Hi I would like to ask whether a life insurance a must to have ?

Hi anon,

​

This depends on what you need to cover for.

​

Naturally the best time to get insurance is when you are young and healthy and the need for it has been established.

​

If you got into a car accident, you can't buy insurance to cover the accident since it has already happened. You can only cover the costs of the car accident if you have car insurance before the accident. The same goes for your health.

​

Insuance is bought with health. It is paid for in cash.

​

Having said that, let's talk about what kind of scenarios you would need insurance

• Someone/something is dependent on your income

This can be a mortgage (something) or people who are dependent on you (parents you are supporting, non working spouse, children). In this scenario, you will want to protect your income in the event of death or permanent disability. A term plan will typically be sufficient, since mortgages get paid off, and dependents won't be dependent forever (parents will leave us one day, and our children will grow up and be independent)

• You are dependent on your income

This is in the event that you are severely ill and are unable to earn an income. Yet, you still need to keep living and will have expenses to need. You'll need critical illness coverage for this. Hard cash for you to stay afloat and continue to meet your obligations while you focus on the recovery.

​

If you ask me, insurance is really just about risk transfer. There's no way a typical person can self insure on large amounts. If you needed $200K on your critical illness cover, saving $2K/mth will still take you 100 months to get there. But a claim will be an immediate payout of that same $200K. Even the richest people insure themselves to ensure that a disaster will not erode all their assets, so what more the typical person on the street? Insurance, no matter how much stigma it may come with or how much some bad eggs may destroy the image of advisors, is still a product that fundamentally ensures that unforseen events do not leave you in an unfortunate and unwanted scenario. It's a must for anyone really, the only question is what type of insurance you need, and for how long you need the cover.

If you're only referring to the death portion of life insurance, the payout is usually meant to benefit others. It is not a "must have" but rather a "nice to have" if you choose to do it. Think of it as a tool to solve life problems.

​

Scenario 1: Your family is dependent on you for money

If you have dependents that you financially provide for (eg. parents - possibly retired or in poor health, young children, spouse), the payout from a life insurance policy in the event you're gone can keep them going for several months/ years depending on how much you have.

​

Scenario 2: Mortgages

Getting a loan for your housing in today's market easily works out to be in the hundreds of thousands or millions. Should you pass on prematurely, the house will still need to be paid for, likely from your family. If you can't pay the remaining loan balance, your house could be foreclosed (sold off likely at an unfavourable price). Your family would have to move out and find alternative living accomodation. Basically you don't get to keep the house.

​

The other reasons for taking up life insurance could be to ensure a business is able to continue (difficult to explain here but you can look up keyman insurance & buy-sell agreements between business partners if you're interested) or even to pass on a legacy to your loved ones.

​

Fun fact: rich people have problems too. Eg. How to I distribute 5 properties amongst 8 children. Or even if its 5 children, who gets to have the nicer property? Life insurance payouts can be equally divisible to make them happy, don't sue each other etc.

​