I'm young and healthy. Do I need life insurance?

Photo by Djim Loic from Unsplash

Lindsay Stevenson never thought she needed life insurance. At 27, she was busy establishing her career as a dental hygienist and starting her life with then-boyfriend, Garrick. But when the two decided to buy a house together in Waterloo, Ont., Stevenson realized it was time to get serious about protecting her investment—and her partner. “We got term life insurance because it covers everything,” she says. “On the off-chance that something happens to one of us, money will be one less thing for the other to worry about when they’re grieving.” If you’re young and healthy, the last thing you’re likely to think about is your own mortality. But there are plenty of good reasons to consider protecting your loved ones in case of calamity, says Lorne Marr, director of new business development at LSM Insurance. “Life insurance is the most unselfish purchase you can make because it’s not for you. That’s the challenge that a lot of people have to get through,” he says. “It’s not a car or a house; it’s not a piece of jewellery. But people have to realize there is good value in it.”

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There are two main kinds of life insurance available: permanent and term. With a permanent plan, you receive the same rate of coverage for your entire life, but the premiums can be quite high. For example, says Marr, a 25-year-old woman buying $250,000 of coverage may pay an annual premium of around $1,070. Term insurance, on the other hand, covers you for a predetermined number of years so the monthly premiums tend to be much lower. That same 25-year-old, for instance, may pay around $165 annually for a term of 20 years. Because it’s a less expensive option, many insurance professionals recommend a 20- or 30-year term for younger people. Here are some of the reasons you might want to consider life insurance now.

You have debt (with a co-signer)

Did Mom and Dad sign off on your student loans? Put bluntly, they’re responsible for paying off your debt if you die. That could be a huge burden for a mourning family. “My daughter is getting her masters in the States and has taken out a six-figure loan,” says Glen Cooke, an independent life insurance broker and president of lifeinsurancecanada.com. “I absolutely have a life insurance policy on her so that if she passes away, I’m not on the hook.”

You’re buying a home

Let’s say you and your bae decide to buy a place together. Now imagine one of you suddenly wasn’t there to help pay the mortgage. Terrifying, right? Buying a term life insurance policy with enough coverage to pay off the house could help your partner stay in the home. “There are some big advantages to choosing term life insurance over mortgage life insurance,” says Marr. For example, with mortgage life insurance, the value of your coverage decreases as you pay down your mortgage. With term life insurance, your coverage stays the same for the whole term. “Term insurance is portable, so you can keep your policy even if you move homes or switch banks, and a term policy lets you choose your beneficiary, whereas with the mortgage life insurance the bank is the beneficiary,” he says.

You make a lot less (or a lot more) than your partner

Another reason to buy life insurance is if there’s a big disparity in income between you and your partner. “Say one partner makes $170,000 per year and the other makes $30,000. Insuring the difference in income means that if the higher income person dies, the lower earning person can maintain their standard of living while they rebuild their life,” says Bruce Sellery, contributing editor at MoneySense magazine.

You’re young and healthy

Buying life insurance requires that you take a medical exam to determine your premiums and level of coverage. You’ll want to lock in a standard rate now in case illness is in your future: “If you have a term insurance policy, there’s no further medical requirements for the duration of the term,” says Cooke. Chances are you’re going to need to buy life insurance at some point—particularly if kids are in your future, so it might be a good idea to apply now to take advantage of your good health. Now 32, Stevenson is glad she and husband Garrick made the decision to buy term life insurance. “I’m happy we bought it when we were nice and healthy,” she says. “You just never know what will happen in the future. It’s best to cover your bases.”