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Major Life Events That Impact Insurance Needs

Just like checking your smoke detectors with the daylight savings time change, it’s essential to review your life insurance policy when major life events occur. Why? Because as your life evolves, so do your insurance needs. Let’s explore the key life events that signal it’s time to re-evaluate your life insurance coverage.

 

Life Events Triggering a Policy Review

Life doesn’t stand still, and neither should your life insurance policy. Here are the major milestones that necessitate a second look at your coverage:

  • Marriage or Partnership: Tying the knot or entering a long-term partnership often means merging finances and shared responsibilities. It’s time to ensure your partner is protected. Similarly, the financial impact of divorce can have major financial implications.
  • Birth or Adoption of a Child: New additions to the family bring joy and new financial responsibilities. Updating your policy ensures they are financially secure in any scenario.
  • Purchasing a Home: Buying a house usually comes with a mortgage. Adequate life insurance can cover this significant debt, preventing financial burdens on your family. For more on the financial implications of these changes, you can test some sample figures using our mortgage calculator or our life insurance calculator.
  • Changes in Employment: A new job or change in income (up or down) can impact the amount of coverage you need. It’s crucial to align your policy with your current financial status. Bear in mind the impact of rising inflation – our Salary vs Inflation calculator can help you assess how your salary growth compares to Canada’s inflation rates.

 

According to a survey by The Investment Funds Institute of Canada, nearly half of Canadians review their financial plans at least annually, yet many overlook reviewing their life insurance policies. Our first-hand research with our Canadian market research panel at LARi Insight Inc. revealed that over 31.2% of Canadians believed they were “likely under-insured” or “definitely need more coverage.” Awareness is a good first step – taking action is even better.

 

Why These Changes Matter

Life insurance isn’t just about the policyholder; it’s about ensuring those who depend on you are taken care of. When significant life events occur, the financial landscape changes, often increasing the amount of coverage you need. A policy that seemed adequate when you were single might not suffice once you have dependents or a mortgage.

 

“A life insurance policy should be a living document, changing and growing along with your life’s milestones.”

 

Remember, keeping your life insurance up-to-date is not just a box to check. It’s an ongoing part of managing your financial health. As life changes, reassessing your coverage is as essential as adjusting your budget or investment plans.

 

Adjusting Your Policy to Reflect Life Changes

Life is as unpredictable as Canadian weather. Just as you swap your snow boots for sandals as seasons change, it’s important to adjust your life insurance policy to align with life’s transitions. Let’s dive into how you can modify your policy to ensure it continues to meet your evolving needs.

 

Tailoring Your Coverage for New Circumstances

Here’s how to reshape your life insurance policy to fit your current life stage:

  • Increasing Coverage: Major life events often mean more responsibilities. If your family grows or you purchase a new home, increasing your coverage amount ensures your loved ones are adequately protected.
  • Changing Policy Types: Sometimes, a term policy might need upgrading to a permanent one to better suit long-term needs. Check out our posts on term vs permanent life insurance, and the difference between whole life and universal life insurance. Review the pros and cons of these different policy types in light of your current circumstances.
  • Updating Beneficiaries: Changes in your personal life, such as marriage, divorce, or childbirth, may require updating your list of beneficiaries to reflect your current wishes.

 

It’s essential to review your policy periodically, but especially after significant life changes. The Investment Funds Institute of Canada notes that life events are key triggers for financial review. Make sure your life insurance is part of that process.

 

Seeking Professional Guidance

Adjusting a life insurance policy isn’t always straightforward, and there’s no one-size-fits-all approach. Seeking advice from a financial advisor with a financial planning process can provide clarity and direction. They can help assess your new insurance needs and guide you through the process of making necessary changes to your policy.

“Adjusting your life insurance policy is a proactive step towards ensuring your financial plan keeps pace with your life’s journey.”

 

Updating your life insurance isn’t just about reacting to changes; it’s about proactively securing your and your family’s future. Whether it’s increasing your coverage, changing policy types, or updating your beneficiaries, each adjustment ensures your life insurance policy remains relevant and effective.

 

Regular Reviews: A Key to Adequate Coverage

Keeping your life insurance policy updated isn’t a one-time task. Let’s explore the importance of regular policy reviews and what to look out for during these check-ins.

 

The Importance of Routine Policy Reviews

Life insurance needs can shift subtly over time, even without major life events. Regular reviews help catch these changes. Here’s why they’re important:

  • Financial Changes: Increases or decreases in income, changes in debts, and adjustments in living expenses can all impact your insurance needs.
  • Ageing and Health: As you age, your health and life expectancy change, which may influence the type of coverage you need and the cost of premiums. Learn more about the potential impact of retirement healthcare costs.
  • Long-term Goals: Evolving goals, like retirement planning or changes in investment strategies, can necessitate adjustments in your insurance.

 

According to the Canadian Life and Health Insurance Association, many Canadians overlook the need for regular life insurance reviews. Ensure you’re not among them by scheduling periodic check-ups.

 

What to Look For During a Review

When reviewing your policy, consider the following:

  • Coverage Adequacy: Does the death benefit still meet your family’s current and future financial needs? You can use LARi Insight’s Life Insurance Calculator to assess your current income, debt, and the future needs of your dependents to arrive at a recommended level of insurance coverage. For extra convenience, you’ll find our calculator embedded at the bottom of this post.
  • Policy Features: Are there new features or products that better suit your current situation?
  • Beneficiary Information: Are your beneficiaries up to date and in line with your current wishes?
  • Your Financial Health: Life event changes can significantly alter your net worth. Use our Net Worth Calculator (Canada) to quickly sum up your assets and liabilities.

 

It’s recommended to review your life insurance policy at least every three to five years or after any significant life change. This practice ensures your coverage continues to reflect your current situation and needs.

“Regular reviews of your life insurance policy are like annual health check-ups: essential for long-term well-being and peace of mind.”

 

Regularly reviewing your life insurance is a proactive approach to financial health, ensuring that your coverage evolves alongside your life. Keeping your policy aligned with your current needs is essential for providing the security and peace of mind you and your family deserve. By staying informed and proactive, you can ensure that your life insurance remains a strong pillar in your financial plan, ready to support you and your loved ones through life’s many journeys.

Life Insurance Calculator

The amount you leave behind for your loved ones can have a big impact on their lives in future years. Many Canadians opt for a flat amount without giving it much thought, but that might result in coverage that isn’t adequate for your family or, conversely, has you paying for more insurance than you really need. We developed a life insurance calculator for Canada which walks you through some criteria to consider, allowing you to balance the assets you currently have against debt that your estate will incur, while also factoring in the future needs of your dependents.

Your Current Assets

Your Current Liabilities

Support Needs

Life Insurance Coverage Needed

We'll send the results to your email for easy reference.

the calculators on LARi.ca are strictly for illustrative purposes. A financial advisor or insurance agent can guide you through a more detailed scenario for your specific needs.

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