Nine Common Life Insurance Myths in Canada

We’re all occasionally guilty of procrastination. We put off going to the dentist or dealing with the check engine light on our dashboard. Researching and selecting the right life insurance plan can feel the same.

While life insurance – especially if you’re young and single – might seem like something you can put off purchasing until later on in life, it’s actually an important financial safety net that all Canadians should consider sooner rather than later.

“I’m too young for life insurance” is just one of the all-too common misconceptions that get in the way of protecting yourself and your loved ones in the event of an unexpected accident or loss. And that’s not the only misconception out there.

We’ve rounded up nine beliefs people have about life insurance and explain why protecting yourself with dependable life insurance can be a smart move.

Myth 1. I’m too young for life insurance

You’re not alone if you think life insurance is for older people, or you’re too young to think about covering your expenses, should you die. However, even younger Canadians can benefit from the protection life insurance provides.

Planning for the future now means there’s money aside should you loved ones need it. While you may not yet have a mortgage or significant other to consider, you may still have other expenses like student loans or credit card debt. With life insurance, this means your parents or other family members won’t be left carrying a financial burden.

The one reason to get life insurance early, when you’re young and healthy is compelling: Life insurance is typically more affordable and you’ll pay lower premiums over the long-term.

Myth 2. Life insurance through your employer is enough

Employee health insurance is a big job perk for many Canadians. As well as covering out-of-pocket health and dental expenses, it also probably includes life insurance. However, look carefully and you’ll likely find the coverage is the equivalent of one or two years of your income. Will that be enough? Does the amount cover your mortgage, your child’s education, or buy enough time off your family for your loved ones to grieve?

Another concern with group life insurance is its portability – coverage usually ends if you move to another company, retire, or are laid off.

A quick way to check if you’re sufficiently covered is using a free life insurance calculator. It can recommend a coverage amount based on your personal circumstances. Even with group life insurance, you can still complement it with a term life insurance policy of your own. Then, if circumstances change, you’re still protected.

Myth 3. Life insurance is too expensive

When it comes to life insurance, wondering “How will I afford it?” is a common concern. While there’s a misconception that life insurance is too expensive for the average Canadian, it actually doesn’t have to be.

Purchasing a plan when you’re young and healthy is one way to save money long-term by locking in at a low premium. Another is by choosing the right type of life insurance and coverage for you. Term life insurance is an affordable solution. Coverage ranges from 10 years and up, meaning you’re protected for the season of your life when you most need it.

For example, a 40-year-old woman would pay $32.63 per month for Simplified® Term Life Insurance, while a man the same age would pay $44.10 per month. And, if you choose term life coverage now, you can typically convert it to a permanent life insurance plan in the future.

Still wondering whether or not you can fit life insurance into your budget? Use the RBC Insurance term life insurance quote tool to see how much you could expect to pay each month.  

Learn more: How much does term life insurance cost in Canada?

Myth 4. I don’t need life insurance because I’m single

Major life events like marriage or having children are often triggers for considering life insurance. If you’re single with no dependents, that doesn’t necessarily mean you’re free from financial responsibilities. You may be a car loan, personal debt, or be a first-time home-owner with mortgage payments to maintain. If something were to happen to you, life insurance protects your parents or family members from shouldering these responsibilities.

Life insurance can be a benefit, regardless of your relationship status. If something were to happen to you, life insurance protects your parents or family members from shouldering any debt or leave money behind to cover funeral costs.

As life unfolds, your family may grow, and alongside it, the amount or length of life insurance coverage you need. If and when this happens, you’ll already be insured and can convert or layer your plan to suit your changing lifestyle.

Myth 5. You only need life insurance to cover funeral costs

Funerals in Canada can be expensive – ranging anywhere from $5,000 to $10,000 or more – and having a life insurance policy that covers your final expenses is important. However, life insurance can cover more than funeral costs. There can be other expenses, such as loans or mortgage, as well as leaving money to support kids’ school fees or a partner.

A life insurance policy can act as a financial safety net for the people you love, leaving them money tax-free, after you’ve gone.

Read more: Funeral insurance vs life insurance: Which one do you need?

Myth 6. I can’t get life insurance if I have health issues

For people with health issues, life insurance coverage sometimes feels unobtainable. In reality there are coverage options available to Canadians with a pre-existing health condition. Your health is just one of many factors that will determine your eligibility.

Simplified term life insurance is one product for Canadians with stable medical conditions. It often requires no medical exam. Another option is guaranteed acceptance life insurance. Coverage is for life and there’s no medical exam or health questionnaire.

If you have health issues and are concerns about qualifying for life insurance, speak to a licenced insurance advisor. They can offer you personalized guidance. 

One important thing to note: if you do have a pre-existing health condition and you don’t disclose, your life insurance payout may be declined – meaning your family won’t receive a lump-sum payout. Learn more about what disqualifies a life insurance payout. 

Myth 7. Stay-at-home parents don’t need life insurance

If you’re a stay-at-home parent, you might not think about the financial impact their passing would have on their family. But while many people view life insurance as an income replacement tool for a primary earner in a family, it’s more than that.

Stay-at-home parents are an important part of a family’s economic and emotional wellbeing. Replacing their contribution in the home would come at a high cost.

The surviving single parent would likely need to pay for childcare and support with the household or take additional time off work to grieve and care for their family. 

Whether your family is a single or dual-income household, adequate life insurance coverage is essential for both parents to ease the financial stress and additional emotional strain that would arise should an unexpected tragedy occur.   

Myth 8. Life insurance only covers me if I die

Knowing that your beneficiary will receive a lump-sum payout should you die is the central reason why people purchase life insurance – but it certainly isn’t the only reason. In fact, there are other benefits to taking out life insurance, which Canadians may not be aware of.

Life insurance can also offer financial security over the course of your life through policy add-ons like critical illness riders or long-term care riders. For instance, additional coverage for critical illness means you’d receive a tax-free, lump-sum payout if you were diagnosed with common conditions such as heart attack, stroke, or cancer.

If you opt for permanent or whole life insurance, your policy can also act as an investment vehicle, growing the cash value component for future use or reinvestment. The investment component of your policy comes with tax advantages and can be managed to supplement your retirement or leave behind a legacy to your chosen beneficiaries.

Myth 9. Applying for life insurance is complicated

The misnomer that applying for life insurance is a complicated process may have at one time been true. However, today, Canadians can compare and apply for coverage online in as little as 15 minutes or have a licenced insurance advisor call to walk you through your options.

With simplified plans such as RBC Simplified Term Life Insurance, applications can be approved quickly — sometimes even the same day. In other cases, there may be a short period of review. With guaranteed acceptance life insurance, there is no underwriting required at all.

Insurance underwriters are responsible for reviewing your information and depending on your age and the type of insurance product you choose, you may need to complete a medical exam. Even then, applications usually require a short review.

Learn more about the process: What is insurance underwriting and how does it work?

How much life insurance do Canadians typically need?

Typically, insurance experts recommend that Canadians purchase insurance equal to seven to 10 times their annual income. And on average, Canadians have over $450,000 worth of life insurance coverage per household. But the amount of life insurance you need will be unique to you.

Begin by asking yourself what you want life insurance to do for you. Consider these four categories:

The RBC Insurance calculator tool provides a window into how much coverage you may need. Try it here. 

While there may be misconceptions about life insurance, the reality is: life can be unpredictable. Educating yourself about the benefits of life insurance and protecting yourself and your loved ones with life insurance is one step you can take.

Unsure where to start, or which life insurance policy is right for you? A licenced insurance advisor can answer your questions and provide options on an affordable policy that offers financial protection and peace of mind.