A lack of understanding about insurance products among Canadians could be an obstacle to them seeking the best type of coverage for their needs, and that’s where financial advisors could step in and provide critical advice, says Chris Buttigieg, senior manager, wealth planning strategy at Toronto-based Bank of Montreal (BMO).

Buttigieg’s observation is supported by the fact that although Canadians understand that insurance is important, less than half (49%) feel they have some understanding of the insurance products best suited for their life stage, according to a BMO Wealth Institute report, entitled Insuring for a Financially Secure Future, released on Wednesday.

Advisors can be of value to clients who are confused or uninformed about their insurance options by conducting an insurance needs analysis that will take into account factors such as a client’s income, assets, liabilities, expenses and any insurance policies that are already in place, Buttigieg says. Advisors can then assess whether clients are underinsured or overinsured and make the proper recommendations.

“Advisors need to have that detailed conversation with the client,” he says. “They really need to get to know the client and their family, their loved ones, people they’re perhaps taking care of [or] providing support for.”

An advisor may learn details that are critical to choosing the appropriate insurance coverage, such as that a client’s family unit extends beyond a spouse and children. A client can be taking care of a parent or even an uncle or aunt and this must be considered if an advisor wants to determine the right amount and type of insurance, Buttigieg says.

Based on the BMO report’s findings, it appears that a more extensive discussion is necessary as this obstacle is contributing to an underinsured population, with 31% not possessing any of the following insurance policies: life, travel, accident, disability, critical illness or long-term care.

In fact, about four in 10 (43%) Canadians say they own or will purchase life insurance, which is the most popular type of insurance policy in Canada, in the next 12 months. This lack of coverage has 51% concerned that should they pass away, the financial well being of their families would be in jeopardy.

The right type and amount of insurance will ensure that a client’s entire financial plan is protected in the case of a sudden event like death or illness, Buttigieg says.

“All of a sudden, [clients] might be turning to [their] investments, which were meant for another goal, or the financial plan could be derailed as a result of not looking at what are the imminent risks that could impact them, their families or their loved ones,” he warns.