Life Insurance for Lawyers in Canada
Here is everything you need to know about life insurance as a lawyer in Canada.
11 Minute read
Published: December 6, 2023
Updated: July 12, 2024
Life Insurance for Lawyers in Canada
Here is everything you need to know about life insurance as a lawyer in Canada.
11 Minute read
Published: December 6, 2023
Updated: July 12, 2024
As a lawyer, you’ve dedicated your career to safeguarding the rights and interests of your clients. But have you considered how to protect your own financial future and the legacy you’ll leave behind? Whether you’re a seasoned attorney or just starting your law career, understanding the life insurance policies available to you is essential. With the right life insurance, you can ensure the security of both your family and your business. Here is everything you need to know about life insurance for lawyers in Canada.
In this article:
- Why Get Life Insurance as a Lawyer
- Life Insurance Policies for Lawyers in Canada
- Can I Get Life Insurance Through My Bar Association in Canada
- Corporate Owned Life Insurance for Business Owners and Law Firm Partners
- Key Life Insurance Riders for Lawyers
- Case Study Examples
- Frequently Asked Questions (FAQs) about Life Insurance for Lawyers
Why Get Life Insurance as a Lawyer
Life insurance is essential for lawyers the same as any other professional Canadian as it offers a way to safeguard your family from any financial hardship that would come from an unexpected loss. Life insurance offers a means to replace any income you earn as a lawyer which is even more important if you are the primary breadwinner of your family. Additionally, if you have a mortgage a life insurance policy can ensure that your significant other won’t be left to pay the remainder without your income if you were to pass away.
Lawyers who own or are partners in law firms may also benefit from life insurance for certain business obligations. Life insurance can play a key role in estate planning for lawyers, providing a tax sheltered death benefit which can be used to cover estate taxes and other expected costs that may come with an unexpected death.
Here are some of the key reasons lawyers get life insurance in Canada:
Income Replacement: One of the main functions of life insurance is to help replace lost income in the event of the policyholder’s death. Lawyers, especially those who are primary earners, should consider their current income and how many years of income replacement would be necessary to maintain their family’s standard of living.
Future Obligations: Beyond current income and debt, it’s essential to consider future financial obligations. This includes children’s education costs, planned family milestones, mortgages, and so on. Ensuring these obligations can be met even in your absence is an essential way to financially safeguard your family.
Final Expense Costs: Life insurance can is also commonly used to cover final expense costs such as a funeral or memorial.
Retirement Savings: If your retirement savings are minimal, more life insurance coverage may be necessary to ensure the financial security of your spouse in the event of your death.
Offsetting Estate Taxes: Life insurance is also commonly purchased as a way to help cover the estate taxes when you hope to pass down a property such as a family home or cottage to your heirs.
Life Insurance Policies for Lawyers in Canada
There are three primary types of life insurance policies available to lawyers in Canada: term life insurance, whole life insurance, and universal life insurance. Each policy type offers unique benefits and which one is suitable for you will depend on your current situation and financial goals. Here is a brief overview of each type of policy:
Term Life Insurance
Term life insurance is often considered the simplest and most affordable option when it comes to life insurance. As the name suggests, this type of policy provides coverage for a specified term, typically ranging from 10 to 30 years. This type of policy is ideal for young lawyers who would benefit from flexibility due to changing financial circumstances as they progress in their career. Term life insurance can offer a financial safety net during financially vulnerable times like paying off a mortgage, caring for young dependents, or when paying off student loans. The affordability of term life insurance makes it an attractive option for those seeking substantial coverage without a significant premium cost.
Here are the monthly term life insurance rates for Canadians aged 40-45 for a 10-year term with $1,000,000 in coverage:
Whole Life Insurance
Unlike term life insurance, whole life insurance provides lifelong coverage with the added benefit of cash value accumulation. The cash value amount of the policy grows over time at a fixed interest rate and can be borrowed against, meaning your policy can both provide coverage and be a wealth building tool. This type of policy is suitable for established lawyers who can afford the more expensive premiums and are looking to integrate their life insurance policy into a broader financial strategy, such as retirement planning or estate planning.
Here are the monthly whole life insurance rates for Canadians aged 40-45 with $1,000,000 in coverage:
Universal Life Insurance
Universal life insurance also offers permanent life insurance coverage, but differs from whole life insurance due to the flexibility of the cash value investment. This type of policy allows policyholders to adjust their premiums and death benefits within certain limits making it an ideal option for lawyers at mid-career or senior levels who are interested in the investment options but still have fluctuating financial needs.
Here are the monthly rates for minimum-funded universal life insurance for Canadians aged 40-45 with $1,000,000 in coverage:
Can I Get Life Insurance Through My Bar Association in Canada
Purchasing life insurance through the Canadian Bar Association (CBA) or its insurance arm, the Canadian Bar Insurance Association (CBIA), is an option to all lawyers in Canada. If you are thinking of getting life insurance through your bar association as opposed to corporate owned insurance or a personal policy, here are some things you should consider.
Tailored for Legal Professionals: CBIA offers insurance products specifically designed for legal professionals. These products are often tailored to the unique needs and risks associated with the legal profession, which can be an advantage.
Competitive Rates: Group rates offered through associations like the CBIA can be more competitive than individual rates available on the open market. This can lead to cost savings for lawyers.
Convenience: Purchasing insurance through the Bar Association can be more convenient, as it offers a streamlined process and products that are already vetted for relevance to the profession.
Policy Limitations: Policies offered through the Bar Association often include exclusions and limitations. If you are more difficult to insure due to a reason such as a health condition, no medical life insurance may be better for you.
While purchasing life insurance through the Canadian Bar Association can offer tailored solutions and competitive rates, it’s not automatically the best choice for every lawyer. It’s advisable to thoroughly compare these options with others in the market and consider personal circumstances and needs before making a decision. Consulting with a financial advisor can also provide valuable guidance in this process.
Corporate Owned Life Insurance for Business Owners and Law Firm Partners
If you own your own law firm or are a partner at a law firm, corporate owned life insurance (COLI) might be right for you. With this type of insurance, the business is both the policyholder and the beneficiary of the policy. The person covered by this policy would be an owner, partner, shareholder, or an essential employee of the business. If the covered person were to pass away, a tax free death benefit would be paid out to the business.
The advantages of corporate owned life insurance include:
- Tax Advantages: The death benefit received by the company upon the death of the covered executive or employee is typically tax-free. Policies also typically have a cash value component that grows tax-deferred and can be accessed through loans or withdrawals for business purposes.
- Key Person Protection: COLI policies provide financial protection for the business against the loss of a key staff member, helping to cover the costs associated with finding a replacement and any potential revenue loss.
- Supplemental Benefits: This type of policy can be used to fund non-qualified executive benefit plans, such as deferred compensation, enhancing the overall benefits package.
If you have your own law firm, or are a partner at a law firm, it’s best to work with an advisor who can help tailor your policy to you and your corporation’s needs. Reach out to one of our expert financial advisors today so we can find the best policy for you.
Key Life Insurance Riders for Lawyers
For lawyers, life insurance policies can be tailored with specific riders and benefits to provide comprehensive coverage that extends beyond basic death benefits. Understanding and utilizing these additional features can significantly enhance the value and effectiveness of their insurance plans.
Disability Riders: This is particularly relevant for lawyers, whose work often relies heavily on their intellectual capabilities. A disability rider ensures that in the event of an inability to work due to disability, the policyholder receives a monthly income. This feature is crucial in maintaining financial stability during periods when practicing law is not possible.
Critical Illness Rider: This type of policy provides a lump sum payment to the policyholder if they were to ever develop one of the critical illnesses covered by their policy. A critical illness insurance rider can be used to cover medical expenses, replace lost income, to modify a home to accommodate new health needs, and so on.
Waiver of Premium: If a lawyer is suddenly unable to work due to a disability, this rider ensures that the life insurance policy still provides coverage without the need to continue paying premiums. This can be a financial lifeline, maintaining insurance coverage during challenging times.
Long-Term Care Riders: As lawyers plan for the long term, including their retirement years, this rider provides coverage for long-term care services, which may become necessary due to aging or illness. This can protect your savings and assets from being depleted by the high costs of long-term care.
Estate Protection Riders: For lawyers with substantial assets, estate protection riders can help in managing estate taxes and preserving wealth for their beneficiaries. This rider can provide additional funds to cover estate taxes, ensuring that the policyholder’s assets are passed on as intended.
By choosing to add specific riders to your life insurance policy, you can ensure that your coverage adequately meets your individual needs. These additions make life insurance policies a versatile tool for risk management and financial planning in the legal profession.
Case Study Examples
Case study 1:
Sarah is a 38-year-old lawyer, married with two young children. She is also paying off her mortgage with her spouse. She is interested in obtaining life insurance to ensure her mortgage is covered, to maintain her family’s standard of living, and to cover her children’s education costs in the event of her unexpected death.
To determine her coverage needs, Sarah considers the following factors:
- Sarah and her husband currently have $300,000 left on their mortgage. They anticipate paying it off in 20 years.
- Sarah decides to allocate $200,000 for her children’s future education costs.
- Sarah wants to ensure her family can maintain their current standard of living. This includes covering any lost income and additional childcare expenses, totaling $500,000.
Based on these considerations, Sarah determines she needs a total of $1,000,000 in life insurance coverage to secure her family’s financial future.
Sarah consults with an expert financial advisor to explore her life insurance options. After discussing her goals and financial situation, they determine that a term life insurance policy providing coverage until her youngest child finishes college is the most suitable solution.
Given Sarah’s good health and stable financial situation, she is quickly approved for the policy. This term life insurance policy ensures that her family will be financially secure if she were to pass away unexpectedly in the coming years.
Case study 2:
George is a 45-year-old partner at a prestigious law firm. With a successful career and a significant income, George is interested in corporate-owned life insurance (COLI). As a key partner, his role is critical to the firm’s success. COLI would provide the firm with the necessary funds to find and train a replacement and ensure the firm’s stability in the event of his death.
George considers the following to determine the firm’s coverage needs:
- George decides that $1,000,000 in coverage would be sufficient to cover the firm’s operating expenses for a year, ensuring that the firm has the necessary liquidity to handle any immediate financial challenges.
- George determines that an additional $500,000 would be necessary to cover the costs associated with finding and training a new partner to take over his responsibilities.
Total Coverage Needed: $1,500,000
George discusses his situation with a life insurance broker. George is in good health with no significant pre-existing conditions. After reviewing various options with his broker and submitting an application.
George successfully qualifies for a COLI policy with $1,500,000 in coverage. The policy is structured to benefit the law firm, ensuring that the firm receives the death benefit to cover operating expenses and the costs associated with finding a new partner. This policy provides George and his partners with peace of mind, knowing that the firm’s future is secured in the event of his death.
Frequently Asked Questions (FAQs) about Life Insurance for Lawyers
Lawyers often have unique financial situations, including substantial student loan debt and high income potential. Life insurance can provide financial security for their families and ensure their financial obligations are met in case of an unexpected death.
Yes, generally, the younger you are when you purchase life insurance, the lower the premiums. Age is a factor in risk assessment, so buying life insurance early in your career can be cost-effective.
Term life insurance provides coverage for a specific period, ideal for temporary or specific financial responsibilities. Whole life insurance offers lifelong coverage and a savings component. The choice depends on personal financial goals and circumstances.
Find a solution that’s right for you.
By carefully considering your unique needs and staying informed about your options, you can ensure they have the right coverage to safeguard what matters to you. At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure we find the best solution for your unique needs. We provide expert life insurance solutions, including no medical life insurance, critical illness insurance, disability insurance, term life insurance, and permanent life insurance to build the best package and give you the protection you need.
Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia, Manitoba, and Alberta including areas such as Hamilton, Grande Prairie, and Abbotsford.
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