Imagine this: You’re sipping coffee on a lazy Sunday morning, scrolling through your phone, when you see a post about someone crowdfunding for a family who just lost a loved one. The story hits hard—the breadwinner passed away unexpectedly, leaving behind a spouse and kids with no financial cushion.

It makes you pause. What if something happened to you? Would your family be okay financially? Would they be forced to make tough decisions, like selling the house or struggling to cover basic expenses?

This is why life insurance exists. It’s not just another financial product—it’s a safety net that ensures your loved ones can carry on without the added stress of money worries.

In this post, we’ll explore Why do you need a life insurance, how it fits into personal finance, and why it’s one of the smartest long-term financial moves you can make.

What Is Life Insurance, Really?

At its core, life insurance is a contract between you and an insurance company. You pay premiums, and in return, the company provides a lump sum (called a death benefit) to your beneficiaries if you pass away. It’s a way to financially protect those who depend on you, whether it’s your spouse, kids, aging parents, or even business partners.

But why do you need a life insurance when you’re young and healthy? The simple answer: because life is unpredictable. No one wants to think about worst-case scenarios, but planning ahead ensures that your family won’t have to struggle financially if something unexpected happens.

Real-Life Scenarios: Who Needs Life Insurance and Why?

Let’s break it down with some real-life examples. Chances are, you’ll see yourself in one of these situations.

1. You’re a Parent with Kids Who Depend on You

Meet Lynn and Jack. They’re in their early 30s, working full-time, and raising two young kids. They just bought a home, and their mortgage payments take up a big chunk of their income.

If one of them were to pass away unexpectedly, the other would be left with all the bills—including the mortgage, daycare, and groceries—on a single income.

Life insurance ensures that if something happens, the surviving parent wouldn’t have to struggle to maintain their lifestyle or uproot their kids’ lives.

2. You’re a Young Professional with Student Loans

Linda is 29, single, and working as an engineer. She doesn’t have kids yet, but she has a $60,000 student loan that her parents co-signed. If something were to happen to her, her parents would be on the hook for that debt.

A simple, affordable term life insurance policy would cover that debt so her parents wouldn’t have to worry.

3. You’re a Homeowner with a Mortgage

Buying a home is a huge financial commitment. Whether you live alone or with a partner, life insurance can help cover the mortgage if you’re no longer around.

Take Benny and Lynna, for example. They just bought a house with a 25-year mortgage. If Benny were to pass away unexpectedly, Lynna might not be able to afford the payments on her own. But with life insurance, she wouldn’t have to sell the house or face financial stress during an already difficult time.

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• Pay Off Mortgage or Invest in RRSP: What Should You Do?

4. You’re Self-Employed or a Business Owner

If you run your own business, life insurance is even more crucial. Entrepreneurs often have business loans, employees who rely on them, and even partners who would be financially affected if something happened.

Consider Bradley, who owns a small marketing agency. If he passes away, his business loans don’t just disappear. His wife, who isn’t involved in the business, might be left with the financial burden.

A life insurance policy would help cover outstanding debts and allow his family to either sell or continue the business smoothly.

5. You’re Supporting Aging Parents or Siblings

Not everyone has kids, but many people support aging parents or siblings with disabilities. If you’re the main financial provider, life insurance ensures that your loved ones will still have financial support, even if you’re not around.

The Different Types of Life Insurance Explained

When people ask why do you need a life insurance, they often hesitate because they don’t understand the different options. Let’s break it down simply:

Term Life Insurance – Affordable and Straightforward

This type of insurance covers you for a set period (e.g., 10, 20, or 30 years). It’s often the most affordable option and ideal for people who want coverage until their kids are grown or their mortgage is paid off.

If you pass away during the term, your beneficiaries get the payout. If you outlive the term, the policy expires.

Best for: Young families, homeowners, and those on a budget.

Permanent Life Insurance – Coverage for Life

This policy lasts your entire life and often builds a cash value over time. It’s more expensive but can serve as both a safety net and an investment tool.

Best for: High-net-worth individuals, those looking for tax advantages, or people who want lifelong financial protection.

How Much Life Insurance Do You Actually Need?

A common rule of thumb is 10 times your annual income, but the right amount depends on your personal situation. Here’s a simple way to calculate it:

✅ Mortgage & Other Debts – Ensure your family can pay off big financial obligations.
✅ Income Replacement – Cover daily living expenses for your family for a set number of years.
✅ Children’s Education – Factor in future tuition costs.
✅ Final Expenses – Funeral costs, legal fees, and estate settlement.

Example: If you make $75,000 per year, have a $300,000 mortgage, and want to cover 10 years of living expenses for your family, you might need around $1 million in coverage.

Common Myths About Life Insurance

🚫 “I’m young and healthy, I don’t need it yet.”
✅ Life insurance is cheapest when you’re young. Waiting means paying higher premiums later.

🚫 “It’s too expensive.”
✅ A healthy 30-year-old can get a $500,000 term policy for about $20/month—less than a streaming subscription! If you’re in your 40s, the same coverage could cost about $35/month. The earlier you get it, the cheaper it is.

🚫 “I have life insurance through work, so I’m covered.”
✅ Employer-provided insurance is often limited (just 1-2x your salary) and disappears the moment you switch jobs or get laid off.

Bonus point: If you’re a member of a professional association like CPA Canada or another regulated profession, you might qualify for better insurance rates through your association. Be sure to check your membership benefits in advance!

The Peace of Mind Factor

Beyond the numbers and calculations, life insurance is ultimately about peace of mind. No one likes thinking about worst-case scenarios, but having a plan in place means that if something happens, your family won’t be left scrambling.

It’s not about you—it’s about the people who love you. And ensuring they’re taken care of is one of the most responsible financial decisions you can make.

So the next time you see a crowdfunding post for a grieving family struggling with expenses, you’ll know that you’ve already taken steps to protect the people you love.

That’s the real answer to “Why do you need a life insurance?”

👉 Take a few minutes today to explore your life insurance options. Whether it’s through your employer, a professional association, or an independent policy, getting covered now means your loved ones will be financially secure no matter what life throws your way. Start planning for their future—because they’re worth it!