Term Life Insurance

If you’re working with a good certified financial planner here in Canada (a CFP), there are specific categories that they should be helping you optimize. According to FP Canada, which is the organization that issues the Certified Financial Planning designation (the CFP), there are 6 areas that should be covered, as they are critical to your financial health. 

For your reference, the pillars are insurance and risk management, financial management, investment planning, tax planning, retirement planning, estate planning and legal aspects. 

Today, we’re going to talk about the insurance and risk management pillar to help you optimize that, and my returning guest today is insurance expert, Laura McKay.

Laura used to work as an actuary, and is now the Co-founder of PolicyMe. 

One of the things that I REALLY like about PolicyMe, is that they have an incredibly useful tool on their site to help you determine how much, if any, life insurance you actually need. 

What I found really sets it apart from the other online calculators that I’ve seen, is that it will actually honestly tell you, if you do not need life insurance. 

Questions Covered:

1. As the new year kicks off and we look for ways to optimize our finances, one important area when it comes to our financial health is insurance coverage and risk management.A big piece of this has to do with life insurance. In case somebody is on the fence or not really motivated to look into life insurance, can tell us why this should be on our radar, and what are the consequences of not having this type of insurance when we need it?
2. Can you tell us more about what the role of life insurance is in financial planning?
3. I suspect that one of the reasons that looking into life insurance isn’t often near the top of Canadians’ to-do lists, is that it’s perceived as expensive and as an additional cash flow drain month-to-month. Can you give us a ball-park range of what life insurance can typically cost us in Canada, and what things can we do (that we have control of), to get the absolutely lowest rates for the coverage that we need?
4. Is there any innovation around insurance happening in Canada that we should be aware of, especially when it comes to making insurance more affordable? 
5. I’ve definitely heard of Canadians getting some really slick and persuasive sales pitches to use permanent life insurance as an investment vehicle, in addition to the life insurance coverage that it provides. Often large tax savings are mentioned as one of the key benefits. Can you talk about the pros and cons of using a less expensive term life insurance policy to just cover our life insurance needs, vs using permanent life insurance like whole life or universal life to receive both life insurance as well as an additional investment vehicle (please define whole life and universal life insurance for anybody not familiar too).
6. Of course now, with COVID being the big elephant in the room, I’m sure many Canadians are wondering whether COVID has impacted their life insurance in any way, and if they are in the process of getting life insurance, will they still receive the payout if the insured person in their family passes away due to COVID. How can we best ensure that we are covered if we get life insurance now, and for those that already have life insurance, what’s the best way to check that we're still covered?
7. For anybody listening that does not currently have life insurance, how can we best determine if we actually need it for our particular situation?
8. Whether we’re shopping around for a policy, or already have one, what kind of analysis can we do ourselves to evaluate the quality of a policy?
9. Are there certain types of Canadians for which life insurance is especially critical?
10. Personally, I've always felt a bit skeptical when asking somebody that sells insurance “How much insurance coverage I need?”. I’d think of it like asking a real estate agent how big of a house I need when their commission is obviously higher the bigger the house I purchase. With insurance, I find it often a similar story where the insurance expert that you are speaking to is maybe compensated more depending on how large the policy is that I buy, so there is an incentive for them to paint a story of why you need as much insurance as possible. For people like myself that have this concern how can we best determine how much insurance we actually need without having to take advice from someone that is financially incentivized to sell us as large of a policy as possible?
11. Can you tell us where we can get more of your educational resources and what is a good next step for someone that thinks life insurance is something that should be on their radar, but either doesn’t have any life insurance, or is not sure if they have enough through their employer, or other sources?