Buy life insurance while young but only after paying off student debt: experts

TORONTO - Lee Salo credits the birth of his son last year with changing his perspective on a lot of things, including how he viewed the insurance industry.

"Before then, I could say that the idea of life insurance seemed like a way for people to swindle money out of you," laughs the 32-year-old Vancouver man.

Nowadays, Salo, who also recently became a homeowner and motorist, is thinking more and more about his legacy, and more importantly, the financial safety net he wants in place for his young family if he died.

"As you get older, you realize you're not the individual who is exempt from any kind of issue," he said.

"When you're young, you assume that nothing will ever happen to you, that you're indestructible."

Financial adviser Harley Lockhart says everyone should have a life insurance policy, even if they are still in school, or just entering the workforce.

"One thing that is overlooked about life insurance is that nobody has any right to life insurance," said Lockhart, who runs a practice in Kelowna, B.C. and chairs Advocis, the Financial Advisors Association of Canada.

Something he tells clients over and over is that the earlier you buy insurance premiums, the cheaper they'll be and the longer you'll be able to lock them in at that price.

"Frankly, for a young person to buy term insurance is a very minimal expense, less than what their phone bill is every month, that's for sure," said Lockhart.

Not only does insurance give people with young families piece of mind, he says, but the reality is, teenagers, and even children, should have policies to protect their parents from financial burden too.

"Basically, life insurance is something you buy if you love somebody," said Lockhart. "People who don't love anybody, don't need it, have no use for it."

Janine White, vice-president of Kanetix.ca, an online insurance quoter, says policies can be tailored to suit financial demands following a death, from funeral costs to paying off a mortgage to supporting children left behind.

According to the website, an average $250,000 policy for someone 18 years old can be as little as $150 a year.

Yet despite the low cost, many young people don't think about making the purchase until a major life event, like buying a home, a new marriage or the birth of a child.

Before buying a policy, White recommends speaking with an expert who can help with determining your financial goals.

In some instances, it may be smarter for a student to take the money and use it to pay off outstanding bills instead of buying insurance, she said.

"If you've got debts, student loans, you haven't maxed out an RRSP and you're very young, the advice is often to look at those things first and make sure those things are covered off, before looking into life insurance to cover off the future," said White.

"Look at your present to make sure that's all sorted."