Canadians are working into retirement, postponing having children, and living longer, and this has implications not only on personal finances and retirement savings, but on insurance needs, too.
According to a recent report by Toronto-Dominion Bank, the average age Canadians expect to retire is 61. With average life expectancy now at 80 years old, Canadians planning to retire at that age need to be prepared to save at least two decades worth of income to support themselves during retirement.
Dave Minor, vice president, TD Insurance says insurance can play an integral role in mitigating the risks associated with this shifting lifecycle.
“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 Minor. “That’s why it’s so 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, Minor says critical illness insurance is becoming more important to protect against the increasing risk of critical illness disrupting a family’s ability to earn income and save for the future, especially during prime income earning years.
With many families are choosing to have children later in life, 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. 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. You will generally be rewarded with better rates at younger ages and reduce the risk of being declined for coverage due to health issues,” says Minor.
High youth unemployment (currently at 14.7%, almost double the national rate) and increasing post-secondary education costs means many young people are relying financially on their parents until their late 20s. This can translate into higher-than-expected household expenses, including additional life insurance coverage to mitigate the loss of, or a disruption in, household income, and even an increase in home insurance coverage that may be needed for the extra valuables in the home.
The average debt level of Canadian households is now equivalent to around 150% of personal disposable income. What’s more, 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 growth7.
“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.”
“Everyone should review their insurance needs, because it will help them plan for their future well past their prime earning years” says Minor. “Having a financial plan that includes the right insurance coverage will provide them with financial support and protect them from unexpected events.