Is Life Insurance Actually Worth It? An Honest Guide (2022)

You may have heard that you need life insurance. But when you're young and healthy, is life insurance worth it? You may be looking at life insurance quotes and wondering, "Couldn't I save that monthly payment for something else?"

In this post, we’ll spell out when you need life insurance, and when you don’t, with real-life examples to help you decide. 

Is life insurance worth it in Canada? 

If you have someone in your life that’s dependent on your income, the answer is probably yes, life insurance is worth it for you.

Would they be able to provide for themselves if you were to pass away? If not, it’s worth considering life insurance. The death benefit your family would receive is significantly more than the monthly premiums you’d pay to maintain your coverage.

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.

Short on time? Skip down to these real-life scenarios and find the one that most matches your situation to help you decide if you need life insurance.

First, let’s cover the basics. Why get life insurance?

Life insurance is for those left behind in the event of your passing. Getting a life insurance policy means your family will be taken care of financially, no matter what happens to you. 

If you pass, life insurance provides a lump sum of cash to your dependents. This money can be used for pretty much anything:

  • Everyday expenses for your spouse
  • Mortgage payments
  • Outstanding debt payments
  • Your children’s education expenses

This lump sum will be tax-free if you buy the life insurance policy. Read more about taxation and life insurance here.

We’ll explain why it depends and some factors to consider when thinking about life insurance for your family. 

Who actually needs life insurance?

If someone in your life depends on your income, you need life insurance so they’re financially protected if something happens to you. 

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, especially if there’s a mortgage and outstanding debts to cover. 

And we haven’t even gone into the funeral costs, living expenses and other “extras,” like saving for the kids’ education.

Most young families haven’t yet built up the assets needed to cover all these obligations and plan for the future without the help of a life insurance policy. 

Life insurance is also a good idea for married couples, those who financially support their parents (or other family members), or those with significant debts. Coverage is a good idea for anyone with substantial financial obligations – the case for many Canadians. 

Here are a few examples of when you’d need life insurance:

Is life insurance worth it? who should get coverage

Learn more at: What is Life Insurance? Everything You Need to Know

Do you see yourself among the people listed above? That might be your sign to finally stop putting it off.

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), receive an instant decision, and get an affordable policy that protects you, your family, and your budget.

Who probably doesn't need life insurance (for now)?

Suppose you’re living on your own, with no dependents or debts, then you may not need life insurance. 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:

  • Cover your financial obligations (debts, mortgage, car payments)
  • Help your surviving family members maintain their standard of living
  • Pay for future expenses (like post-secondary for your children)

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?

Is term life insurance worth it?

Yes, for anyone who needs life insurance, term life policies are likely their best bet. 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 term life insurance? In general, your financial responsibilities will have an end date. Your kids won’t depend on you financially once they grow up. And eventually, you’ll have paid off your mortgage and debts. 

You’ll also hopefully be building up a financial cushion of savings and investments during your prime earning years that you can use if something unexpected occurs later in life. 

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. 

Is whole life insurance worth it?

Whole life insurance is a type of permanent life insurance, which may sound appealing at first. After all, who doesn’t want “permanent” coverage? But the premiums for any type of permanent poilcy 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 surrender 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. 

Is employee life insurance worth it?

Your work may offer an optional life insurance policy and if the employer fully covers the costs, it’s a no-brainer to opt-in. 

If you have to pay a portion of the costs, group life insurance is still worth looking into for some extra coverage. But remember that these voluntary life insurance policies usually only pay out the equivalent of about 1-3x 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. 

What is the best age to get life insurance in Canada?

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 what if you’re a bit 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 may be worth looking into a life insurance policy, despite the higher cost. 

You may want to consider taking on a smaller policy since this will reduce the cost of your life insurance premiums while still providing your family with some coverage. 

The chart below outlines the differences in the estimated monthly premium cost for an adult male, depending on his age. Securing a life insurance policy early can mean significant savings for the same length of coverage.

Is Life Insurance Actually Worth It? Chart detailing the average cost of life insurance by age

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? Get a no-commitment, no strings attached quote below.

Real-life scenarios for who does and doesn’t need life insurance in Canada

To make it more clear, let’s get into some examples involving real-life Canadians who, like you, are wondering whether they need life insurance. 

Real-life example #1 - Elena, 31 and Feng, 33, in Burnaby, BC

  • Elena and Feng have been married for 2 years, with a $500,000 mortgage on their home
  • Elena works as a financial controller, while Feng is a coordinator at a non-profit

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.

Real-life example #2 - Nicolette, 37 and Stefan, 38, in Montreal, QC

  • Nicolette and Stefan have been together for 8 years and have 2 kids aged 3 and 5, but have never made it “official” with a trip down the aisle
  • Stefan works full-time in construction, while Nicolette has a part-time job as a medical receptionist, and they rent their home.

Nicolette and Stefan need life insurance: both their incomes are necessary to support their two kids and their living expenses.

Read more about life insurance for couples here.

Real-life example #3 - Matt, 20, in London, ON

  •  Currently halfway through a 4-year university degree, Matt lives with a couple of roommates to save on costs.
  • Between his parents and his part-time job, his tuition and living expenses are covered, he has no other debts and no dependents. 

Matt doesn’t need life insurance: he doesn’t have people that count on his income to make ends meet. 

Real-life example #4 - Asma, 33, in Calgary, AB

  • Asma works as a business analyst and owns her 2 bedroom condo with a mortgage of $250,000
  • Although she lives on her own and makes all the payments herself, her mother co-signed her mortgage loan

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.

Real-life example #5: Laila, 24, in Regina, SK

  • Laila is a few months away from completing her studies.
  • To make sure she can start her life debt-free, she chose an affordable program, lives at home and commutes to school a few days a week. 
  • Her parents are still working and can comfortably provide for their own needs.

Laila probably doesn’t need life insurance: she has no debts or dependents. 

Real-life example #6: Ian, 44, in Moncton, New Brunswick

  • Ian is a senior manager at a credit union and lives on his own in an apartment that’s mortgage-free.
  • He financially supports his mother, who has been unable to work for over 7 years due to an injury she sustained in a car accident.

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.

Real-life example #7: Barb, 58 and John, 62, in Barrie, ON

  • Barb and John had kids early on in their relationship, and now they’re grown and have moved out to start their own families.
  • They’re both still working, but with an eye on their retirement - they’re hoping to pay off the mortgage before quitting for good!

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. 

The bottom line: Life insurance is a safety net for your family

Is life insurance worth it? If you were to pass, you and 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. 

Remember:

  • The earlier you secure a life insurance policy, the more affordable the premiums tend to be
  • Some coverage is better than nothing - if you can’t afford a policy that will fully cover your obligations, a smaller policy will still protect your family.
  • In most cases, term life insurance is all you need - it’s much more affordable than permanent life insurance.

Life insurance is an extra layer of security for your family. With it, you can help provide stability for their financial future. 

Laura McKay

COO & Co-Founder

About the Author

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