Michael D'Angelo- January 2020

Young adults don’t typically think about life insurance. After all, in your 20s and 30s, you probably feel like your entire life is endlessly stretched out ahead of you. You have all the time in the world to make big decisions about your life. Why think about something you might not need for hopefully many many years? This is a huge mistake. Life insurance is more valuable and necessary than you might want to think about. Let’s explore some key details about life, critical illness and disability insurance, why you should have this coverage, and looking into getting this important coverage in your 20s and 30s.

What Is Life Insurance?

Life insurance is meant to help take care of your dependents after you have passed away. It can be used for a variety of expenses such as funeral costs, to pay down debt or mortgage amounts, as a livable income for a spouse as they adjust to life without you, and can even go towards children’s education. The amount of coverage you'll want to buy will vary depending on how much your dependents will need and your income if you pass on. 

Types Of Life Insurance

There are two basic types of life insurance policies you can obtain. One is called “term” and the other is called “whole” or permanent life insurance.

Term life insurance is paid out if the death of a person occurs within the time frame of the policy, usually within one to thirty years. A level term means that the death benefit (money received at death), stays the same throughout the policy’s duration. Most life insurance purchased is considered “level term.”

A whole life insurance policy is paid out whenever you die. It doesn’t have a specific time limit. Under this type of life insurance, there are quite a few variations in coverage, so make sure you get the one that’s right for you. Understanding all the ins and outs of your coverage may seem complicated, but it’s worth looking into so you completely comprehend what you are getting for your money.

Critical Illness and Disability Insurance

Ironically, millennial's, widely considered the most health-conscious generation, often feel immune to the kinds of health problems that can derail the best-laid plans. Even if you know someone your age who has experienced a serious illness or disability, it can be hard to believe something similar could happen to you. In fact, there’s something called the “optimism bias” that makes people underestimate the risk that negative events, including injury and sickness, will affect them. Safeguarding your income can help prevent you from being caught off guard by lessening the financial impact of an unexpected illness or injury.

Know Your Risk!

Don’t be a subject to optimism bias! We have a fiduciary duty to ourselves to know our risk and prepare for an unfortunate turn of events. Visit Manulife’s InsureRight.ca and click the “What’s Your Risk?” tab and see yourself what your risk may be. Just to give you an idea, here is an example of a 24 year old male, non-smokers’ risk:

Disability Before Age 65: 22%

Critical Illness Before Age 65: 27%

Dying Before Age 65: 7%

Probability of dying, becoming critically ill, or disabled before age 65: 44%

How Does Disability Insurance Work?

Disability insurance pays a percentage of your income if an illness or injury prevents you from working. It covers physical health as well as mental health, which is important because it is estimated that half of Canadians will experience a mental illness by the time they reach age 40.

How Does Critical Illness Insurance Work?

Critical illness insurance pays a lump sum if you are diagnosed with an illness or condition covered by your policy. To save money, consider term critical illness coverage, which protects you for a specific number of years. It can be renewed for the same term or upgraded to a longer or permanent duration later without further medical underwriting. That way, in case your health changes down the road, you will be able to keep your protection for a longer term in a cost-effective manner.

How Much Protection Do You Need?

When deciding how much disability and critical illness insurance you need, consider how long you could be away from work before you would be in financial difficulty. Recovery from a serious injury or illness may take many months. It can also be stressful – so the fewer financial worries you have, the better.

Beyond covering your own lost income, consider other costs you might encounter, such as:

• Your partner or other loved ones needing to take time off to help you get better

• Extra help with child care for a period of time

• Out-of-pocket costs for things like medications, hospital parking, home care or accessibility renovations

Be Health-Conscious About Your Finances

Healthy finances are an important part of a healthy life. Both disability and critical illness insurance can help strengthen your finances and make them more resilient – and, if you have a serious injury or illness, they can provide a financial cushion that lets you concentrate on getting well again. 

Whether it be life, disability or critical illness insurance, it may not be a pleasant subject to talk about. Being prepared for anything that might happen, even in your 20s and 30s, is important for the well being of your family. Protect the healthy lifestyle you’ve worked hard to build! This healthy lifestyle you’ve worked hard to achieve also includes your finances! Ensure you have the right protection. Give yourself the peace of mind that you deserve.