Life Insurance for Parents: Why Coverage Matters for Your Family

Do parents need life insurance?

Parents, including single parents and stay-at-home parents, need life insurance to protect their children’s financial future and ensure that debts and other obligations are covered if they pass away. 

Generally speaking, term life insurance is the best choice for most parents—and it’s a good idea for each parent to have coverage. If you pass away during the term, your surviving spouse and/or children would receive a tax-free, lump-sum payout to help cover their expenses and ensure your family’s stability during a difficult time.

Life insurance can be used to cover things like:

• Mortgage or rent payments
• Education costs
• Daily living expenses
• Medical expenses
• Your funeral expenses

Even if you’re a new parent, now is the right time to consider getting life insurance coverage. You now have someone depending on you until they’re financially independent. If you pass away unexpectedly, the insurance death benefit will help ensure that they’re cared for and supported—and that the surviving parent has financial stability during a difficult time. Plus, life insurance premiums are the most affordable when you’re young and healthy.

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What about coverage for my kids?

PolicyMe’s term insurance for adults includes $10,000 of free child coverage. In most cases, kids don’t need their own life insurance policy.

Types of life insurance for parents

There are two main types of life insurance for parents: term and permanent. Both provide payouts to your family members if you pass away, but that’s where the similarities end. 

When you’re comparing term vs. permanent coverage, you might think that lifelong coverage sounds like the best way to take care of your family. But ultimately, a term life insurance policy is usually the best choice for parents. Here’s why:
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• It’s affordable. Term premiums are the most affordable option—and the earlier you secure coverage, the lower your premiums will be. Use the extra money in your budget to invest in higher-return investment vehicles, like RESPs or RRSPs.
• It’s flexible. You can choose the term that works best for your financial situation. You can also ladder policies with different term lengths to better match your family's needs.
• It’s easy to manage. With fixed premiums and a set coverage period, term life insurance is as close to “set it and forget it” as you can get. 

“[Term insurance] is generally for people who want to have their mortgage covered… If they're a young family and they want to be responsible and look after their kids, term insurance is the way to go. It's going to get you the most coverage and the biggest bang for your buck. Once your kids are all grown up and independent, you don't need to worry about insurance anymore.” —Erik Heidebrecht, Life Insurance Advisor

The best type of life insurance policy for every parent

How much life insurance coverage do parents need?

Parents need enough life insurance coverage to protect their family’s financial security. The exact number for financial support depends on your family’s situation. The general guidelines are:

• Working parent: At least 5–10x the annual gross income to replace lost income, pay off debts, and fund future expenses (like education)
• Stay-at-home parent: Generally $250,000 to $500,000 to cover childcare, household management, and other essential expenses

You can use the DIME method to estimate the right amount for your family:

• Debts
• Income replacement (annual salary)
• Mortgage
• Educational expenses

Add up all your financial obligations or use a free life insurance calculator and you’ll get a sum that represents the approximate amount of life insurance you need as a parent. But remember, this is an estimate so make sure to assess whether it’s enough for your family’s needs (and your own funeral costs).

Read more: How much life insurance do I need?

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Already have coverage through work?

While group life insurance can be helpful, you likely need additional coverage. Employer-sponsored policies have limitations and only provide about 1–2x your salary in coverage. Plus, the insurance coverage will end if you leave the company.

How much does life insurance for parents cost?

The average cost of life insurance varies depending on your age, health status, term length, and coverage amount. Here are some sample rates for individual policies for non-smoking women:

And here are sample rates for non-smoking men:

Remember, rates vary person by person, and your premium might be higher if you are deemed higher risk because you:

• Smoke
• Engage in high-risk hobbies
• Have a high-risk profession
• Have pre-existing health issues

Parents can save 10% off the first year of coverage with PolicyMe by applying together for two individual policies (rather than one joint one).

How to fit life insurance in your budget as a parent

Parenthood is expensive, but life insurance is an expense worth fitting into your budget, even if it’s a challenge. Here’s how you can make it easier: 

1. Buy early: Buy life insurance as soon as it enters your financial plans and conversations. This may be before your first child is even born, but there’s an advantage to jumping the gun. Not only will your eligible premiums go up by 8% for each year you wait, but pregnancy and childbirth can introduce significant health risks that could result in higher premiums for the rest of your life. 
2. Don’t buy joint insurance—unless it’s the best option: If you’re applying for life insurance with a partner or co-parent, purchasing two individual life insurance policies with combined premiums is likely the most cost-effective way to ensure financial protection for your kids, since one policy will pay out when either parent passes. With joint policies, there’s only one payout, leaving someone uninsured no matter how you set up the plan. 
3. Go for the medical exam (if you need one): Don’t skip a medical exam when buying life insurance to protect your children. While medical exams can be a hassle, full underwriting is your best shot at a competitive price. Unless you’re in good health and qualify for instant approval through accelerated underwriting, it’s worth going through with a medical exam. 
4. Don’t overbuy: Most Canadian parents need term life insurance, not permanent life insurance—and that term should only last as long as your financial obligations. Estimate when your youngest child will be financially independent and use that as a guide when setting up your life insurance.
5. Compare quotes: Not every life insurance company will quote you the same rate. Take the time to shop around and compare quotes for the same type of policy before you settle on an insurer. 

“To keep premiums low and still get meaningful protection, buy the amount of coverage your family would truly need for things like the mortgage, education, and living costs. Apply early while you’re young and healthy, since that’s when rates are lowest and you can lock them in for your full term.” —Jeremy Burbano, Licensed Insurance Advisor

Best life insurance companies for parents

Based on affordability and coverage options, the best life insurance companies for parents in Canada include PolicyMe, Sun Life, Manulife, and RBC. Here’s how they stack up against each other:

* Financial strength scores from A.M. Best. PolicyMe’s financial strength score reflects the rating assigned to Securian Canada, PolicyMe’s underwriting partner. 

PolicyMe is a good provider for parents who want affordable policies with free child coverage. The online application process is simple and the 10% first-year discount for when applying as a couple is an added bonus.

Parents who are interested in more bells and whistles may wish to consider Sun Life, Manulife, or RBC. These are established companies with more perks and features, but you can expect to pay higher premiums.

FAQ: life insurance for parents