What’s holding young consumers back?
Many Canadians appear to know they need coverage but put off locking it down. That ambivalence may explain why 35 per cent of Canadians told a recent Ipsos poll they don’t currently have life insurance coverage.
Wark says many young people only seek coverage when they have a specific need and generally opt for term life policies since they can be more affordable.
“When you deal with younger clients, they may have just bought a house, they may have just gotten married, they may have children and the cash flow is limited,” says Wark. “As they look through their needs, insurance may come near the bottom.”
But it’s a choice they may eventually regret. “What I’ve found with friends and clients is that they wish — when they’re in their 50s — that they had bought more permanent protection,” he adds. “Eventually, that term insurance disappears.”
Landing on the right insurance policy for the holder
So how do you know the right time to buy a permanent policy? That’s tricky, says Betty-Anne Howard, a financial planner with Athena Wealth and Legacy Solutions in Kingston, Ont.
Howard bought her first whole life policy when she was just 25 and then another at 31. Not everyone is that forward-thinking, but she advises young people to buy life insurance coverage while it’s still affordable. It doesn’t matter whether or not you know where you’ll be in life ten years from now.
“[It] locks down your insurability,” says Howard. “Once you have a policy, nobody can take it away from you.” That’s important because, after a certain age, term life insurance premiums can double or triple in cost when the time comes to renew.
If a policyholder opts to let a term policy expire, they’ll have no coverage. And if they’re later diagnosed with a critical illness like heart disease or cancer, they may find it too expensive, or even impossible, to get insured.
Wark adds there’s also a recent trend of discontinuing or removing features and benefits from insurance products. He gives the example of permanent policies that used to have specified investment accounts that provided policyholders with three per cent returns. That feature is no longer offered.
“Those who bought those policies ten years ago still get that feature,” says Wark. “There is a risk that certain beneficial product features that exist today will not exist in the future.”
The process of buying life insurance can also be challenging. Thinking about what will happen after you die is emotional, but navigating the steps of getting coverage — and keeping it affordable — is formidable too. “A lot of people are doing their own rate shopping ... online,” says Wark. “And there’s lots of good information [out there], but often I think you can be overwhelmed.”
He suggests seeking advice — not just from professionals, but from friends or family members who seem financially astute or have experience with buying insurance.
Howard adds these conversations can help young people make other important financial decisions: Who do they want their money to eventually go to? Why? What do they want those people to be able to do with that money?
It can raise some uncomfortable feelings or questions, but both Howard and Wark agree it would be worse to never have the discussion and miss out not only on affordable coverage, but any coverage at all.
“It’s not a topic people want ... to address unless they have to [when it’s] often too late,” says Wark.