Samantha Gowers

Samantha Gowers

There are many reasons that someone might need life insurance – maybe it is to secure a loan, to cover your mortgage in the event you predecease your spouse, or to preserve your estate from the erosion caused by final taxes. Many of these insurance needs can be properly covered by term insurance, but there are some that will require permanent coverage since term policies become increasingly expensive over the years, and most terminate in your 80’s.

The big question to ask yourself when considering if permanent life insurance makes sense for you are: “Will I reasonably need to have some sort of insurance when I pass away, regardless of when that may be?”, “If I don’t need life insurance long term, is there still a place for permanent insurance as another bucket in my financial planning?”, and “Is now the right time to explore this option?”. Most will answer “yes” to the first two questions, but the latter can require some more thought. Here are a few signs you might be ready to consider permanent life insurance:

  1. You expect that your final taxes will be high, and you want to find a way to keep your estate intact.  
    • A great way to determine this is by having a Financial Analysis done to see what your estate taxes are likely to be at your life expectancy.
  2. You can afford the premiums and are ready to commit to the cost for at least 15 years.
    • Typically permanent insurance makes sense financially when you have paid off your debt (except mortgage), and have a positive cash flow.
  3. You currently have a foundation of savings established, whether that be in your RRSP, TFSA or other non-registered accounts, or within your corporation.
  4. You want to leave a legacy.
    • Whether you want to leave a legacy to children, grandchildren, or a charity, permanent life insurance is a great vehicle for transferring wealth to the next generation.
  5. You understand that you may become uninsurable, and that it is better to explore your options while you are young and healthy.
    • Many term insurance policies will have conversion features that don’t require medical evidence. It is always best to look into permanent coverage when you are younger, since you are locking in the premium for the long term and costs go up as you age.

If any of these signs sound like you, it might be time to have a conversation about permanent insurance. With the 2017 changes to life insurance, it’s important to review your coverage now, so that you have all of the information to make an informed decision before time is up. Given the volume of applications coming, we recommend having a plan by August – October, to meet the December 31st deadline.