For younger clients, getting life insurance is not always top of mind.
But “life insurance tends to come up when there are people depending on that person,” said Vikas Tiwari, financial advisor with Keybase Financial Group in Richmond Hill, Ont. At that point, there is often “a switch that turns on.”
After a person buys a house, gets married or has children, they often begin thinking about how they would support their loved ones if they were to die prematurely, he suggested.
Tiwari said younger people can have a greater need for life insurance than older, more established clients. Young clients probably have a mortgage, a young family and possibly elderly parents to take care of, but not much by way of liquid wealth.
“People have fewer assets when they are younger, and their expenses are higher,” he said. “So the need for insurance becomes more important.”
In addition to planning for those expenses to be covered, Tiwari asks clients what they want to provide after they are gone. If they have children in sports or after-school programs, for example, will they be able to continue those activities when one breadwinner is no longer around?
Tiwari said clients considering life insurance should speak with an advisor who can do a thorough needs analysis instead of purchasing a policy online.
“Insurance tends to be a black box for people; they don’t really understand how it works,” he said. “When you are working with a professional who understands the products, you can get a better idea of certain features of the policy that you might not be aware of.”
Zainab Williams, founder and principal financial planner with Elleverity Wealth Management in Milton, Ont., said there are several reasons why someone should buy life insurance sooner rather than later.
Even if a person has no dependents, a small amount of life insurance could cover funeral expenses or unpaid debts, alleviating any burden on family or friends left behind.
Getting life insurance is also much easier when you are young and healthy, Williams said, and more affordable. She added that some clients even get their children a life insurance plan when they are as young as a year old.
Williams said often, younger people look at mortgage insurance instead of life insurance when they buy a home. However, she said a term insurance policy is probably more cost-efficient and serves the same purpose — and can meet the majority of a person’s other needs.
Williams said one challenge when talking to clients about life insurance is that people want to avoid the topic because it makes them think about death. But she reframes the discussion to be about how someone wants to be remembered.
“It’s not just a matter of dying, it’s a matter of leaving a legacy that you may not have had access to,” she said.