For many Canadians, estate planning and getting life insurance are pushed to the bottom of the to-do list. Nobody wants to think about their own mortality, we get it. But not having a will and life insurance can leave loved ones unprotected in the event of an emergency.
Thinking about getting life insurance? Consider making an estate plan (and vice versa)
If you’re thinking about getting life insurance, you probably have a loved one(s) that you want to protect financially if you were to pass away. Life insurance allows you to name a beneficiary on the policy to receive a non-taxable amount upon your death, helping to replace your income. If this sounds familiar, then you should also consider estate planning. Making a will allows you to name your loved ones as beneficiaries of your estate, ensuring that important assets are left in their hands to continue enjoying.
When you make a will and buy life insurance, you may also want to think about how you can reduce probate fees and leave the most financial support possible for your loved ones. By naming an individual as the beneficiary on your life insurance policy (instead of naming your estate), the death benefits from your policy sidestep probate fees and pass directly to your beneficiary without going through your estate. This can help maximize the amount received by your beneficiary.
When do you need to buy life insurance and make an estate plan?
It’s easy to procrastinate on making a will and buying life insurance because neither task comes with a due date. None of us know when a will or life insurance will be needed, so it gets pushed aside for a rainy day. Instead of waiting for an emergency situation to arise, there are key life moments that cause you to need a will and life insurance.
Consider whether any of the following key life moments apply to you:
1. You’re married
If you’re married, then you need a will and life insurance. While nobody wants to think about leaving their partner behind, it’s necessary to plan for an emergency that could leave them without financial support to live the life you both intended. Naming your partner as a beneficiary on your life insurance policy and will ensures that a financial safety net will be there to catch them should something happen to you.
2. You’ve purchased a home
Becoming a homeowner is exciting but costly. Buying a home is likely the most expensive purchase you’ll ever make, and it comes with a mortgage, bills, maintenance costs, taxes - the list goes on. If you’re a homeowner, getting life insurance allows you to leave behind money to cover your mortgage. Making a will allows you to name a beneficiary to inherit this very valuable asset if you own it alone (if your home is jointly owned, it will pass to the surviving owner by right of survivorship).
3. You have a child or children
Having life insurance and a will is even more important when you become a parent. No parent wants to think about not being there to raise their child, but not planning for it is also not an option. If you’re raising a child, you have an obligation to financially support from ages zero to 18 (and unofficially the age limit often extends even further). Life insurance provides financial protection for your child, ensuring they can live the future you wanted for them if you were to pass away. A will adds even more financial protection for them by allowing you to leave an amount of money and/or percentage of their estate for your children, choose the age of inheritance, and name a guardian to care for them if they didn’t have a surviving parent.
Don’t forget about powers of attorney
If it’s time to get life insurance and make a will, then it’s also time to get powers of attorney in place. Power of attorney documents include a power of attorney for property and a power of attorney for personal care. (Note that these two types of power of attorney documents have different document and role names in different provinces, and may have different signing requirements.)
Power of attorney for property
A power of attorney for property names a person to make decisions about your property and finances if you were medically unable to do so yourself. This includes important tasks like paying your bills, managing your investments, and collecting any money owed to you.
Power of attorney for personal care
A power of attorney for personal care names a person you trust (usually a spouse, relative or close friend) to be the voice of your healthcare decisions that you’ve outlined in the document in the event you are incapacitated due to illness or injury. This person can make important decisions about your health care, life support measures, medication, housing, meals, and clothing.
You can think of a powers of attorney like home insurance - you hope you’ll never need to use it, but you can feel peace of mind knowing it’s there if you do.
The bottom line
If you’re wondering whether you really need life insurance and a will, take that as a sign that you do. As an adult, the sooner you complete these important financial to-dos, the better. Life insurance only gets more expensive as you age, so acting quickly will help you to secure the best rate. Similarly, making a will as a young adult ensures there’s a plan in place to protect your loved ones from life’s unpredictable moments long before they happen.
If you’re still not convinced, here’s a reminder that you can buy life insurance and make a will in less time than it takes to cook dinner, do laundry, or wash the dishes. With platforms like Bounc3, you can find tailored insurance at the lowest rates in just a few minutes and with Willful, you can make your will without a lawyer from the comfort of home, in less than 20 minutes.