Life insurance is worth it in Canada for anyone that:
Term life insurance is generally worthwhile for the average Canadian family's financial needs. As a starting point, here's how much more affordable term life insurance would be versus whole life insurance.
If you’re unsure if you need life insurance, start by asking yourself a question: would your loved ones be able to provide for themselves if you passed? To start, we’ve summarized who needs life insurance in this image:
Life insurance is worth it for you if you answered "yes" to most of the questions. And it might cost less than you think! PolicyMe has some of the most affordable term life insurance premiums in Canada.
It’s a good idea to get life insurance if someone relies on you financially. More specifically, here's a look at who should consider coverage:
If you passed away, your dependents could be left struggling financially, but life insurance coverage can help prevent that.
For example, this is a breakdown of the economic situation that your loved ones would need to navigate if they lost your income:
These are example questions you should ask yourself when considering life insurance:
You probably don’t need life insurance if there is no one that will shoulder your financial responsibilities if you pass away.
But consider this: you may have enough to cover immediate obligations, but what about things like your spouse's retirement or the kids' education?
If your primary income was lost, could your family maintain the existing savings schedule? If you don't think they'll be able to cover all future expenses, then life insurance would be worth it.
The best age to get life insurance is when you first have a dependent. "New" dependents are usually the catalyst behind most life insurance purchases.
That can be a spouse, kids or any other family member that relies on you. And the age at which you buy your policy can also have significant benefits. The younger and healthier you are, the cheaper your life insurance will be.
Just how much more worthwhile is it to lock in your rate sooner? Here's a comparison of the cost of life insurance by age:
The age at which you don't need life insurance depends on your financial situation and the needs of your loved ones. Remember: the point of life insurance is to protect your dependents from financial burden if you were to pass prematurely.
You may no longer need coverage if you've reached an age where:
For most of us, this happens sometime around the time that we retire. The average age of retirement was 64 years old in 2022, says Statistics Canada.
This is a good milestone to help you plan for the end of your life insurance needs.
Life insurance is generally worth it for many Canadians, but specific types of policies are more suitable than others, depending on your situation. We'll be looking at:
Term life insurance is worth it for most average Canadian families that need life insurance to cover financial obligations and dependents.
“[It] provides cost-effective, temporary coverage over an insured's younger years," explains the CLHIA.
Permanent life insurance can be a worthwhile option for Canadians with extremely high income. But it's likely not worth it for the average family. Here's a summary of what you need to know about permanent life insurance:
As a rule of thumb, group life insurance is a good supplement to a term policy, but it's usually not enough to cover all of a family's financial needs in Canada. Here's a breakdown of group policies:
Here are some examples of real-life Canadians wondering whether they need life insurance. Life insurance advisor Stephanie Roux shares her recommendations:
1. Elena, 31 and Feng, 33, in Burnaby, BC
"Elena and Feng need life insurance. If one of them were to pass, the surviving spouse would have to cover the mortgage. And without their partner's income, the other might need help with daily expenses.”
2. Asma, 33, in Calgary, AB
"Asma needs life insurance. She has a mortgage that needs to be paid if she passes. And because her mother has co-signed, she'd be responsible for the payments.
Any other outstanding debts she has could also become her mother's responsibility. She doesn't want to burden her with these costs.”
3. Laila, 24, in Regina, SK
"Laila probably doesn’t need life insurance. She has no debts or dependents."
4. Barb, 58 and John, 62, in Barrie, ON
"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 through-line here is that life insurance is designed to protect your family from the financial consequences of your passing. And for many, life insurance is a worthy expense.
But that doesn't mean it's the only method you can use for financial protection. Here's a quick look at some other approaches:
Life insurance is a smart investment for Canadians with people that rely on them financially in the sense that it's a wise purchase. But life insurance should not be used as an investment vehicle for cash value, as it isn't the most efficient way to invest (versus things like the stock market or an RRSP). 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.
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 pass 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 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 and Saskatchewan.
No, life insurance is not a scam. It’s a valuable service that fills a real need in Canadian society by offering peace of mind and financial security for those left behind when a loved one dies. But not all life insurance policies will be worth it for everyone, and making payments toward a policy doesn’t always have an upside.
In the event that you do need life insurance, your loved ones will be thankful you made the investment. The key to maximizing the benefit of life insurance is to find the policy, rate, and coverage that makes the most sense for you and your family, and doing your due diligence to ensure that you work with a reputable life insurance company.
Canadian Life and Health Insurance Association. Canadian Life and Health Insurance Association - Canadian Life and Health Insurance Facts, 2022 Edition. https://www.clhia.ca/facts
Canadian Life and Health Insurance Association Inc. https://www.clhia.ca/
Government of Canada, Statistics Canada. Retirement age by class of worker, annual. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410006001
Payment Delinquencies Increase, Credit Card Demand and Balances are Rising. Equifax.com. Retrieved March 14, 2023, from https://assets.equifax.com/assets/canada/english/consumer-trends-q3-report-en.pdf
Statista. Average value of new mortgage loans Canada Q3 2021-Q3 2022, by metropolitan area. https://www.statista.com/statistics/1202954/average-value-of-mortgage-loans-canada-by-metropolitan-area/
Walker, A. Funeral Costs in Canada: Questions and Answers. https://eirene.ca/blog/funeral-costs-questions-and-answers