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Is life insurance worth it for the average Canadian family? The answer will depend on your specific financial situation. You may be looking at life insurance quotes and wondering, "Couldn't I save that monthly payment for something else?". We spell out when you need life insurance, and when you don’t, with real-life examples to help you decide.
Life insurance is worth it for Canadians that have someone in their lives that’s dependent on their income.
Would your loved ones be able to provide for themselves if you passed away? If not, it’s worth considering life insurance. The death benefit your family would receive is significantly more than the premium payments needed to maintain your coverage. If you pass, life insurance provides a lump sum of cash to your dependents. This money can be used for pretty much anything:
The reality is that some people genuinely need to invest in life insurance, while others can forget about it (for now). There’s no one-size-fits-all answer to this question.
You need life insurance if someone in your life depends on your income, so they'd have financial protection if something happened to you. Here are a few examples of when you’d need life insurance:
Coverage is a good idea for anyone with substantial financial obligations; the case for many Canadians. For example, a family with young children could benefit from having a life insurance policy in place. The loss of income from the death of a parent would have a financial impact on the remaining family members to cover things like a mortgage, outstanding debts, living expenses, childcare costs, etc.
If you're among those listed above, you might be in a life situation where having a policy to help your beneficiary(ies) with a life insurance payout.
You’ve probably already got a long list of financial to-dos. So we’ll cut straight to the chase: get a quote in seconds, apply online in 20 minutes or less (without meetings or small talk).
You may not need life insurance if you live on your own with no dependents or debts. A question we're often asked is "do I need life insurance if i have no dependents?". But if you also have enough financial assets to cover any end-of-life expenses (and a bit extra if you’d like to leave some money behind for family or close friends).
You may be able to forgo life insurance even if you have a spouse or family. For that scenario, you’d need to have significant savings and investments, enough to:
If your passing won’t have a detrimental impact on your family’s finances, then you likely don’t need life insurance.
But what type of life insurance is most worth it for the average Canadian?
Term life insurance is likely worth it for the average Canadian that needs life insurance. As the Canadian Life and Health Insurance Association explains it, “Term insurance provides cost-effective, temporary coverage over an insured's younger years.”
It’s affordable protection for a fixed period of time – 10, 20 or 30 years – until you anticipate no longer having dependents or significant debts.
Why a term life policy? Generally, your financial responsibilities will have an end date. Your kids won’t depend on you financially once they grow up. Eventually, you’ll have paid off your mortgage and debts. You’ll also be building up savings and investments during your prime earning years.
Term policies give you just the life insurance coverage you need, so you don’t spend more than you have to.
Want to know how much a term life insurance policy will set you back, month to month? It might be less than you think. PolicyMe has some of the most affordable term policy rates in Canada.
Whole life insurance is probably not worth it for the average Canadian family. The premiums for any type of whole or permanent life insurance policy are costly, up to 4-5x what you’d pay for a term policy.
And if you were about to ask if universal life insurance is worth it, unfortunately the answer for that is also "probably not, if you're like 98% of Canadians". Many permanent or universal life insurance policies have a cash value component or investment option which may seem attractive. But they’re funded by the unnecessarily high premiums you’d pay.
That money is locked into your policy with limited flexibility for withdrawal, and you risk forfeiting your coverage if you’re unable to continue your payments.
Needless to say, this is not the case for most Canadian families.
You’d be better off paying into a more affordable term insurance plan and investing the rest of your funds on your own. You will have more control over how the money is managed and also be able to choose how and when to use the funds.
This chart gives you a quick visual of how permanent life insurance stacks up against term life insurance paired with investment, when it comes to growth and returns.
An employee (or group) life insurance policy might be worth it for you. But remember that these voluntary life insurance policies usually only pay out the equivalent of about 1-2x your annual salary; likely not even enough to pay off your remaining mortgage. And if you leave your job, your coverage ends.
A term life insurance policy, which can cover your mortgage, debts, and your family’s current and future expenses, is a better bet.
That said, any coverage is better than none at all. If you can't pay the premiums of a more robust policy, you shouldn’t skip getting life insurance altogether. A policy you can afford, even if it's with a smaller payout, will still help to protect your family.
The best age for you to get life insurance is when you have a dependent, whether it’s your children, spouse or other family members. For most people, this is when they get married or start having kids.
We know what you’re thinking: “But I just got a mortgage, and kids aren’t cheap! How am I supposed to afford life insurance?”. But the benefit to getting life insurance at a young age; your life insurance premiums will be much more affordable. It’s wise to lock in a low monthly rate when you’re young because it’ll stay at that price for the entire term of your policy.
But what if you’re older? Is life insurance worth it for seniors? For those in their 50s or 60s, term life insurance premiums will be higher than they would be for those in early or mid-adulthood. But if you have debts and family members dependent on your income, it's worth looking into a life insurance policy, despite the higher cost.
The table below shows the differences in the estimated monthly premium cost for an adult man by age. Securing a life insurance policy early can mean significant savings for the same length of coverage.
Term life insurance premiums are significantly more affordable in early to mid-adulthood; a great reason to lock it in early if you can. So how much life insurance do you need? And how much will it cost you? Try our free life insurance calculator.
Let’s get into some examples involving real-life Canadians who, like you, are wondering whether they need life insurance. Should they join the ranks of the 22 million Canadians holding $5.1 trillion in coverage? Certified Life Insurance Advisor, Tobin Tuff, shares his recommendations below:
"Elena and Feng need life insurance: if one of them were to pass away, the other would not be able to afford the daily expenses and the mortgage payment every month."
Read more about mortgage life insurance here.
"Nicolette and Stefan need life insurance: both their incomes are necessary to support the two kids and their living expenses."
Read more about life insurance for couples here.
"Matt doesn’t need life insurance: he doesn’t have people that count on his income to make ends meet."
Read more about life insurance in Ontario.
"Asma needs life insurance: if she passes, her mother would need to continue payments for the condo and pay for Asma’s funeral expenses. This is a burden Asma does not want to leave behind for her mom."
Read more about life insurance in Alberta.
"Laila probably doesn’t need life insurance: she has no debts or dependents."
"Ian needs life insurance: Even though he’s paid off his mortgage, he helps pay his mother’s bills and living expenses. He wants to ensure she would be taken care of financially if he were to pass."
"Barb and John need life insurance: they still have an outstanding balance on their mortgage. Financially, their children are just starting out and may not have the money to support the surviving parent."
Do any of these scenarios ring a bell? You can see how much a life insurance policy might cost you in a few minutes, no commitment required.
Is life insurance worth it? Everyone will have a different answer for why life insurance matters to them. If you were to pass, your family deserve the peace of mind knowing the finances will be taken care of. And having this peace of mind may be less pricey than you think.
Learn more at: What is Life Insurance? Everything You Need to Know
Life insurance is generally not a good investment for Canadians. There are very specific scenarios in which a life insurance policy might be a worthwhile investment vehicle, but for the average Canadian family, this isn't the case. The main reason you would use life insurance for investment purposes would be for tax benefits. But if your TFSA and RRSP isn't maxed out, you're better off putting your money there.
There is no particular age when life insurance is no longer needed. Your need for a life insurance policy largely depends on your financial obligations. For example, if your mortgage is paid off, if your kids no longer depend on you financially, if you've paid off your debts or if you've already set up a retirement plan.
Life insurance reduces the risk of leaving your family with financial issues. As a regular practice, you should reassess the "risk" regularly to see if your obligations have changed.
The main reason for having life insurance is to protect your loved ones from financial issues if you were to pass away. Buying a life insurance policy makes sure that the people that rely on you for financial support don't have to face monetary losses if you passed away. A death benefit would give them the gift of financial security in a difficult time.
Life insurance is a good idea if someone financially depends on you, like your spouse/partner, kids or aging parents. Only some Canadians need life insurance. If you're single, financially independent and don't have large debts like a mortgage, you can probably skip a life insurance policy. But if your financial situation has changed recently, it may be time to reevaluate your need for a policy.
You need life insurance for as long as you have someone financially dependent on you. That length of time is different for everyone, but your answer likely won't stay the same forever. That's why we tend not to recommend permanent life insurance.
Term life insurance lets you choose the term length that suits you and your family the best. So you can save money by only getting the amount of life insurance than you need.
Your life insurance policy's worth will depend on the type of life insurance you have. Permanent and universal life insurance tends to have a cash value component, which will change over time. If this question is in the context of selling your life insurance policy to someone else, take note that you are only able to sell your policy in Quebec, New Brunswick, Nova Scotia and Saskatchewan.