Family Life Insurance: What's the Best Option for You? (2024)

March 11, 2024

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5 minutes

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In This Article

Key takeaways:

Family life insurance usually means one policy that covers your entire family, but this option isn't available in Canada.
Instead, you can choose to get a joint policy for you and your partner or separate policies (recommended).
Get free Chid Coverage with PolicyMe, or pay to add your kids to your policy. Or buy them their own policy.

What is family life insurance?

Family life insurance is a type of life insurance policy that covers multiple family members under a single policy.

Instead of buying individual life insurance policies for each member of the family, you can buy one policy to cover everyone.

Now here's the truth: family life insurance doesn't exist in Canada.

Some Canadian life insurance companies say they offer "family life insurance," but what they mean is that you can buy separate policies for the parents and then cover their kids with add-ons called riders.

In any case, family life insurance, whether one policy or multiple, offers peace of mind knowing that your family members will be financially protected in the event of your untimely death.

The payout from the policy can be used to cover outstanding debts, funeral costs, or to provide for the living expenses of your dependents.

Some life insurance policies also offer added benefits like critical illness coverage, offering financial support should a family member be diagnosed with a serious illness.

Family life insurance: as one policy

Just so we're clear, traditional family life insurance means having one policy for everyone, instead of individual policies.

Instead of having to manage several individual policies, you can ensure the financial safety of all family members under one umbrella. This not only simplifies the management of life insurance but can also prove to be cost-effective.

This sounds great, but this option isn't available in Canada. Companies like Manulife and Desjardins market their life insurance as "family life insurance" but it's really separate policies you can buy together.

Family life insurance: as multiple policies

Family life insurance that's NOT one policy can come in a few (slightly confusing) flavours in Canada:

Parents have two separate life insurance policies
Parents have one joint life insurance policy
Single parent has one individual life insurance policy
Kids are covered under riders (add-ons) to a parent's policy
Kids have their own separate life insurance policy

Confused? Let's break down the different types below. We'll also give you some resources if you need help making your decision.

Types of family life insurance

Term life insurance for families

Think of it like a lease on a car: it lasts for a specific period (like 10, 20, or 30 years). If you're still kicking at the end of the term (and we hope you are!), the policy simply ends.
It's straightforward and typically the most affordable option.
This type of insurance can be beneficial for families as it can provide significant financial protection during the years of highest financial obligation, like mortgage payments or child-raising years.
Coverage duration typically spans from 5 to 30 years. Shorter term lengths and lower coverage amounts (think $100,000 as opposed to a $1M death benefit) are cheaper.

Best for: Term life insurance is great if you want an affordable policy that will cover you until your kids are grown and flown and your mortgage is paid off.

Whole life insurance for families

This is more like owning a car. As long as you keep up with the payments, it's yours for life. It even builds cash value over time.
This policy provides families with the benefit of guaranteed death benefits, level premiums, and cash value accumulation.
An added financial benefit of whole life insurance is the accumulation of cash value over time, which can be borrowed against if necessary.
This all sounds great, but life insurance is designed to protect your family financially, not build wealth. You're probably better off investing your money in registered accounts like RRSPs and TFSAs, but talk to a financial advisor you trust first.

Best for: If you can afford higher premiums and want lifetime coverage, whole life insurance could be right for you, especially if you're a very high-net-worth individual with complex estate planning needs.

family life insurance options and whole vs universal life insurance compared in a table

Universal life insurance for families

This is a flexible option that combines elements of term and whole life. You can adjust your premiums and death benefit as needed.
It can be advantageous for families as it can adapt to changing financial needs over time, with the ability to adjust the death benefit and premium amounts.
This policy also includes an investment component, which allows for cash value accumulation that can be invested for further growth.
It's a bit more complex but offers a lifetime of coverage and potential cash value growth.
Downside is that if you don't manage it properly, your premiums can go way up and you may not be able to afford to keep your policy anymore.

Best for: Universal life insurance is a bit more complex but offers a lifetime of coverage and potential cash value growth. It's not a set-it-and-forget-it solution, so it's not right for most folks.

Mortgage life insurance for families

Your premiums are added to your monthly mortgage payment, which is convenient.
Only covers the balance of your mortgage, and the benefit decreases as your mortgage balance goes down.
But, payments often stay the same, so you're not getting bang for your buck.
The payout usually goes directly to the mortgage lender, so your family can't decide what to do with the money.
You don't have to do a medical, but that means you pay higher prices because the insurer hasn't properly assessed your risk.

Best for: We don't recommend mortgage life insurance, for the above reasons.

Joint life insurance for couples

The joint policy can be a term or permanent policy.
Sometimes getting one joint policy that covers you and your partner can be cheaper than getting two separate policies.
35 and up, joint would be less expensive than individual coverage.

Best for: Those who are really price conscious and don't anticipate splitting up, ever (hard to place a bet on that, but only you know!).

Life insurance for children

You can get your child term life insurance, whole life insurance or add them as a rider on your existing policy.
Parents often opt for life insurance for their children to lock in a low rate. Setting up a whole life policy now can secure a consistent premium rate for your child, making it easier to obtain coverage as they grow older.
That said, most healthy adults won't have trouble getting coverage.
Also, using the investment component of a whole life policy can potentially increase the payout.
But, it's likely you'll get more bang for your buck by putting money in a savings plan like an RRSP, RESP, TFSA etc.

Best for: Probably not your child. Getting policies specifically for your children might not be the most effective way to lock in financial security for your family. The first step towards creating financial well-being for your kid is to secure your own life insurance policy.

family life insurance and children's life insurance pros and cons

Which type of life insurance is best for you and your family?

Term life insurance offers a smart choice for the average Canadian family as it delivers affordable and personalized coverage, ensuring financial security for your loved ones.

Here's why term life insurance might be a great idea:

Affordability: With coverage set for a specific duration, premiums are generally more budget-friendly compared to whole life policies.
Flexibility: You have the freedom to pick the coverage amount and term length that perfectly match your family's needs, regardless of your life stage.
Simplicity: Policy terms are straightforward, making them easy to comprehend, and the tax-free payout can be utilized by beneficiaries as they see fit.

All in all, you should strongly consider term life insurance, especially if your dependents rely on your financial support.

Should my partner and I get joint life insurance or two separate policies?

Joint life insurance can be cheaper, especially if you're 35 years old and up, but individual coverage is a lot more flexible, according to PolicyMe life insurance advisor Erik Heidebrecht.

Separation and divorce, unfortunately, is not uncommon. A lot can happen in a couple's lives during the 10 to 30 years of a term life insurance policy. And if you happen to part ways, it's much harder to separate a joint policy.

You may be stuck paying for a policy you don't want, with nothing to do but ask the bank to stop payments if your partner won't agree to cancel.

Individual policies? Just change your beneficiary (a straightforward exercise). If you need less coverage, it's possible to do that too, or just cancel the policy if you want.

A chart that explains what joint life insurance is as well as the difference between joint first-to-die, joint last-to-die and individual life insurance.

What are the best family life insurance plans in Canada?

PolicyMe Term Life Insurance

PolicyMe is known for its family-friendly perks, including:

10% discount in the first year for couples who apply together.
$10,000 in free Child Coverage per child.
5-10% cheaper than comparable policies, on average.
Apply online in 20 minutes or less (on average, for eligible applicants). Sign your policy online too.
Noncommissioned licensed advisors are available by phone or email to help walk you through your options. We'll even tell you if you don't need life insurance at all!
Almost 70% of eligible applicants don't need to submit further medical information.
Backed by insurance giant Canadian Premier for extra security.

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Manulife Family Term™ Life Insurance

Individual policies for each parent, then the option to add child coverage for a fee.
Gain complimentary access to specific Manulife Vitality benefits, receiving rewards for your commitment to a healthy lifestyle.
Up to $20M in coverage
You can only get 10 or 20-year terms.
Premiums stay the same for the entire term.
$1,000 towards your family's bereavement counselling costs
Cash advance if the policyholder is diagnosed with a terminal illness.

Best for: Those who want permanent life insurance and who are high-income earners who want to take advantage of the estate planning aspects of Manulife's whole or universal life insurance options.

Desjardins Family Life Insurance

You and your partner need to first buy a Desjardins term or permanent life insurance policy.
Then you can add a term life insurance rider for your partner and cover them up to $25,000.
Add on a child rider and cover your kids for up to $20,000 each.
The child rider can be converted to a permanent policy when it expires.

Best for: If you don't want to buy a lot of coverage for one partner. In that case, not buying a full policy for your spouse, but adding them as a rider to your policy, is more affordable. That said, coverage is really minimal, so they must have the means to provide for your family financially otherwise since the death benefit is so small.

Co-operators Mortgage Guard®

Unlike other mortgage insurance, Co-operators' version sends the money directly to your beneficiaries, instead of the bank.
Your beneficiaries can use the payment to cover the mortgage, or whatever else they like.
Even if you change mortgage lenders, you keep your coverage.
Your death benefit stays the same for the entire term, which, since your mortgage balance decreases, doesn't really make sense.
A big perk of Mortgage Guard® is that you can add disability and critical illness coverage as extra riders.

Best for: Possibly no one. Since the death benefit doesn't decrease with your mortgage balance, you're paying for more than you need. If you need more coverage than your mortgage balance, get term life insurance instead. If you just need mortgage coverage, get a policy with a decreasing death benefit (and payments).

What to consider when choosing family life insurance

Family Size and Composition: Your family's size and the ages of family members can significantly influence your choice of life insurance. Larger families or those with younger children may require more comprehensive coverage.

Financial Goals: Align the policy with your family's financial objectives. Whether you aim to cover funeral costs, pay off a mortgage, or ensure financial security for your children's education, choose a policy that supports these goals.

Budget and Affordability: Determine a suitable premium that fits within your budget without causing financial strain. Remember, the aim is to provide financial security, not to become a financial burden. Again, use our calculator, talk to one of our noncommissioned agents, or

Policy Features: Examine the specific features of each policy type. Consider aspects like coverage duration, the potential for cash value accumulation, and the flexibility of premium payments.

Long-Term Planning: Consider how the policy fits into your long-term financial plans. If you are looking at life insurance as a financial planning tool, you might want to consider policies with a cash value component.

Insurance Company's Reputation: Evaluate the reputation and financial stability of the insurance company. Check ratings by independent agencies and read reviews from other policyholders. Our post on the best life insurance in Canada is a good place to start.

Policy Riders: Look into possible policy riders (add-ons) that could enhance your policy, such as a disability waiver of premium or an accelerated death benefit rider.

Confused? You have options:

Use our life insurance calculator to figure out exactly how much coverage you might need.
Talk to one of our noncommissioned, licensed advisors to get honest advice tailored to you.
Reach out to a life insurance broker to help you compare policies. Ask a friend, or do a quick Google search. Just be advised that brokers work on commission.

Steps to buying family life insurance

Identify Your Family's Needs: Consider your financial obligations, dependent care responsibilities, and future plans to determine the amount of coverage your family will need.
Research Different Policies: Explore different type of insurance policies, their coverage, premiums, and features. Identify the ones that suit your family's unique needs.
Choose a Reputable Insurance Company: Look for a company with a strong financial rating and positive customer reviews.
Contact an Insurance Agent: An experienced insurance agent can guide you through the process, explain policy details, and help you understand the costs involved.
Fill Out the Application: Provide accurate and complete information about your lifestyle, health, occupation, and income.

Laura McKay

COO & Co-Founder