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Daniel Audet: "Don’t gamble on being uninsured"

10/19/2020 12:00:00 AM

The top life insurance mistake, from a consumer’s perspective, has to be the choice to gamble on being uninsured (or underinsured).

LIMRA reported a year ago in 2019 that 32 percent of Canadian households do not have any life insurance coverage, while 56 percent of Canadian households do not have any individual life coverage. Everyone would agree that there are more pleasant things to consider and address than the risk of dying prematurely, and that may be the reason why so many Canadians are shying away from a proper assessment. More likely, the observation comes from a knowledge gap of the risk and associated loss. Many Canadians would not necessarily consider themselves as gamblers, meanwhile the chosen approach of not buying insurance (or not buying enough) is very similar to that of a gambler’s behavior. The gambler “invests” a little wager with a small probability of a large payoff. In comparison the non-insured “saves” paying a small premium hoping he/she wouldn’t die with a significant financial burden. Both types of gamblers have small amounts involved when compared to what is at stake, and the odds of the event, while relatively small, can have a significant impact. They are just at both ends of the spectrum: the casino gambler hoping for the big win, and the life gambler neglecting to consider the major financial loss.

Turning a blind eye to the needs of paying final expenses, replacing income, paying off the mortgage, or paying the estate bills, and choosing not to be insured (or underinsured) is essentially just like gambling the financial state of the loved ones left behind. Several Canadians, when asked why they do not own life insurance, have stated they could not afford it (27 percent) or that they had other financial priorities (25 percent). The real reason boils down to not fully understanding the risk and its consequences. I would “bet” that, when faced with the facts, most Canadians would mitigate their risk, allow the need for insurance to climb their priority scale, and choose not to be a gambler.