Changing lifecycles put premium on insurance

As if the sandwich generation didn’t have enough to fret about, they now have to worry about their new insurance needs, too. And many don’t even know it.

The changing lifecycle of Canadians has implications not only for their personal finances and retirement savings, but also on insurance needs, according to a recent report by TD.

“People are living longer, supporting adult children and aging parents, and are more active later in life than previous generations—and that means they need more money to sustain their quality of life,” says Dave Minor, vice-president, TD Insurance. “It’s important for Canadians to speak with their insurance provider and develop a financial plan that includes the right insurance to safeguard their income and assets.”

Thanks to medical advancements, more people are surviving critical illnesses and living longer. The average life expectancy is now 78 for men and 83 for women. As a result of these lifecycle shifts, critical illness insurance is becoming more important to protect a family’s ability to earn income and save for the future, especially during prime income earning years.

Another lifestyle change that impacts insurance needs is the fact that many families are choosing to have children later in life. According to Statistics Canada, the number of women giving birth in their 40s has more than doubled in the last few decades.

“Many young and healthy Canadians put off buying life insurance until they start planning for a family,” says Minor. “But the reality is, even if you’re postponing having children until later in life, sooner rather than later is the best time to purchase a policy.”

The earlier you start a life insurance policy, the better your premiums will be given your younger age, and it reduces the risk of being declined for coverage due to health issues, he added.

High youth unemployment and increasing post-secondary education costs mean many young people are financially reliant on their parents until their late 20s. This can translate into higher-than-expected household expenses, including additional life insurance coverage to mitigate any disruption in household income and even an increase in home insurance coverage that may be needed for the extra valuables in the home.

These issues could add multiple layers of stress, both financial and emotional, to households already straining under a debt level that is equivalent to around 150% of personal disposable income.

Worse yet, a report by TD Economics found that over the past decade, while average debt-loads in Canada increased at twice the pace of income, the debt-loads of those 65 years and older grew at three times the rate and contributed as much as half to the overall debt growth.

“Life insurance is frequently used to cover debts and protect the estate assets in case of death, sometimes even paid for by the beneficiaries to help manage the cash flow of the insured,” says Minor. “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.”