Does Everyone Need Life Insurance?

The short answer is “no”. Not everyone needs life insurance, in spite of what some life insurance advisors will tell you.

Let’s explore who doesn’t need life insurance.

  • The Rich. If you have enough money (RRSPs, stocks, bonds, real estate, cash, business assets, etc.) to pay all of those expenses at death and provide the income you want to those you financially support, then you don’t need life insurance. Of course, the rich do buy lots of life insurance but that is because they want to provide tax-free money to survivors to pay income taxes or pass on assets, such as their Muskoka cottage, to family members. More about the rich in another article.
  • No dependents. If you have no family, you don’t need life insurance. You may want to have some to
    pay for last expenses, such as funeral costs, but strictly speaking, you don’t need life insurance.
  • Children. Life insurance is purchased to either create an estate or preserve an estate. In the event of the passing of a child, neither the creation or preservation of an estate is likely to be needed. It could be argued that a monetary loss by the child’s caregiver(s) will occur but such a loss is not a certainty. There are many reasons why life insurance is purchased for a child, however, and those reasons will be discussed later.

By process of elimination, everyone who is not rich; has dependents or is not a minor needs life insurance. Pretty simple, eh?

Next: How do I know how much life insurance I need?