So you've landed a job with benefits — kudos! Even better, as part of that package, you're covered by a group life insurance policy. Now you don't have to worry, right? Not necessarily — the insurance provided by your employer may not provide you with the amount of coverage you ultimately need, at least, not according to surveyed Canadians.
Wondering if you need to back up your insurance? You've come to the right place. We've got the answers to all your burning questions below.
It’s a good idea if your life insurance policy lands somewhere between five and seven times your net income.” —Canadian Life and Health Insurance Association
Q: If I have a group life policy through work, why do I need more life insurance?
A: Having more insurance is like having more friends to rally around you during a breakup — you can't really have too many shoulders to lean on. Whether you're single or married, you'll want to know exactly what your employer covers so you understand what financial support is available to you in a worst-case scenario.
Besides, if one day you fulfill your lifelong dream to run a Bahamian beach hut or even if you just wind up at a new gig down the street, you'll no longer be covered by the insurance policy provided by your current job.
Q: How can I tell if the life insurance provided by my employer is enough?
A: Let's say you make $60,000 per year and the life insurance from your employer covers $60,000 to $120,000. That adds up to one or two years of coverage. Seems like a decent payout? Truth is, it may not be enough.
Own a house? Here's a wild guess: Your mortgage payments will stretch longer than a couple of years. And if you have little mouths to feed, you'll likely need even more coverage. In fact, it’s a good idea if your life insurance policy lands somewhere between five and seven times your net income.
Don't worry, you don't need to do all this math. Just use this tool to help you find out what you need.
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Q: I'm young and healthy, so I don't need critical illness insurance, right?
A: We hate to be a downer, but the Canadian Cancer Society states that two out of every five Canadians develop the disease at some point in their lives. That's where critical illness comes in — if you're diagnosed with a type of cancer covered by your policy, you'll get a lump-sum payment to help you with your expenses, which can be crucial if working isn't an option.
Something else to keep in mind: While you're young and healthy, it may be a good time to get critical illness insurance. Because as you age, it could become tougher to get critical illness insurance coverage, as well as potentially cost more.
Q: And if my employer provides disability insurance? I don't still need critical illness coverage, do I?
A: This is one you may want to think about. With disability insurance, you'd likely get a certain percentage of your income while you're unable to work (think income replacement so you can still pay bills like your mortgage). Critical illness is financial support to help with the costs of a serious illness (think medical bills for treatments not covered by government health insurance).
At the end of the day, even if your employer group policy is second to none, you still may want to top up to make sure you're adequately covered through major life moments, such as getting married, buying a home or starting a family.
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These comments are general in nature and should not be construed to be legal or tax advice, as each client’s situation is different.
Please consult your own legal and tax advisor.