**This is a sponsored post written by me on behalf of RBC Insurance. All opinions are my own.

Over the last few years, my wife and I went through two significant life events that drastically affected our finances. We bought our first home in June of 2016, and our daughter was born in the summer of 2017.

Many of our friends and coworkers in our age range also celebrated similar life events. While we all shared tips on how to save money as new homeowners and parents, one subject that never came up was life insurance.

Honestly, this shouldn’t be a surprise. Who wants to talk about life insurance when you can share pictures of the crazy things your kids have been up to or new home renovations instead? I’m not suggesting that you need to have an in-depth conversation with your peers about your finances, but life insurance is something you and your partner need to think about if you own a home or have a child.

RBC life insurance
Why life insurance is vital

When my wife and I bought our home, like most new homeowners, we had to get a mortgage. Our payments easily fit within our family budget, but if one of us were to pass away suddenly, the surviving spouse would not only be grieving, but they would also be stuck with the high cost of a funeral as well as paying the mortgage on a single income.

This would obviously cause some great financial stress, so my wife and I both purchased life insurance policies to ensure that a worst case scenario wouldn’t completely devastate us.

New parents could also face a similar tough financial situation if one partner were to pass away. Raising a child on a single income is no easy task, but by having life insurance in place, the surviving parent will not need to worry about their finances as much.

When our daughter was born, we re-evaluated our needs with our life insurance consultant, but our policies were still good enough so we didn’t make any changes. If we have another child, we’ll re-evaluate our insurance again at that time.

When you think about it, life insurance is really just buying you peace of mind. In the event of the policyholder’s death, the beneficiaries get a tax-free benefit which can help pay for funeral costs, the mortgage, children’s education and maintaining their lifestyle. There’s no need to worry if you have the right policy in place.

Types of life insurance

Besides life insurance not being a fun subject to talk about, many people avoid it since they don’t really understand how it works. Generally speaking, life insurance is pretty straightforward since you have two types of policies that you can purchase.

Term life – With term life, you pay a fixed monthly amount (known as the premium) that covers you for a set term (usually 10 or 20 years). Once your term is up, you’ll still have insurance but the rates go up, or you have the option to convert or cancel. This tends to be okay for most people because the assumption is that when your term of 10 or 20 years is up, you’ll no longer need the life insurance payout because the mortgage will be paid and the kids will no longer be relying on your income. This type of life insurance is appealing to younger people since it’s cheap and easy to understand.

Universal life – Universal life insurance has higher monthly premiums compared to term life, but you get an investment component that goes with your insurance. Although universal life may be the right choice in certain situations, it can be a complicated product to understand. Since there is no term, you would keep this policy until you pass away or you decide to cancel the policy. If you do cancel your policy, you may be forfeiting some of your cash (read the policy details before you sign up).

For most people, term life is the most popular choice, and despite what you may have heard, it’s relatively inexpensive. For example, a 35-year-old, non-smoking female would pay about $18 a month to get term life insurance with $500,000 coverage. That monthly premium goes up to $22 a month when you hit the age of 40, so it’s cheaper if you purchase a policy when you’re younger since you can lock in your rates.

Purchasing life insurance has never been easier since RBC Insurance was first in the marketplace to introduce simplified term coverage of up to $1 million, with the option of choosing any term between 10- and 40-years. You can get an instant quote online, and then purchase coverage by just by completing a short and simple 15-minute application.

What are you willing to give up for financial security?

According to a recent poll by RBC Insurance, 74 per cent of Canadians are kept awake at night worrying about their financial situation, 72 per cent have worries about their health and wellbeing, and 58 per cent said they’re concerned about their family’s financial security if they weren’t around to help provide for them.

Life insurance will put your mind at ease since it’ll ensure your family’s finances are in order, but what are you willing to give up for it?

Let’s say for a family of two, the cost of life insurance is $50 a month. That’s roughly the cost of eating out one night a month so you could easily cut that out. A trip to the movies for two or concert tickets could easily cost about $50 too. Heck, even dropping one fancy coffee a week could end up paying for your life insurance. As you can see, you don’t exactly have to sacrifice a lot to ensure your family is protected financially.

Even if your budget is tight, life insurance can be tailored to suit your lifestyle. You also have the flexibility to make changes as your needs evolve so there’s no reason why you shouldn’t have a policy. To learn more about life insurance, check out RBC Insurance where you can get a no-obligation quote.

Final thoughts

For my wife and I, there was never any doubt about life insurance. We knew that it was an essential part of our financial wellbeing, so we budgeted for it even before we purchased our policies. We never stress out about what-if scenarios since we know our life insurance policies are there to protect our family.

How $18 a Month Could Protect Your Family’s Finances

6 Comments

  1. Michael Allen on January 21, 2019 at 7:52 am

    When you do the math on Universal Life Insurance (what they used to call Whole Life Insurance back – way back – when I took my high school personal finance course) and calculate your returns on the investment component, you’ll find you’re better off buying Term Life, investing the difference in premiums yourself and cancelling your coverage once your house is paid off and you have enough savings to protect your dependants. My teacher was right then, and he’s right now.

    • Barry Choi on January 21, 2019 at 8:10 am

      Michael,

      I 100% agree with you. It seems like the industry has moved towards encouraging to get term which is a welcome change. That being said, there are certain situations where Universal Life may make more sense and I’m sure there are some insurance consultants out there who push whole life since it gives them a bigger commission.

  2. SUSAN on January 26, 2019 at 11:16 am

    At risk of wading into a big debate I also recommend life insurance on children for at least the amount of one years income for both parents. There is a common thought that you don’t get insurance on kids since they don’t make any money or if you do you just need enough to cover a funeral. However, having watched a friend lose her child, I know I’m not going back to work the next week. So the income that insurance on my child is covering MY income so that I can take whatever time I need to grieve. And the same for my spouse.
    It’s a controversial topic in the world of insurance discussions but for the small amount of the premium, I say it’s money welll spent. And no, I’m not in the insurance business.

    • Barry Choi on January 26, 2019 at 11:52 am

      Susan,

      I think the reason you stated makes sense to get life insurance for children. Another instance where life insurance for children may make sense is if there are health risks in the family bloodline. It would be easier to get insurance for the children early as opposed to them trying to get it in their adult years when their health may have changed.

  3. SUSAN on January 26, 2019 at 11:58 am

    Correct. It’s crazy how some financial experts get all crazy when suggesting insurance for children. They stick hard and fast to the “cover income” philosophy (unless of course they sell insurance – but that’s a whole other discussion).

    No one wants to think of their child dying. But that is exactly what insurance is for – a financial safety net for the unimaginable. And it’s so inexpensive that I don’t even understand why it’s a debate for those people.
    “Better to have it and not need it than need it and not have” it is my mantra. Works for everything from umbrellas to insurance.

  4. Jeffery Romansky on January 29, 2019 at 11:45 am

    Good article Barry! I agree, term life insurance is often more affordable than most think.

    Barry, you mentioned Simplified Coverage. As an expert, I am not a fan of simplified coverage and I like my clients going through the medical questions. As an example, the RBC Simplified Application asks if you ever had a treatment/medical advice/known indication of any condition affecting the central nervous system. Most would be quick to answer “no” to this question.

    However, if you look up the different types of central nervous system disorders, you will find that migraines are a listed disorder. This means that one who has migraines in the past should answer “yes”. Don’t think I need to go into the risks of accidental non-disclosure.

    RBC is a great company, one I often recommend. However, I will always recommend their traditional products first. Here is a blog post I wrote back in 2017 on this exact subject. https://secureplan.ca/the-hidden-risk-of-simplified-insurance/

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