Risk & Business Magazine Gifford Associates Fall 2015 | Page 31

Misconceptions & Myths
What Did You Think Would Happen?
BY: RICHARD PERKINS, PARTNER, MAP INSURANCE INC.

M

ost people tend to want to bury
their head in the sand when it
comes to buying life insurance, and
more specifically why they need to. It’s so
common amongst a very large segment of
society, ostrich like we vow ‘it will never
happen to me’ but the sad reality is that it
does, far more often than we realize.
There are many misconceptions and
myths surrounding life insurance, and
while it’s not rocket science, it does
require some calculated planning and
periodic review even once you’ve set it
up. Here are 5 points to consider when
making your plans.
Myth #1:
I have enough through work.
If you’re a single person with no
dependants, this may be true. For
everyone else, the sad reality is that we
have at the most, 2x our annual salary,
while many have 1x or less. Chances
are very good that this is not going
to be sufficient enough to provide for
your family once you’re gone.
Myth #2:
Only the main breadwinner
needs coverage.
While not as common, I still
encounter it from time to time where
one parent has committed to the role
of homemaker, or part time work,
while the other is off in a full time
position. How can you accomplish all
the tasks peformed at home? Stay at
home partners perform an extremely
valuable task. If you’re unclear on this
just check the cost of daycare!

Myth #3:
I only need two times my salary.
There are varying opinions on the
exact amount, and you will have
different ranges from as little as four
years salary to twenty! The truth
is the number varies depending on
your personal situation and several
different factors, which you should
discuss with a trusted financial
advisor. Having twenty times your
salary in life insurance may be too
much, but two times is not likely
going to offer much security for your
family towards your final expenses
and debts.
Myth #4:
The bank has my mortgage covered.
Traditional life insurance is
underwritten before the policy is
purchased, mortgage protection,
issued by our banks, is underwritten
at time of claim and can, very easily,
be declined. On top of this, the bank
owns the policy and is paid first in
the event of your death. The coverage
amount decreases as you pay down
your mortgage while your premiums
remain level. And, should you change
lenders, you no longer have the
coverage.

Myth #5:
Life insurance is really expensive.
Studies have shown that there are
many Canadians who believe they
really need more insurance than they
have, but also overestimate the costs
with acquiring the coverage. There is
an old debate in the industry around
Permanent vs. Term Insurance, and
while there are arguments around the
merits of both, the costs in many cases
have been coming down steadily over
the past several years.
These are just a few ideas to consider,
it’s an important decision and one you
need to make with a trusted advisor. You
should also consider a review of your
coverage any time you make a major life
change. A new child, home, spouse or
job are all good opportunities to open a
dialogue with your agent. Your policy is
your protection against the unexpected
events in life, make sure it’s right for the
needs of your family, and don’t be an
ostrich!
Richard Perkins is a life insurance
broker with over 20 years experience
in the industry, and a partner at MAP
Insurance Inc.

RISK & BUSINESS MAGAZINETM FALL 2015

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