A recent poll done for the Bank of Montreal shows Canadians continue to feel indestructible, as fewer than 20 per cent are financially prepared to deal with an emergency.
“The most difficult thing in the world is convincing people they need life insurance,” says Yaffa Sakkejha, the general manager at Beneplan Co-operative in Toronto, Ont. “Not until it is too late. To put it into better perspective, you don’t go looking for home insurance when your house is on fire.”
In its annual Rainy Day online survey, conducted by Pollara, 17 per cent of respondents say they have less than $1,000 in savings to draw upon in the event of an emergency.
Another 20 per cent have up to $5,000, 14 per cent have up to $9,999 set aside and 18 per cent say they have set aside $50,000 or more for an emergency.
Brett Boadway, the director of Broker Relations & Communications for the Insurance Brokers Association of Ontario, feels brokers are crucial to helping clients prepare for the worst. (continued.)
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“A broker is a facilitator of making good decisions,” he says. “While not all consumers are alike, the broker is there to provide expert guidance in that consumers best interest.”
Boadway says a broker can help limit the consumer from making irrational and over confident decisions, as clients tend to seek out information that supports their search, usually based on price, downplaying the information that doesn’t, like coverage and exposures.
“When working with a broker, the ‘it won't happen to me’ mentality is disrupted,” Boadway says. “The broker asks critical questions and identifies precious opportunities. The broker encourages consumers to make the right decision, at the right moment. This can make all the difference.”
Half of the respondents said they have the equivalent of three months of expenses set aside while 43 per cent have less than three months.
About one-quarter, or 23 per cent, said they are living paycheque to paycheque. And that isn’t just those earning $25,000 a year, says Sakkejha.
“We see cases of people earning $300,000 a year, but they too are living paycheque to paycheque,” she told InsuranceBusiness.ca. “It is important for people to understand that even a little disability insurance is better than none.”
Two-thirds have had to dip into their rainy day fund in the past, with car repairs, job loss and home repairs being the most common reasons. (continued.)
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The poll also found that those over the age of 65 are most likely to feel prepared while those between the ages of 35-44 are the least likely.
“Financial emergencies, such as a broken furnace or major car repairs, can crop up at any time and, without some form of financial cushion, can potentially cause households to take on more debt than is necessary,” said BMO vice president Janet Peddigrew. “The ideal emergency savings fund should be equal to three to six months of your income.”
Alyssa Richard, the president of InsuranceHotline.com, cites the example of a spouse passing away and leaving the family carrying the burden to pay the mortgage as an excellent example of the need for proper life insurance coverage.
“When your family purchases a home it's important to think about the worst case scenario. If you or your spouse were to pass away would the burden of the mortgage be too much to carry on the family?” she asks. “To protect your family in this scenario it's important to consider life insurance or specifically mortgage life insurance. As the products are complicated, it's important to speak with a life insurance broker or financial advisor.”
