Can you pay for life insurance with a credit card in Canada? It's a common question, and pretty logical if you want to maximize the points or cash back you earn on your spending.
In short: yes, you can charge your life insurance to a credit card with select Canadian life insurance providers such as PolicyMe, CPP and BMO, but there may be conditions.
You should also know that it's not always a good idea to charge your life insurance premiums to your credit card; we'll explain why below.
There are a few Canadian life insurance providers that will allow you to charge your insurance policy to a credit card, but only if the annual payment is selected.
To date, you can pay for life insurance on an annual basis with the following Canadian companies:
With BMO, you can only pay for your annual life insurance premium in the first year of your policy. CPP lets you pay your annual life insurance premiums on your credit card for the entire duration of your policy.
Some people will jump at this opportunity since it's an easy way to earn points, miles or cash back, but note that using a credit card is only allowed in the first year of the policy.
After you've paid for your first year, you'll need to set up a direct debit from your financial institution.
At PolicyMe, you have the option to pay for your monthly premiums with a credit card for the entire length of your term life insurance.
Other life insurance companies do not offer this option to avoid people's policies from expiring if their credit card expires or goes over the limit.
PolicyMe has a measure in place to notify customers if this happens, so their policy does not lapse.
You may be asking: can I afford to add a life insurance payment to my credit card every month? Life insurance is actually a lot more affordable than most Canadians think. Get an online quote from us, with no obligation to commit.
Unfortunately not, only some insurance providers give you the option to pay with a credit card. Although earning miles or cash back can be appealing, you should not choose an insurance provider just because they allow you to use a credit card.
Generally speaking, you should care more about what it provides and how much the policy will cost. If the insurance provider happens to accept credit cards as a form of payment, that's a bonus.
At PolicyMe, not only can you pay for life insurance with a credit card, you can pay with a Visa Debit card as well.
It really depends on what your goals are. For example, many of the best travel credit cards in Canada come with a generous sign up bonus, but you need to charge a set amount within a certain amount of time to qualify for that bonus.
That could be $1,000 within three months of opening your account. The value of the bonus differs depending on the credit card, but it wouldn't be unusual to get at least $250 out of it.
Let's assume for a second that your insurance policy is going to cost $30 a month. That's a total of $360 you'd spend on insurance for the year.
If you chose the annual payment option and your insurance provider allows you to charge your policy to your credit card, you'd already be more than a third of the way to reaching your minimum spend requirement.
Keep in mind that some premium credit cards such as the American Express Platinum Card have a much higher minimum spend requirement, but it can be worth it since the welcome bonus might be more valuable. With this card, you'd want to charge anything you can to help you meet your minimum spend.
Life insurance is one of those things you hope that you'll never have to make a claim. You won't get anything if you don't make a claim (a good thing), but you can get something by using one of the best cash back credit cards in Canada.
Many of these cards give you an increased earn rate for the first three months of card membership. How much are we talking about here? Some cards offer as much as 10% cash back for new clients.
Using the same $360 annual premium example, you would get $36 back with some credit card promotions. Okay, $36 isn't exactly a lot, but if you went the direct debit route, you'd get nothing, which is why using a credit card to pay for any expenses can be beneficial.
You should not use a credit card to pay for life insurance if you aren’t certain about being able to pay off the full balance on time. Since credit cards have an average interest rate of 19.99%, you could end up paying more in interest than any rewards you might earn.
Having a life insurance policy that fits your needs is more important, so don't worry about any missed points or cash back.
Alternatively, if you aren’t confident about being able to pay your credit card in time, you can consider paying with your visa debit card. Paying for you life insurance premiums with a debit card will allow you to be free of interest payments.
That said, if affordability is an issue, you can try:
You may need to undergo medical underwriting again if you let your policy lapse. This can be very risky if your health has changed because your monthly premiums may go up.
If you do need to carry a balance on your credit card for a reason, use a low interest credit card as the rates are much more reasonable.
It really doesn't matter what financial institution you use to pay for your life insurance, but using one of the best high interest savings accounts (HISA) can benefit you in other ways.
As the name implies, HISAs pay high interest. That said, the term high interest is a relative term right now since we're seeing some of the lowest interest rates in history.
Many HISAs such as EQ Bank offer a rate of around 1 - 2%, which is significantly higher than traditional banks who typically pay 0% interest. Since you need to keep your money somewhere, you might as well make some interest on it with a HISA.
The interest rate you earn won't affect your life insurance payments since it's a direct debit, but the idea here is to make your money work for you by putting it in an account that pays some interest.
Some people may be disappointed to learn that many of the top life insurance companies in Canada don’t allow you to pay for your monthly life insurance premiums with a credit card, but it makes sense since direct debit will usually ensure that there are no interruptions to your payments.
That said, at PolicyMe, you have the option to pay for your monthly premiums with a credit card or even your Visa debit card. PolicyMe has a measure in place that notifies customers if their credit card is expiring, so as to not let their policies lapse.