Insurance and Why you Need It

This is a guest post written by

I don't think there is anyone out there who likes to think about what happens if they die or if they get into a car accident.  It is human nature not to want to think about these negative feelings and thoughts.  However, as much as it pains us to think about these possible scenarios, it is important to protect ourselves and our families from burden that the loss of our life or the totaling of our car entails.

Life Insurance

Many people say that it's not important to get life insurance if you don't have any dependents.  When you do have dependents though, be it your spouse or your first newborn child, life insurance becomes much more important.  We do not know where our lives may take us, we do not know how long we have to live on earth.  We do know that if we die, we will leave behind our loved ones.  And the last thing you want to do is leave behind debt for your loved ones.  With the massive mortgages necessitating dual income earning families these days, it's important to think about possibilities of you not being here to support your family.  Certain life insurance policies can offer you one lump sum, this will help your spouse pay off the mortgage, help send your children for post secondary education, and just live life as best as possible under the circumstances.  Your loved ones can try to go one with living life without having the financial burden of large debts and possibly having to file for bankruptcy.  They have enough to deal with, you don't need to let them deal with financial burden on top of grieving their terrible loss.

life insurance Pictures, Images and PhotosAnother feature of a good life insurance policy is where you have the option of taking money out beforehand if you were terminally ill.  Cancer is occurring at a higher and higher frequency, even in those who are young, and who we do not expect the possibility of cancer.  Those who have wanted to have children, those who are diagnosed with breast cancer at the age of 32, and those who are diagnosed when they are 50 and they haven't gotten the chance to see their unborn grandchildren yet.  Cancer is undeniably a terrible disease to have, and treatment to fight it even when you are diagnosed as terminally ill can be very costly.  An insurance policy that includes payments before death occurs can be very  helpful.  Especially if your loved ones take time off work to care for you.  Or your loved one needs to have private nursing or needs to go into a hospice.  These services can be very costly.

Car Insurance

With car insurance, you want to get the most bang for your buck for less.  It's important to read the fine print and realize what your annual car insurance covers and what it doesn't.  Oftentimes, you can save on car insurance by increasing your deductible.  What is the likelihood of you being at fault in a car accident?  If you have an impeccable driving record, you should take advantage of increasing  your deductible and paying less annually in car insurance.  If you want the potential car accident to be as completely stress-free as possible, you can choose to add on extras, like a courtesy car if your car is stolen or completely totaled, you can.  The best thing about good car insurance companies is that you have the option of adding on extras, and that they aren't added on for you to start off with.

Youngandthrifty's Take:  I hadn't needed to buy life insurance until I got my mortgage, but I want to make sure that my partner isn't going to struggle with finances if I die.  I think that's the last thing he should have to worry about.  I think it's important to think about the “what ifs” and buy life insurance early (and remember to renew) because you never know where life may take you.  With the ever increasing rates of cancer and terminal disease in younger people, I think it is especially important to protect our loved ones from financial burden.

As for car insurance, I still need to look into alternate car insurance companies other than the Crown corporation of ICBC (Insurance Corporation of British Columbia).  I know that as a young driver, it is better to stick with ICBC, but now that I have 10+ years of driving experience under my belt, it may be time to look around for cheaper car insurance companies.  The great thing about ICBC is that its so hassle free and everyone uses it.  The bad thing about ICBC is that its a crown corporation and they were caught rebuilding cars that had been written off and trying to sell them for a profit.

Readers, do you have life insurance?  What are your annual car insurance rates? (mine's $1600 and this includes the 43% discount for 10 years of good driving experience)


  1. krantcents on August 22, 2011 at 10:41 am

    I would add homeowners/renter’s insurance too.

  2. jesse on August 22, 2011 at 11:28 am

    Food for thought: many large corporations “self-insure” because they are big enough that it’s worth it to pay out uncorrelated events than it is to give a hefty premium to an insurance company.

    You cannot insure risk away completely in aggregate. The insurance company will take a profit. All sorts of schemes are thrust upon consumers about the “worst-case scenario” and ensuring dependents have their entire lives paid for, whatever. You can buy this line but to me it’s fear-mongering. As I get older my insurance requirement decreases as I amass savings and have fewer years left. We had term insurance for a time when we had less savings but haven’t bothered increasing it as our lifestyles improve. We simply carried it over and will likely terminate it once we have enough saved up. The premiums simply don’t make sense after a certain point, unless (as I mentioned) you take into account the worst-case scenario. The best insurance you can get is to save and give your kids enough education so they don’t need to rely on an inheritance.

    Farmers got into cooperative insurance years ago: basically they do what corporations do and “self-insure” for property and flood. It is a great model; profits are recycled to members instead of shareholders.

    On a final note on my rant, many financial advisors I know have basically told me they make much of their income from commissions selling insurance. It’s a lucrative racket, which lead me to ask how much insurance I really need. Any financial advisor that makes money off insurance I wouldn’t trust to be void of conflict of interest.

  3. Etienne on August 22, 2011 at 3:30 pm

    IMO, before you have kids, the main insurance you need is disability insurance. You have a lot of bills, and no savings usually, you need to make sure you’ll be able to pay the bills if you are disabled.
    Once you have kids, you add life insurance to protect your family, before that, there is not really any need because you have low liabilities.
    Car insurance is mandatory, but if the car is not worth a lot, you only need basic coverage.

    Read the book Wealthbuilding by Kurt Rosenreter, it explains why you should consider disability insurance and not life insurance before you have kids.

  4. eemusings on August 23, 2011 at 12:27 am

    No life insurance. Should probably think about income protection, disability though.

    Full car insurance is $1200 – I don’t drive so it’s jus T. He’s 22, has had a couple of accidents. Car is about 10 years old.

  5. Money Pincher on August 23, 2011 at 10:02 am

    I have life insurance. I bought mine last year when I found out that my mom was sick. Since anything can happen anytime, I didn’t want to leave her without money for her medicine. (her drug cost her at least $1300 per month). I pay about $80 a month for 15 years and it will pay for itself until I die. I also bought critical illness insurance because I know how costly it can be, so I spend about $120 a month on life insurance all together

    My car insurance cost $2400 with a 35% discount…sigh… you gotta love ICBC @_@

  6. Sarah H on August 23, 2011 at 3:56 pm

    I love that you just wrote about this. My husband and I just got life insurance last week. We have minimal coverage through work, so we decided to take out private insurance as well. Now we are both covered substantially, and if one of us were to pass (how morbid to think), our mortgage would be paid for and we would have some left over funds. We will more than likely take out another policy once we have children.

    We were paying mortgage insurance (how stupid of us.. but we didn’t know) and it was 98 dollars a MONTH! we are paying less for private and we get way more!

    We also opted to get critical illness insurance. This means that if either myself or my husband were to get sick, we would get 50G automatically. It is a one time payment, but hey, we both have cancer in our family, so we decided to pay a few extra dollars a month for this.

    We did term LI for 30 years… we figure when we hit 55, our needs will change drastically and we can go from there. 🙂

    As for car insurance, my husband drives in town <5km to work every day.. so pays 1300, and I pay about 2000, but I commute over 150km to work everyday. I am at 40% hubby is at 35% discount.

  7. World of Finance on August 23, 2011 at 9:12 pm

    I don’t like insurance companies but it’s something you have to have. No likes to talk about it, but you ALWAYS have to be prepared for the “what-ifs.” You never know what could happen or when it could happen.

  8. World of Finance on August 23, 2011 at 9:14 pm

    These what-ifs (unexpected events) are what can flip a family’s personal financial situation upside down into financial ruin with medical bills and the like.

    P.S. My car insurance is expensive just like yours 🙁 It’s the area I live in.

  9. young on August 24, 2011 at 12:33 am

    @World of Finance- Agree. It’s a necessary evil, unfortunately. It’s those “what ifs” that we all have to prepare for… I think it’s just being pragmatic and realistic, and protecting yourself from these “what ifs”.

  10. young on August 24, 2011 at 12:36 am

    @Sarah H- My work insurance coverage is pretty scant too. It’s something like $50,000 for my life LOL! I’m worth less than I make annually? what? 🙂 Wow $98 a month? You know what, I have mortgage insurance too (but my mortgage is massive haha) and it’s about $60 a month. I checked for private insurance, and because BF smokes (or has been smoking within a year) our insurance would be hefty compared to the mortgage insurance. So I guess until he quits….

    You commute 150km to work every day? Wow! You’re getting a good deal for insurance compared to your husband I suppose 🙂

    It’s nice to know that what I’m paying isn’t completely unreasonable 🙂

  11. young on August 24, 2011 at 12:40 am

    @Money Pincher- Wow $2400 (I thought my $1600 was bad), but I remember you have a luxury car right? Did you end up getting that Lexus? 🙂

    Wow, $1300 a month for medications. Doesn’t pharmacare cover a portion of that? 🙁 It’s crazy how health care can be so expensive, even though we have so much coverage.

    That’s good that you made the decision to buy insurance- it sounds like you got term life insurance?

  12. young on August 24, 2011 at 12:48 am

    @eemusings- My aunt lives in Australia and I remember that car insurance over there is fantastic and very reasonable. I am assuming it’s the same for New Zealand because $1200 for being 22 with a couple of accidents sounds amazing!

  13. young on August 24, 2011 at 12:49 am

    @Etienne- Thanks! I haven’t heard of that book yet, now I’ve got another book to review and read 🙂 That makes sense. It’s to protect your family, and it’s a very “selfless” thing to do, pay into life insurance, but its important.

  14. young on August 24, 2011 at 12:50 am

    @jesse- I’m very much turned off by life insurance/ mutual fund sales people/ financial advisors too. It’s all about the commissions, I suppose. Thanks for your input!

  15. Money Pincher on August 24, 2011 at 7:46 am

    Young and Thrifty, I didn’t get a luxury car 🙁 I have my 2009 Mazda and my insurance is $2400 ><! I have no idea why my insurance why my insurance is still so expensive.

    I had an 98 Acura EL before and at 10% off I was paying $3000 for the insurance… and it was an OLD car too!

    The medication that mom was on is not covered unless you go through 1 round of chemotherapy. My mom didn't want chemo so she choose to pay out of pocket for the target therapy drug 🙁 So now it got me thinking that it's better to have $$$ when any illness are involved :/ $$ just provides more choices.

    I got the universal life insurance from manulife… I didn't get much… I got enough for now… but I will prob need to get more when I have kids… but that will….great thing about the policy is that there's cash value to it that I can use while I am still alive. 1/2 of the money I put in goes to investment… and at the time of my death… if the investments did well… my death benefit would be $200,000 + whatever money the money I pumped in made. So if I die in 15 years and my police carries $11,000 cash value already, my beneficiary will have $211,000 instead of $200,000. I can also take out that $11,000 whenever I need cash and just repay it over the years. I also have the flexibility to pump in $5000 for the next 3 years into my policy and I don't have to worry paying for this policy after that because there's enough money to generate whatever cost that requires to cover the cost the policy.

  16. jesse on August 24, 2011 at 10:58 am

    Agree on the disability side too but again one must be realistic. What my family decided on LI was that if one of us died the family would move to smaller accommodations closer to family. It simply didn’t make sense to pay large sums for life insurance to pay off a mortgage on a place that’s too big.

    Disability is one that many companies cover. We reviewed the plans at the employer and it seemed fair. It won’t lead to riches, mind, but we could survive.

    The “what if” line is a Pandora’s box. You have to draw the line somewhere. Some of the most well-off people I know sell insurance. Just saying.

  17. young on August 24, 2011 at 11:58 pm

    @The Money Pincher- Yowza! ICBC really gets you don’t they? I think maybe its because you probably have less than 10 years of experience? So you don’t get as much of a discount. Wow, $3000 for an old sedans insurance.

    Agree that money provides more choices, especially in our health care system where you often feel powerless because of the seeming lack of choices…

  18. Jen @ SheBloggs on August 26, 2011 at 10:23 am

    I’m actually more concerned about income protection and disability insurance. I don’t have any dependents, but I also know that the older I get, the more expensive the premiums will be on life insurance.

    One type of insurance that doesn’t get a whole lot of attention is critical illness insurance. I got it last year and can sleep much easier knowing that if I get some type of critical illness, I will have a lump sum that will get me through the costs associated with it.

  19. young on August 27, 2011 at 7:59 am

    @She Bloggs- How much did your critical illness insurance end up being per month? There’s so many types of insurance to think about- life, disability, critical illness..!

  20. InsureCan on September 12, 2011 at 5:12 pm

    Jenn, what costs associated with a critical illness? Most people would be hard pressed to come up with specific needs in the event of a critical illness that totals the amount of their policy.

    We live in Canada. Medical expenses are covered. You get cancer, they treat it. No charge.

    Be sceptical about critical illness. There are some potential benefits, but the typical scenario boils down to ‘if you got cancer, wouldn’t it be nice to have $100K’, and most people think, why yes, it would be nice if I got $100K if I got cancer.

    personally, I think it would be nice to get $100K without the cancer. Point being, be aware that you aren’t getting an emotional sale when it comes to critical illness.

  21. young on September 12, 2011 at 7:56 pm

    @InsureCan- Some people seek medical treatment that isn’t covered by the medical services plan though (e.g. complementary or alternative therapies, treatment in the states, beating the line ups for MRIs or PET scans). It could also be for payment of mortgage etc. or perhaps you would need to supplement the compassionate benefits of someone who is taking care of you (since we all know that the government of Canada doesn’t provide much in that realm). I agree that it would be nice to get $100K without the cancer too.

  22. InsureCan on September 13, 2011 at 6:53 am

    That’s the party line you’ll hear from the insurance companies. But seeking alternative treatment isn’t a ‘need’, it’s a want. We’ve got a healthcare system in Canada, I’ve family members that have had cancer, and it doesn’t cost anything for treatment. What you’re describing is an emotional sale.

    And if you think it’s not an emotional sale, did anyone that bought into the CI ‘gives you money for treatment in the US’ actually look at any numbers as to costs? Anyone say, if I get cancer, I need this treatment at this clinic, thus costs would be this? If I have a heart attack, I want to go to this American clinic and that costs this much? Not a chance – it’s simply insurance playing on your emotions. If you get sick, wouldn’t it be nice if you had ‘some large amount of money’ to go get ‘preferential medical treatment’? It’d be nice I’m sure. But nobody actually looks at numbers or specific treatments. It’s all very vague. Don’t ask a lot of specific questions. I understand when the insurance industry plays this on consumers, it’s common. It’s a lot less acceptable when products are discussed on financial sites and nobody casts a critical eye at the analysis.

    More specifically, insurance should properly be designed to cover a catastrophic financial loss. What you’ve described is not a financial loss – it’s creating something based on an event. That’s a lottery, not insurance. Same mechanics, but the intent is entirely different.

    This makes more sense in the US. If you need treatment, costs can be exhorbitant, and having extra cash can mean better treatment. In Canada, we all get the same level of treatment, and at no direct cost.

    As for your mortgage, that’s properly covered by disability insurance. Critical illness insurance is not a substitute for disability insurance. You’re being sold a product again, if you get cancer and were off work for 6 months, wouldn’t it be nice to have money for living expenses? I’m sure it would be nice. But if we’re talking about you not being able to pay living expenses for disability, why are you restricting coverage to a couple dozen conditions? What about stress – that’ll disable you. What about illnesses not considered on the list of ‘critical illnesses’? What about a car accident, or breaking a leg? That’s why, if you’re covering living expenses due to disability, that you seek disability insurance not critical illness. Disability insurance covers loss of income due to disability, without regard to the cause of the disability. Critical illness provides a benefit, but only based on a specific list of conditions.

    Critical illness does have the occassional use. If you don’t have an income (e.g. stay at home parent) then you basically can’t disability insurance because there’s no income to insure. In that case, getting critical illness is a great choice, it becomes the best available option. But that does not mean that we should then take that specific instance and apply it to the general.

    Disability insurance to cover your income for yourself. Life insurance to cover your income for your dependents. Critical illness a distant third, and only after life insurance and disability are properly covered.

    If you’re not completely sick of reading, I wrote a post on this a few years ago on my blog:…insurance/

  23. young on September 13, 2011 at 9:31 am

    @InsureCan- No, I wasn’t sick of reading 🙂 It was fantastic and a great read- it was actually quite refreshing to read coming from a perspective of a person who sells insurance themselves! I have had some of the opposite experiences with family and friends who were sick with cancer. Perhaps its because there are many who are into alternative therapies here on the west coast, but I know of people who have began fundraising within their families and friends and networks to save money for these treatments, and they have been given a very poor prognosis. Some of my other friends have needed to remortgage their home so they can pay for the treatment they currently have. Just food for thought. Different strokes for different folks, I suppose 🙂

  24. InsureCan on September 13, 2011 at 11:16 am

    Fair enough, but then it should be billed as ‘you’re buying insurance for alternative treatments’. And as I noted, that’s not insurance. That’s a lottery. And it’s no longer a ‘need’, it’s a want – because primary treatment is already available for free.

    I’ve no issues with people buying critical illness insurance – the difficulty is trying to justify this as an insurance product. In most cases, it’s not. It’s more along the lines of ‘I want to drive a porche instead of a toyota’. Drive what makes you happy, but driving a porche doesn’t fit in the realm of ‘I’m driving a car based on financial decisions’. they drive it for emotional reasons.

    What people who are discussing finances should be concerned about is two points I’ve already raised; one is whether the amount of coverage has any correlation to the amount needed for whatever wish is being fulfilled, and secondly whether critical illness is masking a real need for disability insurance.

    In short, be critical. Disability and life insurance can stand up to some serious scrutiny. Critical illness insurance, not so much.

  25. Brian Poncelet, CFP on November 28, 2011 at 9:26 am

    Hey Young,

    You may want to add some information regarding Critical Illness insurance.
    In a nutshell with respect to the “termguy” is he does not compare disability and critical illness insurance. They really are two different products, my sense is he does not own it himself so he doe not think it is important.

    For example a cancer victim may be at work in three months…no lump sum payout, with disability insurance.

    Person in a car accident disability monthly amount…no lumpsum payout with critical illness insurance.

    LTD versus CI insurance

    Long Term Disability (LTD) Critical Illness Insurance

    Pays a portion of your lost income Lump sum payment
    Payments cease once back to work Coverage terminates at first payout
    Requires ongoing proof of loss of income to continue benefit payments One time claim adjudication
    The policy continues, additional claims may be made Coverage terminates at first payout

    I wrote a few times on this topic let me know if you want more information on this and the misunderstood term insurance.



  26. Brian Poncelet,CFP on December 5, 2011 at 4:31 pm…tle=Stroke

    Here is the “guts of the story”

    OTTAWA – A new report says cancer and heart disease were responsible for just over half of Canada’s 238,617 deaths in 2008.

    And Statistics Canada reports cancer was the leading cause of death in every province and territory for the first time.

    The agency says heart disease was the second-leading cause of death in every province and territory in 2008

  27. young on December 7, 2011 at 11:16 pm

    @Brian- Definitely definitely agree. Cancer or any other chronic disease is crippling- for both the health and the finances. Especially strokes- those are really disabling because the spouse usually has to quit their job to take care of the person with the stroke.

    Thanks for sharing the stats, Brian.

  28. Brian Poncelet, CFP on December 8, 2011 at 9:12 pm

    Hi Young,

    I think one of the problems with insurance is the costs! Most people if you asked them “if insurance was free or if insurance cost very little would you want the most coverage or the least” Most people would say give me the most …if cost was a non issue!

    The real deal is if most people like better protection, with guarantees. But are told to buy the “cheapest type” and invest the difference. The problem is the market does not always give steady returns.

    The other big problem is to be truly “self insured” is one needs a lot of cash on hand.

    Who has two or ten years of free tax free money on hand?

    In retirement one can have 25% less cash (assuming they were dumb enough to buy insurance) in retirement and yet have more money to spend, pay less taxes, and have better protection. Than someone who bought no insurance or cheaper term insurance.

    See my calculator…n-a-b.html

    For an example.



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