Life events that call for life insurance

Life is full of significant moments such as getting married and starting a family, and with each milestone comes new responsibilities.

One often overlooked responsibility is ensuring that your life insurance coverage keeps pace with your changing needs. Life insurance can serve as a safety net for loved ones, ensuring financial security in the event of a tragedy. Yet even though this protection is vital for most Canadians, far too many are under-insured or have no insurance at all.

A significant life moment should be your cue to take pause and reconsider the protection you have in place.

Here are six key milestones in life that may prompt you to buy or re-evaluate your life insurance coverage:

1. Getting married—Marriage marks the beginning of a shared financial life, and life insurance becomes an essential tool in protecting your spouse’s financial future. After marriage, many couples combine incomes and take on shared financial responsibilities like rent or a mortgage. Should something happen to one spouse, life insurance can provide the surviving partner with the funds needed to maintain their standard of living, pay off debt, or cover funeral expenses.

It’s important to review your policy to ensure it adequately covers both your current lifestyle and future aspirations. If you already have life insurance, this is a good time to update the beneficiary and potentially increase your coverage to match your new financial commitments.

2. Buying a home—Homeownership is a major financial investment, and for most Canadians, it comes with a long-term mortgage. Purchasing a home is one of the biggest reasons people consider life insurance, as it ensures your family can continue living in the home should you pass away unexpectedly.

Buying insurance through your mortgage provider has serious risk involved and is typically never recommended. A standalone insurance policy can provide broader coverage, save money and give your beneficiaries flexibility in how they use the payout.

As your mortgage decreases over time, you may also want to periodically review your policy to ensure it remains aligned with your financial obligations and goals.

3. Starting a family—Welcoming a child into your family is one of life’s most joyous milestones, and with it comes the need to secure their financial future. Life insurance can provide peace of mind that your children will be financially protected if something happens to you. Coverage can help pay for their education, daily living expenses, and any outstanding debts, ensuring they can maintain their lifestyle without financial struggle.

For new parents, a term life insurance policy is often a cost-effective way to ensure you have enough coverage during the years when your children are most dependent. As your children grow older and become more financially independent, you can adjust or potentially cancel your coverage accordingly.

4. Career changes or starting a business—A significant career change, such as a new job, promotion or starting your own business, can dramatically alter your financial situation. If you’ve started earning more or have taken on more financial responsibility, it may be time to re-evaluate your insurance.

Many Canadians also receive life insurance as a workplace benefit, but these policies are often limited in coverage and don’t follow you if you leave your job. It is rare that you’d be wise to rely on this coverage alone.

If you’ve started a business, you may want to consider a life insurance policy that provides coverage for business-related debts or buy-sell agreements. Business owners often overlook this critical aspect, but having the right life insurance can protect your family and business partners from financial hardship.

5. Approaching Retirement—As you near retirement, your financial priorities shift. You may have fewer dependents, but there are still reasons to maintain or re-evaluate your life insurance. For example, you may want to ensure your spouse is taken care of if you pass away or leave behind funds to cover final expenses, like funeral costs.

Some Canadians also use life insurance as a tool for estate planning, ensuring that their loved ones won’t be burdened with taxes or other financial obligations. Comprehensive financial planning may also uncover that the use of insurance will maximize the amount of money you leave behind to your heirs, by shifting more money directly to them instead of going to estate taxes.

At this stage, you may also consider converting your term life policy to a permanent policy, which can build cash value and provide lifelong coverage.

6. Other significant life changes—Life is unpredictable, and significant changes such as divorce, becoming a caregiver for aging parents, or experiencing the death of a loved one can all necessitate a life insurance re-evaluation. Divorce may require you to change your beneficiary; while taking on caregiving responsibilities could mean you need additional coverage to support dependents.

Insurance is a dynamic part of your financial plan, and these unexpected life changes often require you to reassess your needs and ensure your policy reflects your current situation.

Life insurance is not a “set it and forget it” part of your financial plan. As you move through life’s milestones, it’s crucial to periodically review your coverage to ensure it continues to meet your needs and protect your loved ones.

By regularly re-evaluating your policy, you can be confident that your family’s financial future is secure no matter what life brings.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.