The cost of living is rising: Do you have enough life insurance?
With the cost of living on the rise, now is the best time to review your life insurance coverage – connect with our team of licensed brokers to get started today.
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Jessica Ho
Inflation affects every aspect of our financial lives, but one area that’s often overlooked is life insurance. Rising costs can erode the value of your policy over time, potentially leaving your loved ones under-protected – so here’s what you need to know.
Key takeaways on reviewing life insurance coverage
- As the cost of living rises, the death benefit from your life insurance may no longer be enough to cover your loved ones' financial needs. Therefore, it's important to review your coverage regularly to ensure it keeps pace with inflation.
- After-death planning is important, but it’s just as important to plan for your lifetime. Living benefits – like critical illness and disability insurance – offer crucial financial support when you need it most.
The rising cost of living: How it impacts your coverage
Last year, inflation in Canada averaged 3.9% – a decrease from the 40-year high average of 6.8% in 2022. However, the rising cost of living still remains a significant factor with food prices rising by 7.5% and shelter costs rising by 5.6%.
As the cost of living increases, so do the financial needs of your loved ones. A life insurance policy is often intended to cover essentials like mortgage payments, tuition fees, and everyday expenses (such as groceries and gas bills). Due to this, the payout from your life insurance policy may no longer be enough to cover these escalating costs.
To ensure your coverage keeps pace with inflation, be sure to review and adjust your policy if needed. That way, you can ensure that your loved ones are financially secure, regardless of future cost-of-living increases.
Also read: How much life insurance do I need?
Why you should also consider living benefits now
In addition to reviewing your life insurance coverage, now is the time to consider adding living benefits if you haven’t already. This includes critical illness insurance and disability insurance:
- Critical illness insurance – Provides a lump-sum payment if you’re diagnosed with a covered condition like cancer, stroke, or heart disease.
- Disability insurance – Offers regular payments if you can no longer work due to a covered disability, which may include both physical and mental conditions.
While planning for your loved ones' future with life insurance is important, you should also plan for your own financial security during your lifetime. Here’s why:
1. Life expectancy is increasing
According to the World Health Organization, the average life expectancy for Canadians was about 79 years in 2000 (77 for males and 82 for females). By 2021, that number rose to about 82 years (80 for males and 84 for females).
As life expectancy continues to rise, so does the likelihood of facing health challenges along the way. Living longer is a positive development, but it often comes with unexpected costs, such as the need for assisted living care. Additionally, as the population ages, healthcare expenses may rise for everyone. This is where living benefits can provide critical financial support.
2. Health issues are more common than you think
Health problems often come without warning, and they are more common than you might realize. The Government of Canada reports that two in five Canadians will be diagnosed with cancer in their lifetime. And cancer is just one example – critical illnesses like heart disease and stroke are also prevalent.
These conditions don’t just affect end-of-life planning – they can significantly impact your finances during your lifetime (and especially if they occur during your working years). Medical treatments can be costly, and time away from work can further strain your budget. Living benefits, such as critical illness or disability insurance, help ensure you're prepared for the unexpected.
3. Free healthcare has its limits
While Canada’s healthcare system is publicly funded, it has its challenges – particularly, the long wait times are a pressing concern. According to a report from the Fraser Institute, the median wait time for treatment after a general practitioner referral is around 28 weeks.
Living benefits can help cover more than just basic expenses and income loss – they can also provide access to better and faster healthcare for an improved quality of life. This might include seeking private care (even internationally) to ensure you get the best treatment possible.
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The bottom line
To protect yourself and your loved ones, consider increasing your life insurance coverage and adding living benefits to your policy. Connect with one of our licensed brokers today to explore all your options today – one quick conversation could make a huge difference in the long run!