As if today’s sandwich generation doesn’t have enough to fret about, they now have new insurance needs to add to the list. Lifestyle changes can have major implications on personal finances and retirement savings, as well as insurance needs, necessitating the adage that changing lifestyles require different insurance
- People are living longer and more active later in life than previous generations were. The average life expectancy is now 82 for men and 85 for women. This creates a need for more money to sustain our quality of life and to ensure our money lasts as long as we do.
- Thanks to medical advancements, more of us are surviving critical illnesses. As a result of lifecycle shifts, critical illness insurance is gaining importance to protect a family’s income earning ability and saving for the future, especially during their prime income earning years.
- Another lifestyle change impacting insurance needs is that many families are choosing to have children later in life. According to Statistics Canada, the number of women having children in their 40s has more than doubled in the last few decades.
- Many young, healthy Canadians put off buying life insurance until they start a family, not realizing that sooner rather than later is the best time to get coverage. The earlier they purchase the coverage, the cheaper the premiums, along with significantly less risk of being declined due to health issues.
- Today’s high youth unemployment and increasing post secondary education costs are forcing many young people to be financially reliant on parents until their late 20s. This could translate into higher than expected household expenses for their parents, and the need for additional insurance to offset any disruption in the parent’s household income.
All these issues are adding stress, both financial and emotional, to families already stretched with record debt. Right now, family debt is averaging around 150% of personal disposable income. Worse yet, a recent report by TD Economics found that over the past decade, average debt in Canada increased at twice the pace of income. The debt load of people 65 years and older grew at three times that rate and contributed almost half to the overall debt growth.
Our need for life insurance starts with covering off any debt and replacing the lost income earning potential of a deceased family member, then to cover post secondary education costs for children. We also may need to protect our estate assets by offsetting shrinkage due to taxes or unpaid bills, or we may want to equalize estate distribution between siblings. Term insurance is a good option for this objective as it is generally inexpensive and provides a pre-determined pay out to the designated beneficiaries.
This all highlights the need to work with qualified professionals to develop a personalized financial plan with the right mix of insurance products to safeguard your income and other assets.