Are you too young for insurance?

In my latest Living Richer podcast, I began a three-part series talking about insurance – the various types available, who should get it and when, how to use it to protect yourself and your family, as well as in business and retirement.

For this series, I interviewed Raymond James Ltd. estate planning advisor, Greg Jizmejian. In the first episode of the series, Greg and I discuss the ideal time young people should begin thinking about insurance, and the various types to consider. Here is an excerpt from our interview.

Mark: Is there a best time to get life insurance?

Greg: Honestly, the best time to consider insurance is now. Take for example, a couple in their 20s or 30s. While there is a low risk of something happening today, unlike any other product you buy, insurance is something you must purchase when you don’t need it, because by the time you do, it’s too late to buy it. When you are young and healthy you can purchase life insurance at a low cost and it’s your right to retain that coverage regardless of what happens in your future.

Mark: Obviously the risk of someone dying in their 20s or 30s is fairly low. Are there other types of insurance to consider at a younger age?

Greg: The risk of death may be low but the risk that something may happen to you that affects your ability to work is a lot higher. In fact, the biggest reason for foreclosures is due to a disability, not job loss. That’s where health insurance comes in. There are two types to consider: disability insurance and critical illness insurance.

Disability insurance when properly structured can supplement your income while you recover. And if you can’t ever go back to work you’ll continue to receive money until age 65. Too many people rely on disability policies from their workplace. Unfortunately, there are a lot of grey areas in those contracts so it is really important to fully understand your needs and rights.

Critical illness insurance takes away the sudden impact of being diagnosed with a serious illness or disease. It does this by paying out a lump sum amount 30 days after you receive a diagnosis of a covered condition (there are typically 25 conditions that critical illness insurance covers). The money you receive can be used however you wish.

Mark: How does someone know how much insurance they need?

Greg: Historically, you were told to consider 10 times your income, but this really isn’t the best approach because it doesn’t factor in your full picture. In working with clients we assess their full situation. What is their income? Do they have debts? What other assets do they have available to them? Also age and life stage matters. For example, someone in their 40s may have more assets but also more responsibilities – like a mortgage and a family. That’s why it’s imperative to conduct a needs analysis because everyone’s situation is unique.

For more information on insurance, please reach out to us at Living Richer Wealth Management (416)992-2303.

Information in this article is from sources believed to be reliable; however, we cannot represent that it is accurate or complete.  It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities.  The views are those of the author, Mark Shimkovitz, and not necessarily those of Raymond James Ltd.  Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision.  Raymond James Ltd. is a Member - Canadian Investor Protection Fund.