Most people would prefer not to think about the end.

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This article was published 8/7/2017 (1785 days ago), so information in it may no longer be current.

Opinion

Most people would prefer not to think about the end.

That’s likely even more the case when you’re young, because death is generally an abstract concept (until inevitably it’s not).

Michael Probst / The Associated press files</p><p>Investing in life insurance may help you feel your family will be OK at the end.</p></p>

Michael Probst / The Associated press files

Investing in life insurance may help you feel your family will be OK at the end.

So it should come as no surprise then that the main finding of a recent TD Bank survey was life insurance sits at the bottom of the financial to-do list for millennials.

A good argument can be made life insurance is in its rightful place. Young adults just have other priorities — like paying down student debt and saving for a home — that are often more pressing.

"It’s sometimes difficult for us to consider benefits that won’t be for us because we won’t be around," says Mark Hardy, senior manager of direct life and health at TD Insurance. "We generally think that things won’t happen to us when we’re young — ‘Sure everyone needs life insurance, but I don’t. I’m perfectly healthy so why would I need it?’"

Yet life insurance is undeniably a viable financial tool. It’s risk management when you have something valuable to protect.

And for some young adults it should be a higher priority.

But how do you know when you need coverage? And if you do need it, how much do you need and what kind?

Certified financial planner Bob Challis with Nakamun Financial Solutions in Winnipeg says young adults really only need to ask themselves the following question to figure out if they need life insurance.

"Will anyone be financially ‘up-the-creek’ if you die?"

If the answer is yes, then life insurance is worth investigating. More to the point, in all likelihood, buying life insurance is a prudent strategy if you have a young family that relies on you to pay the bills.

Now some worker bees might argue they already have coverage through their employers. And that’s a good start if your budget is very tight.

But Michael Aziz, senior vice-president of sales at Canada Protection Plan, says workplace plans are often insufficient.

"Generally, it’s just one or two times your annual salary," he says. "Does that meet your needs?"

It likely doesn’t if you need to replace your income over several years, maybe decades.

Of course lots of people have probably heard this sales pitch before, especially if they’re lucky and a close friend or relative has tried to sell them life insurance in the past.

And let’s face it. A discussion about life insurance generally invites a healthy dose of skepticism because most folks do grasp that the only reason life insurance companies exist is because there’s money to be made. Insurers turn a profit because the majority of their customers don’t die within the terms of their contract. So the thinking goes: If the odds are in their favour, and you’re unlikely to die, why bother?

But the risk of paying premiums all for naught is worthwhile when you have children and a spouse. And that outcome — the insurer not paying the benefit — is really a win-win. Sure, the insurance company earns all the premiums, but you’re still alive (yeah!).

But what if things turn out differently?

You hit a really bad patch of luck and you do croak. At least you’ve guaranteed some financial salvation for your loved ones, Aziz says.

"Having been on the other end where we’ve paid out families with benefits of a few hundred thousand dollars, I can tell you they were quite relieved that they didn’t have to worry that the mortgage would be paid."

So life insurance lets you rest easy at night knowing that your family will be OK if you die. And that peace of mind comes with a price tag.

The challenge, then, is to figure out what that cost will be, how much coverage you require and for how long.

For most young adults with a young family, term life insurance — 10 or 20 years of coverage, for example — is the most suitable option, Challis says. Other life insurance products — like whole life, which in exchange for a larger premium than term insurance, provides coverage that endures all the way to the bitter end — are best left for people with lots of wealth. For these high-net-worth individuals the tax-free benefit can come in handy to pay a potentially hefty tax bill associated with other assets in their estate — like a family cabin.

"But most young people generally haven’t got to a place yet where tax planning is really an issue," he says. "They are more likely to have more month at the end of their money than they do money at the end of the month."

To that end, term life insurance premiums are fairly inexpensive — when you’re young.

"Life insurance is one of those products that gets more expensive as you age," Hardy says.

That’s why forward thinking millennials with a little extra cash flow to spare might consider term life coverage even if they don’t yet have a young family to worry about.

After all, these days, many people don’t start having families until their 30s. While insurance premiums are still generally affordable at that juncture, they start getting costly if you’re once-svelte 20-year-old self has morphed into a middle-aged desk jockey with high blood pressure, high cholesterol and an inflated middle.

And what if you’ve had a health scare like cancer that makes qualifying for coverage not just costly but difficult?

That is the market insurers like Canada Protection Plan — offering no medical insurance — serve.

"We help people generally who don’t want to go through a medical or may have had a health issue like heart attack, diabetes or multiple sclerosis," Aziz says.

This kind of insurance fills a need in the marketplace, but it’s costly. You pay more for less.

So if you’re young, and have a steady income where $30 or $50 a month isn’t going to put you into financial hardship, life insurance bears closer examination. Those monthly sums can get a healthy young adult about $1 million of coverage for 20 years. And there’s another upside to getting coverage while young: most contracts allow for automatic renewal of coverage — no matter how sickly you are — at the end of the term.

"With the vast majority of term options, the renewal amount is codified into your contract," Hardy says. So you’re guaranteed coverage in the future, though the premium might be higher than you can find elsewhere.

"You always have the ability when reviewing your needs if you’re in good health, to go back to the market to see if you can get a better deal," he adds.

What’s important, however, is millennials give this item at the bottom of their financial to-do list a little more thought.

"Maybe life insurance isn’t for everyone all the time and maybe you’re a little young to think about it now," Hardy says.

"But educating yourself so you can make an informed decision is better than making no decision at all just because you don’t have the time to think about it."