Is Life Insurance a Necessary Evil?

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Episode Transcript

Well, now that I’m a life insurance CONVERT, I wouldn’t use those terms exactly. I might say a “necessary good,” instead. In fact, if you tuned in to our last episode, “Life – Insurance – After Divorce,” you would have heard me use those exact words.
Because, the reality is – once you understand the very important role life insurance plays in the life of your loved ones – you’ll see it’s actually one of the good guys.

Now, don’t get me wrong, I can see why it gets such a bad rap. I mean, all you need to do is watch that made-for-TV movie from back in the 90s, called “Wife, Mother, Murderer,” to see why. The idea of bad people benefitting from the death of a loved one can leave a bad taste in your mouth.

And then there’s the insurance industry in general. We’ve all heard the horror stories – like the ones where a Canadian traveller goes into debt paying for emergency healthcare costs while abroad EVEN THOUGH they had purchased travel insurance before their trip.

The thing is, travel insurance, for example, isn’t as straightforward as life insurance. (Side note: I used to work in the industry, so I know that there are many ways – ways that may feel tricky or misleading – that could result in a claim getting denied.

Like, if you forget to mention a health issue, a new treatment, or even a recent visit to the doctor, you could be denied your payout due to something completely unrelated, like let’s just say you broke your leg while water-skiing but forgot to mention that you recently went to the doctor for high cholesterol.

It can be tricky because life gets busy and humans are forgetful – and it’s not always easy to remember every single healthcare concern, doctor’s appointment, or new medication – especially when they are minor or feel unimportant to you.

The good thing about life insurance, though, is that you undergo health screenings up front – I’m talking a health questionnaire on the phone, and sometimes even an exam in person. Unfortunately, people going through this part of the process tend to view it in a negative light – whether because they’re being asked to share personal details about their health or lifestyle, because it’s time-consuming, or just a frustrating process overall.
But I highly recommend you flip the script in your head and tell yourself this: These upfront “hoops,” for lack of a better word, that the life insurance industry in Canada is making you jump through will get you as close to you can to a guarantee that your loved ones will get a future payout.

I remember being really surprised when I first saw the stats here at Serenia Life: Over 99.9% of claims are paid out… really?!, I thought. “That can’t be right!”

But it is right. And now I get why. This is a highly regulated industry where Canadian consumers can feel confident that they aren’t going to be taken advantage of.

Essentially, what they’re doing is making sure from the GET GO that your Ts are crossed and your Is are dotted, so that you can rest easy knowing that after paying into your policy – for months, years, or even decades – that your loved ones WILL get what is owed to them.

The way I see it, with life insurance, you do the work up front and get paid. With travel insurance, it’s quick and easy to buy, but if you get one thing wrong on your application, your claim could be denied…. when you need it most! And that is far worse than the hassle of a couple of medical exams. Remember, “necessary good” – not “evil.”

With that in mind, can I just mention that I find it a bit odd that car and homeowners are forced to buy vehicle, home, and mortgage insurance, but that life insurance is completely optional?

I mean, that makes it sound like our purchases are more important than our people. And yes, I understand that they are expensive investments, but if we were to put a value on the people we love… we would probably all agree that they are worth more to us than our possessions. And if so, shouldn’t we want to have a financial safety net in place for them if we were to die?

Sorry, I’m getting all philosophical on you – or maybe I’m coming across as biased – but to me, it seems like of ALL the things in life we’d want to protect in the event of the unexpected, it should be the people we love most in the world… no?

When I think about how I used to view life insurance, it becomes obvious to me that there’s truly a lack of understanding about what this product is and what it does. And I don’t blame you – or past me – it’s not like it’s a product you can hold in your hand and examine. If you don’t get it, it can feel like an UNneccesary evil.

I’m the perfect example.

When I was younger, I used to tell my parents not to waste money on my future funeral – that I’d be dead so I wouldn’t know if they had organized an elaborate ceremony or bought a way too expensive casket – that I’d rather they just have a casual good-bye party with all of my friends and loved ones eating and drinking and crying and reminiscing the night away. They would laugh and inevitably change the subject (because: who likes to think about death? – a topic for a future episode, I might add!)

But what I wasn’t understanding was this: Life insurance isn’t just to pay for a funeral (which, even when you’re being thrifty, are typically upwards of $10,000 Canadian these days), it’s there to cover other things too: like unpaid student or car loans, credit card debt, mortgage payments, or even the cost of raising children on your own. It can also help cover final taxes (which I didn’t even know was a thing until a few years ago), capital gains taxes (another thing I didn’t know about – but in a nutshell – if you’re leaving your kids a second property, like a cottage, they could own tens of thousands of dollars in tax if its value has gone up significantly – and who are we kidding? It more than likely has), or other costly things many of us don’t even realize exist until someone close to us dies… and their debt is transferred onto us.

So to come back to my original question – “is life insurance a necessary evil?” – I think, if you look at its origins, it really came from a place of … well, good. What I learned –– was that there were some societies who would collect money from community members to provide financial relief to a widow whose spouse had died, leaving her to raise the kids on her own. This was before women worked, presumably – but what a great way to take care of those in need!

BUT, I can also see how this system would put a lot of strain on those who may not have the means, but feel obligated to chip in – which is why the modern-day version makes more sense, especially considering many of us barely know our neighbours anymore. Plus, it means we aren’t depending on the charity of others, like we often see with crowdfunding platforms these days, but are instead putting our own money aside for if and when it is needed.

And I don’t mean to be a Debbie Downer, but… we all are going to die one day. So we need to plan for it – whether that be working on our will, selecting a Power of Attorney, or simply having our finances in order!

So is life insurance a necessary good? I say yes! Tell me what you think (or if I’ve helped you think differently about it) in the comments!

And now it’s that time when I sprinkle a little bit of kindness into the episode! If this is your first time tuning in, this is the part when I share an act of kindness I observed recently. So here it is:
Back in the spring, my son and I found a baby bunny in our backyard. It was sitting there in the grass, completely motionless – it looked terrified! – and I was worried that one of my cats had gotten to it. I gently picked it up to see if it was hurt, and I was surprised to see it fit into the palm of my hand… that’s how small it was!! It had a small cut on its paw, but no major injuries, so I walked around the yard looking for other baby bunnies or its mother (while it slept wrapped in a towel in my hands), but couldn’t find anything. Meanwhile, my son had told his friends down the street to come and see our adorable discovery. They showed up with another friend, and soon there were about 10 (or more kids) surrounding me as I sat on the front stoop of my house with a sleeping baby bunny on my lap. It was honestly so heartwarming to be surrounded by kids of all ages – I think they ranged from age 4 to 13 – who were genuinely worried about this little animal’s well-being. I don’t think they realized it, but the fact that they all cared so much felt like an act of kindness to me. Maybe because this shared moment with the neighbourhood kids made me feel hopeful about this next generation we are raising. Anyway, I (and three kids who wanted to join me) ended up driving the bunny to a rescue about an hour away, where they told us it was a good thing we had brought it in as bunnies are known for literally dying of fear… their hearts can just stop… and the fact that it was frozen when we first found it was a sign it was terrified. We were very relieved to hear we had done the right thing and that the rescue would nurse it back to health and then release it in the wild. My son still talks about it!
Phew, that was a long one!

Do you have an act of kindness to share? Drop it in the comments – we’d love to hear about it!

Have a question or an idea for a future episode? Email me at podcast@serenialife.ca anytime!