A Complete Guide to Life Insurance in Canada
See affordable life insurance quotes from PolicyMe and other top companies.
What is life insurance?
Life insurance is a legal agreement between you and a life insurance company. In exchange for regular payments, your life insurance provider agrees to make a lump-sum payment to the person or organization of your choice after you pass away.
More than that, life insurance is a flexible and powerful tool of financial agency. It can help support your family, repay your debts, and achieve your most important goals after you pass away.
According to the CLHIA, 23 million Canadians paid for $5.7 trillion in life insurance coverage in 2023. While most coverage falls under group life insurance plans, 17% of policies are bought and held by individuals.
Is life insurance worth it?
Life insurance is worth it for anyone who cares about what happens after they’re gone. The advantages of life insurance include more than just peace of mind: it lets you respond to life’s challenges with more confidence, knowing your family has a financial safety net in place.
With life insurance, you don’t have to maintain a large savings account just to prepare for an unlikely but devastating event.
How does life insurance work?
Strip away the jargon, and you only need to follow 6 steps to understand how life insurance works.
Step 1: Choose a life insurance policy. You can search for one yourself or with the help of a life insurance advisor, agent, or broker.
Step 2: Submit an application. Life insurance companies use applications to determine a customer’s eligibility, mortality risk, and premiums. You may be required to complete an in-person life insurance medical exam to verify your health.
Step 3: Wait for approval. Traditional insurers can take 4+ weeks to review your application, whereas an online company can give you instant approval and same-day coverage.
- A. If your application is rejected, you can ask for less coverage or choose a different life insurance company. No biggie!
- B. If your application is approved, congratulations! Put your policy somewhere safe as soon as you receive a digital or physical copy.
Step 4: Make your payments on time. Making payments keeps your life insurance policy active. Most life insurance companies, including PolicyMe, provide a 30-day grace period on missed payments to help keep your policy from lapsing.
Step 5: Renew, convert, or compare. If your life insurance policy expires before you pass away, you have three options.
- A. Renew your existing life insurance policy and extend the expiration date.
- B. Convert your term life insurance policy to a permanent one (if possible).
- C. Go shopping for a new life insurance policy and submit a new application.
Step 6: In the unlikely event of your death… If you pass away while your life insurance policy is active, your loved ones will have to file a life insurance claim to receive a payout. It can take 30 - 60 days for a life insurance claim to be approved and paid.
That’s it! If you follow these steps, there’s no reason your loved ones shouldn’t receive a tax-free life insurance payout, if the worst comes to pass.
he vast majority of term life insurance policies pay out if the insured person dies, unless…
You lie on your application! The biggest reason why life insurance won’t pay out is fraud.
Your life insurance options
Buying life insurance involves making several major decisions. You’ll have to decide who your life insurance policy will cover (the insured), which company to buy from (your insurer), and who should receive the insurance payout (your beneficiary).
Beyond these essentials, the three most important questions to ask yourself are:
- How much insurance do I need?
- Should I get term or permanent life insurance?
- Should I get fully-underwritten, no medical, or guaranteed life insurance?
1. How much life insurance do I need?
Life insurance coverage refers to the size of the insurance payout—or death benefit—your loved ones will receive after you pass away. In Canada, you can buy life insurance policies with coverage ranging from $5,000 to $25 million.
Figuring out how much life insurance you need is simple, but tedious. Add up the total cost of your debts plus your goals, and then subtract your existing coverage, assets, and savings. Or use an online life insurance calculator.
Multiplying your income by 10 or 12x doesn’t take your priorities or existing funds into account. You’re less likely to overpay for life insurance coverage (or end up underinsured) if you spend some time thinking about what you want to accomplish and how much it’ll cost.
2. Term or permanent life insurance?
The difference between the two main types of life insurance is how long they last:
- Term life insurance lasts for 1 - 40 years. You can match the length of your policy with the length of your financial obligations, including mortgages, business loans, and children’s education.
- Permanent life insurance lasts for the rest of your life (as long as you pay your premiums). It’s ideal for inevitable end-of-life expenses such as funeral costs and estate fees. Whole life and universal life insurance usually include an investment-driven cash fund, enabling you to borrow against your life insurance. Term-to-100 life insurance does not.
You’ll also notice a price difference between term and permanent life insurance. Compared to whole life and universal life insurance, term life insurance is usually much cheaper.
Because it’s affordable, easy to buy, and tailored to the length of your financial commitments, term life insurance is the better product for most Canadians. At the end of your term, you can adjust your coverage to match your new goals and go shopping for a new policy. Although often advertised as an investment, whole and universal life insurance usually performs worse than stocks, bonds, and other financial instruments. Many buyers spend a lifetime paying steep premiums only to end up with far more coverage than they need.
3. Fully-underwritten, no medical, or guaranteed issue life insurance?
During the application process, all life insurance companies perform some degree of underwriting. In other words, they use medical questions and sometimes a medical exam to determine how likely and how soon an applicant might pass away.
Life insurance companies use underwriting to approve or deny life insurance applicants and to set premiums, i.e., how much you have to pay to maintain your policy. The lower your risk of dying, the higher your chances of being approved, and the lower your premiums.
Both term and permanent life insurance are available with different degrees of underwriting, from most to least thorough:
- Fully underwritten life insurance may involve both a medical questionnaire and exam, although qualifying applicants can skip the latter. Because it provides insurers with the most accurate picture of your health, it often results in lower premiums.
- No medical or simplified life insurance uses only a few medical questions to sort you into one of several broad categories known as risk classes. It’s easy to buy, but you’ll probably end up overpaying for coverage.
- Guaranteed issue life insurance asks only a few basic questions. You’re guaranteed to receive a policy if you apply, but you’ll pay handsomely for the privilege.
The effort of applying for fully underwritten life insurance is usually worth the risk. Although many Canadians fear a medical exam will lead to them being denied life insurance, 96% of applicants receive the coverage they apply for and qualify for standard rates.
Always apply for fully underwritten life insurance first. It’s cheaper, it can help you qualify for more coverage, and you can always apply for a no medical or guaranteed issue policy later.
Bonus: Do I need life insurance riders?
Life insurance riders are optional add-ons offering everything from life insurance for children to the chance to share in your life insurance provider’s profits (also known as participating life insurance). Just keep in mind that every rider you choose will add to your premiums.
For most Canadians, life insurance riders aren’t worth the added cost. Look instead for plans with complimentary add-ons, such as PolicyMe’s term life insurance, which provides $10,000 of free coverage per child.
How much does life insurance cost in Canada?
The cost of life insurance in Canada starts at $3.70 per month for a 5-year term life insurance plan for $50,000 for a healthy, 18-year-old female non-smoker in Ontario.
The riskier your age group, birth sex, habits, hobbies and occupation, the more the price goes up. For a 65-year-old male smoker with a pre-existing medical condition, life insurance quotes can top $300 per month.
We’ve broken down sample life insurance quotes by age and sex to give you a realistic idea of what you’ll pay. Understanding how these factors affect your premiums can help you spot a fair rate—or an overpriced one.
All rates are based on a non-smoker with $500,000 in coverage for a 20-year term policy.
While some of these factors are outside your control, many aren’t. Applying for term life insurance, undergoing a medical exam and avoiding optional life insurance riders can all help you find more affordable life insurance.
What’s the best life insurance in Canada?
The best life insurance depends on your needs and priorities, but thousands of Canadians from ages 18 - 65 have found affordable term life insurance through PolicyMe.
PolicyMe has gathered some of the most positive customer reviews in the industry—we know, because we’ve done the research! You can see the results of our in-depth look at the Canadian life insurance market below.
Best life insurance company in Canada
To find the best life insurance company in Canada, we turned to real customer reviews on the Better Business Bureau (BBB), Google, Trustpilot, and Insureye. PolicyMe took the top spot, garnering 4.8/5 from 800+ reviews by real customers on its website.
We also consulted industry sources, including employee reviews on Glassdoor and financial stability ratings by A.M. Best, Morningstar DBRS, and S&P Global. The top-ranking life insurance companies are all financially stable members of Assuris, a non-profit association that protects policyholders from company failure.
For the best and biggest life insurance providers in Canada, take a look at Sun Life, Manulife, and Industrial Alliance. As for the best bank-owned insurance company, our finalists are RBC Insurance and TD Insurance, followed by BMO Insurance.
Cheapest life insurance in Canada
The cheapest life insurance in Canada is term life insurance, and often sold by online retailers with no bricks-and-mortar stores to pay for. The cheapest life insurance policies with the least possible coverage start at less than $4 per month.
But buyer beware: Life insurance isn’t actually affordable if you don’t ultimately get the coverage you need. Along with price, you should consider the insurer’s financial strength, policy flexibility (conversion or renewal options), coverage amount and length, exclusions or limitations, and the ease of claims processing.
* Rates reflect the cost of term life insurance for an 18-year-old, non-smoker living in Ontario.
Best term life insurance in Canada
Because we believe it’s the best product for most Canadians, PolicyMe designed the best term life insurance policies in Canada to provide affordable, streamlined coverage. We offer a 100% online buying process and fast, friendly insurance advice when you need it.
The runner-ups—especially if you’re looking for more than $5 million of coverage—are Sun Life and The Co-Operators. The two companies are major players in the Canadian insurance market and offer a wide variety of term life products and riders:
* Rates reflect the cost of a 10-year, $100,000 term life insurance policy for an 18-year-old, female non-smoker living in Ontario.
Best permanent life insurance in Canada
The best whole life insurance in Canada belongs to Assumption Life, Ivari, and Canada Protection Plan, all three of which score highly on customer service.
For Canadians who want the highest return on their investment, the participating whole life insurance policies offered by RBC Insurance, Empire Life, Manulife, Industrial Alliance, and Equitable Life performed very well in 2024.
Methodology
To find the best life insurance providers in Canada, we evaluated over 30 different metrics for 20 different companies. We compiled the results in 3 categories, scoring each one out of 5:
The study added up to over 2,500 points of data. Added together, the three scores for customer service, industry reputation, and price gave us a definitive ranking of the best life insurance providers in Canada in every category.
Medical questions and exams don’t always have to be bad; in fact, they can give your insurer a more complete picture of your health and help you qualify for lower rates. PolicyMe’s in-home medical exams take as little as 20 minutes, at whatever time is most convenient for you.
FAQ
FAQ: PolicyMe insurance
We’re big believers in keeping things simple, so ask us anything and we’ll answer honestly and without the jargon.
The best life insurance in Canada varies depending on individual needs. Consider insurers like PolicyMe, RBC, Canada Life, CPP, Desjardins, and Empire Life to find the best coverage for your specific situation.
The three main types of life insurance are term life insurance, whole life insurance, and universal life insurance. Each offers different benefits and coverage options, so it's important to carefully consider which type suits your needs best.
Yes, you can cash out a life insurance policy before death if it has accumulated cash value. This can be done through taking out a loan against the policy or by surrendering the policy to access the cash value.
In Canada, life insurance works by the insured paying a monthly premium to the insurance company. If the insured individual passes away while the policy is in place, the company pays a benefit to the chosen beneficiary, such as a spouse or child. It is essentially a contract for financial protection in the event of death.
The cost of life insurance is determined by factors including your age, health status, lifestyle choices, and occupation. These elements help insurance providers assess the level of risk associated with insuring you.
Yes, you can access money from your life insurance policy while you're alive, with certain tax implications. When you pass away, your beneficiaries receive a tax-free payment. Keep in mind there are 2 types of permanent insurance: participating life insurance and universal life insurance.
The average cost of a $500,000 term life insurance policy for a 60-year-old man is typically based on age and the length of the policy.
Life insurance in Canada can cost between $15 to $100 per month, with an average cost of $26.55 per month for PolicyMe customers. It's important to consider various factors like age, coverage amount, and term length.
The best life insurance companies in Canada are Assumption Life for simplified issues, Beneva for combo coverage, BMO for affordability, Canada Life for financial strength, Canada Protection Plan for non-medical purposes, Desjardins for stability, and Empire Life for personalization. Choose the one that fits your specific needs.
Life insurance in Canada is worth buying if you have financial dependents or large debts, such as a mortgage, that you don't want to pass on to your beneficiaries. However, if you have significant wealth or no one depending on your income, it may not be necessary.
Have a question we didn’t answer?
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