When it comes to your life insurance policy — are you covered?

By Laura Bohnert

Many people think of a life insurance policy as a way to provide a little extra financial security to loved ones in the event of an untimely death — but did you know that your insurance policy may actually be able to help you when you are facing a terminal illness, too?

According to a number of recent studies, this isn’t something many Canadians take into consideration when they are deciding whether or not to opt out of buying life insurance or when they are selecting which life insurance policy to purchase.

“Canadians by and large are underinsured,” states Steve Carter, senior vice president for product management and development at BMO Insurance. “Not enough of them have life insurance, not enough have disability insurance, and clearly not enough have critical illness coverage.”

In fact, life insurance ownership in Canada is currently at an extreme low, and many of those who are insured are now finding themselves to be under-insured. Clifford Mertick, Financial Advisor at Edward Jones in Whitecourt, Alberta, was startled by the statistics on life insurance ownership in Canada: “fewer people are covered now than they have been in the last 30 years,” Mertick states. “A new low!”

Close to 30 per cent of all Canadian households are currently uninsured — that’s three in every 10 households and, of those who are insured, 45 per cent claim to be inadequately insured — that is, they either don’t have enough or don’t have the right kind of insurance policy to meet their needs. That’s six million households in Canada alone that don’t have the appropriate level of insurance to meet their needs. “I was not aware of [these statistics],” quotes Mertick, “even though I have sold life insurance for over 20 years.”

And this pattern isn’t restricted to lower- or middle-income families. One third of the households with $100,000 or more in annual income find themselves to be inadequately insured as well.

But, why has there been such a drop in life insurance ownership across Canada? One reason, Mertick suggests, is awareness: “Many people who don’t have life insurance do not realize that insurance companies have a compassionate policy,” Mertick explains, which involves “releasing some of the life insurance funds while the insured is still living when terminal illness is involved” — a policy which Mertick stresses should not be confused with the Critical Illness policy, “which pays out while the insured is alive and most likely will survive the illness.”

Tanya Lafleur is one policy holder who is glad she looked into life insurance early. Lafleur, 35, has been diagnosed with a very rare, terminal form of cancer. Many people feel that because they are young, explains Lafleur, they don’t have to worry about life insurance but “anything can happen.”

“If I didn’t have life insurance before this, I wouldn’t be able to get it,” states Lafleur. Now Lafleur, who knows her husband and 17-month-old daughter will be taken care of due to her decision to purchase life insurance early, has been using her experience in an attempt to reach more Canadians.