Is Your Life, Disability and Critical Illness Insurance Enough?

Most young people only interact with insurance when it’s required by law—auto insurance, tenant coverage or home insurance are common first encounters.

Typical cost-saving tips remain the same: compare providers, bundle multiple policies and consider a higher deductible to reduce monthly premiums.

The Insurance Bureau of Canada also recommends asking about discounts. If you own your home outright, have a history without claims, or have made upgrades to protect against fire and flooding, you may qualify for lower home-insurance rates.

Drivers can lower auto premiums by installing theft deterrents or by opting into usage-based insurance programs that monitor driving behaviour. Maintaining a clean driving record is crucial, and brokers or insurers can often point out savings within an existing policy.

But optional coverage — the types of insurance people can choose but often overlook — deserves more attention.

Younger Canadians are often underinsured for health and disability

Beyond property and vehicles, the most important protections to consider are those for your health, your capacity to earn, and your family’s financial security in the event of death. Yet many younger adults remain significantly underinsured.

“People often need a trigger before they buy insurance,” says Kenneth Doll, a Calgary-based financial planner and life insurance consultant. That trigger can be a major life event such as buying a home, getting married, or having children. Without that prompt, insurance tends to sit on the back burner.

Sometimes a tragic event prompts action. Rob Tétrault, head of Tetrault Wealth Advisory Group at CG Wealth Management in Winnipeg, notes that when a family experiences a loss—especially if a spouse is left without coverage—the need for protection becomes painfully clear.

“Most people need a push to get insurance,” Tétrault explains. “They start asking, ‘What happens to my kids if something happens to me?’ Insurance doesn’t feel urgent until it’s too late.”

That’s unfortunate because younger buyers typically get the best rates. Premiums are heavily influenced by age and health, so buying earlier can mean substantial lifetime savings.

Consider the different types of life insurance

Life insurance broadly comes in two forms: term and permanent. Each serves different needs and stages of life.

Term life insurance offers coverage for a set period and generally has lower premiums. A common choice is a 20-year term, which aligns with major financial responsibilities many people face—raising children and paying off a mortgage. If the income earner dies during the term, the policy helps cover those obligations.

After the term ends, some families may decide they no longer need coverage; others might renew or purchase a new term, although rates are higher with age.

Permanent life insurance lasts for the policyholder’s entire life but costs more. A common strategy is to combine products: buy a relatively small permanent policy early, when coverage is inexpensive, and add a larger term policy to protect major liabilities while dependents are young. For example, a young person might secure $100,000 of permanent insurance and a $900,000 term policy to provide comprehensive protection when it’s needed most.

“Life insurance changes purpose as you move through stages of life,” Doll says. Permanent coverage becomes more relevant approaching retirement, both to ensure lifetime coverage and as a potential estate-planning tool to cover taxes or facilitate wealth transfer.

Disability and critical illness insurance replace income if you can’t work

Disability insurance replaces income when an illness or injury prevents you from working. Critical illness insurance pays a lump sum if you are diagnosed with a covered serious illness, offering flexibility to cover travel, treatments or temporary loss of income.

“High-earning professionals such as dentists, lawyers and doctors usually carry disability coverage,” Tétrault notes. In such professions, income protection is critical if a health issue sidelines the earner.

Personal stories illustrate the value: when a family member received a cancer diagnosis, critical illness benefits helped cover travel to a specialized clinic and some treatment costs, relieving immediate financial pressure.

Advisors often include insurance as part of a broader financial plan—using it to reduce risk, protect capital, manage taxes and simplify estate transfers. Discussing worst-case scenarios with your partner—how mortgage and living costs would be met if one person could not work or passed away—can clarify the level of coverage needed.

While many employers offer group life or disability benefits, workplace coverage is frequently insufficient to fully replace income over the long term. People tend to underestimate how much life insurance they need; while many say a $2 million to $3 million windfall would allow retirement, they often assume $200,000 of life insurance is adequate. In reality, life insurance should reflect the full financial impact of an untimely death—income lost forever and obligations that remain.

Read more about life insurance:

• Your complete guide to life insurance in Canada
• Using whole life insurance for tax-free income in retirement
• Term vs. whole life insurance: Which type of policy is best?
• Does it make sense for a young person to have life insurance?
• Divorce and life insurance: How to make sure your family stays protected