any in-person contact.

If you have collision insurance on your vehicle, but no life insurance on your spouse, take a moment to consider just how absurd that notion is and take advantage of the temporary relaxed underwriting requirements that exist in the marketplace today.


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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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