5 good reasons for having life insurance 

You probably already know the basics of getting your finances in order. Save for retirement. Make RRSP contributions to reduce your income taxes. Build an emergency fund. Pay your credit card balances in full every month. It's common advice.

But as your personal or professional situation evolves, as it does when you welcome a child into your life, buy a home or a start a business, life insurance can be a good thing to add to the list. Here are 5 examples of how taking out a life insurance policy (or renewing one you already have) could help protect your loved ones and your wealth when you die.

 

1. Life insurance can help cover funeral expenses

According to the Corporation des thanatologues du Québec¹, average provincial funeral expenses in Quebec are around $4,500 to $7,500. Even a small life insurance policy can prevent your loved ones from dipping into their savings or taking on debt to cover these charges. Your heirs or the person in charge of liquidating your estate could also use the lump sum from your insurance policy to cover any taxes that will need to be paid as a result of inheriting your assets. It's a detail we often forget—but an important one nevertheless!

2. It can be used to pay off debt

Think about the different types of debt you can carry: car loan, line of credit, mortgage, major appliances purchased through a payment plan... As life goes on, our financial obligations tend to accumulate. When you die, the lump sum from your life insurance policy can also be used to repay your debts so they aren't transferred to your family or estate.

3. Provide your family with income when you die

If you have children, you probably want to make sure they'll be able to maintain their standard of living if something ever happened to you.

Term life insurance covers you for a pre-set term ranging from 10 to 65 years. If you die during the policy term, your estate will receive a lump sum based on the fixed premium you paid throughout the chosen period. After the policy term, your personal life insurance coverage will end.

This type of life insurance can help your family keep up with its short- or long-term financial obligations and maintain their standard of living if you pass away. For example, they could benefit from financial protection until your children turn 18 or finish school.  You can also provide them with an inheritance they can use to cover their financial needs and live their best life.

4. It can protect your business

If you’re part of a business partnership and something were to happen to you, would your loved ones be able to take over? Among other things, shareholder agreements sometimes include insurance that business partners can use to buy back a partner's shares after they die. 

If that happens, the estate will receive a lump sum to give up their shares, and the surviving business partners will avoid having to co-manage the business with the deceased partner's loved ones. You can always reach out to a legal advisor for more information about this topic.

5. You can use it to maximize your savings

If you’ve running out of RRSP and TFSA contribution room,  certain types of life insurance provide additional ways to save.

Participating life insurance is permanent coverage with flexible dividend options. This dividend is paid out annually,² and policyholders can use it in a number of ways depending on the options they chose when they signed up for coverage. Some policies even feature a savings component, which you can use to provide your loved ones with a nest egg, finance the growth of your business or add to your retirement income. What's more, the cash value of your policy will grow tax-free.

Universal life insurance is another option you can use to accumulate savings. This is done via an accumulation fund, which you can use to make investments through your insurance policy. Universal life insurance features a range of investment options. For example, you could decide to invest in a GIC or Canadian equity funds. As long as certain rules are respected, these amounts will grow tax-free.

There are so many benefits to life insurance. It can help your loved ones cover expenses related to your death and provide them with an inheritance, help keep your business running or go to an organization that's close to your heart.

Make sure to contact your financial security advisor whenever your personal or financial situation evolves. They'll be able to explain the different types of life insurance available and help you make an informed decision.  They can also assess your situation and figure out how much life insurance you need.