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Do I really need life insurance?


“In general, life insurance is most necessary when you have dependents who would be impacted financially by your death,” says Lorne Marr, director of business development at Hub Financial and founder of LSM Insurance, an insurance brokerage in Markham, Ont. “Typically, life insurance is used as a way to pay off a large debt, such as a mortgage on a home that you want to leave to your heirs.” But technically, you do not need life insurance. Unlike car insurance for drivers, it’s not required by law in Canada.

Why you may need life insurance

If you have a spouse and kids, ask yourself: What do you want to happen to them when you’re gone? Chances are, you’d like for them to maintain their current lifestyle, as opposed to dealing with financial uncertainty or having to move out of their home. (Read this MoneySense article to learn how life insurance works.)

If you have dependents, you probably need a life insurance policy. It can help settle debt obligations (such as your mortgage, auto loans and credit card bills), allow your dependents to stay in the family home, and cover everyday living expenses. Beyond that, it can pay for future life expenses (the cost of your children’s post-secondary education, for instance). 

If you’re single and no one is actively depending on your income, a life insurance policy is still worth considering. The death benefit may be enough to take care of any debts, cover those inevitable end-of-life expenses (such as your funeral arrangements) and provide financial support for your loved ones or favourite charities.

When you have a mortgage

A life insurance policy isn’t required for a mortgage in Canada, but it’s recommended. “It’s just smart to have,” says Jason Roy, a financial security advisor and managing partner at Adkins Financial in Brantford, Ont. “Your mortgage is most people’s largest expense and usually taken out on a couple’s total income. When something unforeseen happens, the last thing you want to be doing is making decisions because you are financially forced to.”

When you’re single and have debt

You may want insurance in this case, depending on your situation. A life-needs analysis can help you decide by accounting for things like your age, outstanding debts, assets and savings. A life-needs analysis also takes into consideration any future plans to start a family, leave money or assets behind to family members or donate to charities. 

Why you may not need life insurance

If you’re single, with no dependents or debts, and have enough savings and assets to cover all your end-of-life expenses, then it’s probably not necessary. The same goes if you have a family, but are financially set up in a way that would leave them well-cared for (i.e., a mortgage-free house, no debt and lots of savings tucked away).

Still unsure? Here are more scenarios

Retired, with no dependants

Katerina is a single 70-year-old woman with a mortgage of about $115,000. With no dependents and living on a limited budget, she would prefer not paying life insurance premiums. 


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