What Insurance Do I Need and When?

Introduction:

Life is a journey with distinct phases, and as we navigate through its twists and turns, our needs and priorities evolve. In the modern world we live in, one important aspect of this journey is proper insurance planning.

Good insurance planning can mean the difference between a health event being just a small bump in the road or something financially devastating.

In Canada, numerous insurance products are available. These products are simply tools, each designed to address specific needs (aka ‘risks’) that we face as we go about life. The need for these tools can vary across life’s various stages. Not everyone’s circumstances are the same, therefore not everyone’s needs are the same – but for most people their needs will follow a similar pattern.

This article is intended to give you a high-level overview of how insurance needs change over time and when to consider various insurance products during your Working Years and Retirement Years.

Working Years: Building a Strong Foundation

If you’re like most people, you spend your Working Years, building a strong financial foundation (or at least trying to). You might be starting your career, raising a family, accumulating assets, and even planning for your children's education and future.

In this phase, the following insurance products are generally what people should consider have in place – starting from the bottom (the foundation)and moving up the stack.

1. Health Insurance:

Health insurance provides coverage for medical expenses, including prescription drugs, paramedical expenses, dental care, and vision care and more. Having health insurance in place is important to protect against the risk of a large and unexpected health care expense, which could have a meaningful negative impact on your finances (e.g. if you’re diagnosed with something that requires a costly prescription medication). Other benefits included in a healthcare plan for small routine expenses (e.g. paramedical, dental, vision etc.) are good for maintenance of your health and helping to ensure you can continue to be the heathiest version of yourself.

2. Travel Insurance:

Travel insurance is essential for protecting your health and finances while traveling, whether for work or leisure, inside or outside of Canada. It's a lifetime necessity to ensure you're covered wherever you go, as medical emergencies can arise at any age while travelling. Your risk when travelling within Canada is smaller (usually limited to cost of ambulance rides costing thousands or tens of thousands of dollars), as compared to traveling outside of Canada where an unexpected medical emergency can potentially cost hundreds of thousands of dollars. Travel coverage may form part of your Health Insurance plan as it is (in some cases) an included benefit or may be offered as an optional add-on.

3. Disability Insurance:

After Health and Travel are taken care of, Disability ranks as the next most important. Disability insurance ensures you have income protection if you become unable to work due to illness or injury. It's crucial during your Working Years when your income is essential for daily expenses. Without it, you and your family may struggle to maintain your lifestyle (i.e. buy groceries, and pay your bills) if you experience a disability and are unable to generate income.

4. Critical Illness Insurance:

Critical illness insurance offers a lump sum payment upon the diagnosis of a critical illness (e.g. heart attack, stroke, cancer),helping you cover potential medical expenses and treatments, and maintain your lifestyle. It's a valuable lifelong protection against unexpected health challenges, as people can experience a critical illness at any age.

5. Term Life Insurance:

Term life insurance provides financial protection for your family in case of your untimely death. It helps cover immediate expenses, such as the mortgage and other debts, as well as child-rearing costs, and education expenses. Term Life insurance is generally preferred by those in their Working Years, as it can be purchased at a relatively lower cost compared to Permanent Life insurance – thus leaving more funds available for accumulating assets, raising children, etc.

Retirement Years: Preserving Your Assets and Leaving a Legacy

In your Retirement Years, your focus shifts from accumulating assets to preserving them, and ensuring they last throughout retirement. You may also be thinking about your legacy (what you’ll leave behind for your children and/or charitable interests) and efficient tax planning. Here are the insurance products that tend to be relevant during this phase of life:

1. Health Insurance:

Health insurance continues to be important in retirement, ensuring you have protection against the risk of a large health care expense and the broadest possible range of covered prescription medications. Your Provincial/Territorial health care plan may expand upon your turning age 65 to include prescription drug coverage. It is important to be aware that while prescription drugs may be covered, there is still a specific list of covered drugs (called a formulary) which typically numbers in the thousands of drugs. A health insurance plan through an insurance company will ensure you have coverage for a more expansive list (i.e. formulary) than is offered by your Provincial/Territorial plan. Furthermore, as you age, your health needs may increase, making comprehensive health coverage even more valuable.

2. Travel Insurance:

Travel insurance remains important in retirement for the same reasons as during your Working Years. It safeguards your health and finances when you travel and protects against the cost of a large unforeseen medical emergency. It’s relevance often increases as you may be travelling more in your retirement years, as you explore the destinations that have long been on your list of places to visit.

3. Critical Illness Insurance:

Critical illness insurance remains essential in retirement to protect against unexpected health challenges and associated expenses. It can provide a financial cushion to cover healthcare costs or maintain your lifestyle. Some Critical Illness insurance products offer the option of converting some/all of your benefit to Long Term Care insurance – which helps cover the cost of long-term care facilities (nursing/home care) should you be unable to perform some of your usual activities of daily living (Bathing, Dressing, Toileting, Transferring, Continence, Feeding).

4. Permanent Life Insurance:

Permanent life insurance, such as whole life or universal life, offers lifelong coverage and can be used as an estate planning tool. It provides a tax-advantaged way to leave a legacy (for family or charity) and/or cover final expenses. In retirement, it can play a crucial role in estate planning by providing a tax-free inheritance for your loved ones or supporting charitable causes.

Conclusion:

Understanding how insurance needs change over time is important for mitigating potential risks that come our way and ensuring financial security. During your Working Years, focus tends to be on protecting your family and income, while in Retirement Years, focus often shifts to preserving assets and planning for your legacy. Some insurance products, such as health insurance, travel, and critical illness are important throughout your lifetime.

Consulting with an advisor can help you make informed decisions and tailor your insurance portfolio to your unique life journey.

Aeva’s focus is on helping you secure the foundation of your insurance portfolio – health insurance, and you can get started today by clicking here.

Thanks for reading!