The traditional path of starting a family in your ’20s has been slowly shifting towards parents choosing to begin having children later in life. The reasons for this are myriad, however, most commonly, Canadians are working on getting themselves firmly established in a career first, searching for financial stability for their families, getting into an expensive housing market later in life, and simply delaying having kids until they are more settled and stable and had achieved some of their personal goals.
According to Statistique Canada, in 1974, the average age of mothers giving birth was 24.3 years old. By 2022, it had risen to 31.6 years old. In 1974, the average age of fatherhood was 30.1 years. By 2022, that had risen to 34.4.
It’s increasingly common to see individuals and couples welcoming children later in life — sometimes well into their ’40s and even early ’50s.
There are plenty of advantages to starting a family at an older age, and the main reason is to provide better for their children. But with that thinking also comes some challenges. There is the very real risk of being underinsured. Older parents with young children may find themselves in a vulnerable position if something unexpected happens, leaving their families without adequate protection.
Time is beginning to become a premium
Younger parents typically have decades of earning potential ahead of them. If something happens, health and disability insurance can help bridge a long gap of lost income.
Older parents, however, face a very different situation. A 45-year-old parent of a toddler may only have 20 years or less left in the workforce. That shortened earning horizon can make life insurance and disability coverage seem like less of a priority, however, the need is actually greater, as the likelihood of something happening is more probable.
The risk of disability increases with age, with one in four Canadians over 15 experiencing a disability, a rate that rises substantially with each decade. Without adequate insurance, the financial impact of a sudden death or disability can be devastating.
Life insurance becomes harder to get and more expensive as we age
As we age, health risks naturally increase. Conditions like high blood pressure, diabetes, and heart disease are more common in your ’40s and ’50s than in your ’20s or ’30s. Insurance companies account for this increased risk by charging higher premiums, or, in some cases, limiting the types of policies available.
Common reasons to be refused life insurance include advanced cancer, a terminal illness, heart disease, a history of strokes, and a history of substance abuse. Older Canadians may find themselves to only be eligible for simplified issue or guaranteed issue life insurance:
- Simplified issue insurance does not require a medical test, but the insured will need to answer health and lifestyle related questions. Coverage under this type of policy is usually limited to $150,000. You will not be eligible for simplified issue insurance if you have been declined for other insurance in the past two years.
- Guaranteed issue insurance is issued immediately with no medical, questions, or underwriting. Coverage under this policy is guaranteed even if you have been declined for life insurance in the past two years. The trade offs are that coverage is often limited to $25,000, there are higher premiums to pay, and the pay out may be limited to only a return of investment if the insured dies in the first two years.
These options may discourage older parents from buying the amount of coverage they need, with some deciding to skip insurance altogether, thinking it’s not worth it or that they can simply save. But avoiding insurance can leave a major financial gap for dependents, particularly when children are still many years away from independence.
Financial priorities: Retirement savings versus child-rearing costs
Older parents are often trying to balance two big financial goals at the same time: raising young children and saving for retirement. Both are expensive. Childcare, extracurricular activities, and post-secondary education savings can consume a large portion of household income. Meanwhile, retirement is approaching faster than it is for younger parents, leaving less time to build a strong nest egg.
Because retirement savings often take priority, insurance is sometimes put aside. Often the thinking is that as long as there is enough for retirement in the coffers, everything should be fine.
But that is dependent on many factors, including if both parents live and work as planned. If one parent suffers a serious disability, or the loss of a job, those savings can be quickly depleted, leaving both retirement and child-raising goals in jeopardy.
Misunderstanding Canada’s benefits
Another common issue is a simple lack of awareness. Many people think of life insurance as an “extra” rather than the basic foundation of financial security. Older parents might assume that government benefits, such as the Canada Pension Plan survivor benefits or Employment Insurance sickness benefits, will be enough to cover their family’s needs. In most cases, these benefits will certainly help, but are not enough.
These programs are not designed to replace a lost income long-term or fund future expenses like education. They provide only a partial safety net, leaving significant gaps if life insurance isn’t in place.
What older parents can do
Fortunately, it’s never too late to address underinsurance. Here are a few key steps older parents can take:
- Review your needs honestly. Consider your income, debts, children’s future education costs, and long-term goals.
- Seek professional advice. An insurance broker can help assess your unique situation and recommend products that fit both your needs and budget.
- Don’t rely solely on workplace benefits. Employer coverage is rarely sufficient on its own. Supplement with personal policies that stay with you even if you change jobs.
- Look at term life insurance. Term policies can provide affordable coverage during the years when your children are most dependent. Term life insurance is affordable and easy to understand, providing coverage for a specified length of time (usually 10 or 20 years), and costs are guaranteed for the “term.” Term life insurance can be converted to permanent life insurance at any time.
- Consider disability and critical illness coverage. These policies can protect your family if your ability to earn income is interrupted by health issues.
Life insurance combined with estate planning provides long-term peace of mind
Insurance brokers such as us at Lane’s have the skills and the expertise to set you and your family up properly for the long term with the most appropriate coverage. Estate planning is something not a lot of us like to think about, especially when times are tough, as they have been in Alberta for the past few years. It can be difficult to think about saving for the future when even day-to-day expenses can be hard to stay ahead of. But as a low-cost, high-return investment in you and your loved ones’ future, the professional insurance brokers at Lane’s Insurance will always stress the importance of carrying high-quality life insurance.
