Term Life Insurance in Canada: Everything You Need to Know

You’ve hit a life milestone: new baby, new house, new business. To protect your family during these fun but overwhelming times, you might have heard that you need term life insurance, but you don’t really know where to start.

At this point, you’re probably wondering where you can buy term life insurance in Canada and how much it costs. And most importantly: how to compare life insurance providers to get the best rates.

We know that parents juggle a ton of responsibilities, constantly finding the balance between investing in today and saving for tomorrow. In this post, we’ll look at how to choose the right term length and coverage for your family at the right price.

What is term life insurance in Canada?

Term life insurance is a type of life insurance that gives you coverage for a fixed period of time, such as 10, 20, or 30 years.

Term life insurance Canada definition

To keep your term life insurance policy active, you need to pay a monthly fee called a premium. 

When you buy term life insurance in Canada, you select the term length and the amount of coverage you want based on your needs.

If you pass away while your policy is still active, your insurance company will pay the person named in your life insurance policy (the beneficiary) an amount equal to your coverage. 

This payment is called a death benefit. Your beneficiaries will receive your death benefit as a tax-free lump sum, also referred to as a life insurance payout.

They can use this money however they want: to fund your kids’ college education, to pay the mortgage, to buy essentials like groceries etc.

Here’s the good news: Your monthly premiums and coverage amount will be locked in for the entire term, no matter the length of your policy. 

This means that the life insurance company can’t change how much you pay per month during your term, even if your health status changes. Now that’s a relief.

What is direct term life insurance? 

Direct term life insurance is a type of life insurance policy that provides coverage for a specific period of time. Like with any term insurance, if you pass away while the policy is active, your family (i.e. your beneficiaries), will receive a cash payout, or death benefit, that they can use to support themselves financially.

Direct term insurance is a “direct-to-consumer” policy, where the insuree buys directly from the provider without a broker or agent.

What is term to 100 life insurance?

Term to 100 (T100) is a type of policy with guaranteed permanent life insurance coverage or a permanent life insurance protection plan. The term length is for 100 years, with guaranteed premiums payable for the full term. If the policyholder outlives this policy, the insurer may pay the cash value of the full coverage amount to the policyholder.

How much does term life insurance cost in Canada?

The cost of a term life insurance policy in Canada depends on: 

  1. Your age
  2. Your gender identity
  3. Whether you smoke
  4. Your health status

The first three factors determine your base rate. Your health status determines if this base rate will go up. For example, if you have diabetes, your monthly premiums will likely go up. Because every life insurance provider has their approach to calculating the risk of covering you, premium rates will vary.

Below, you'll find some sample rates from different life insurance companies for a term life insurance policy for a non-smoking man, for coverage of $500,000 over 10 years.

Term life insurance Canada price comparison
Pricing based on publicly-available rates as of November 2021. Terms and conditions may apply.

Why is PolicyMe the most affordable term life insurance solution in Canada? Roughly 40% of a traditional life insurance policy's rate is wasted on unnecessary distribution costs and underwriting steps.

PolicyMe has streamlined the traditional insurance process by removing unnecessary steps and costs so that your same-quality policy is a lower rate than other policies in Canada.

How term life insurance rates are calculated in Canada

Let’s dive into how term life insurance rates differ based on your options.

1. The coverage amount you choose

Coverage amount means how much you want your beneficiaries to receive if you pass away during your term.

A $1,000,000 policy means that if the unthinkable were to happen, your beneficiaries would receive $1,000,000 in one lump sum, tax free.

The more coverage you choose, the more your beneficiaries receive if you pass away during your term.

But, here’s the thing: if you want your insurer to pay out a larger death benefit if you die, you have to pay higher premiums every month. 

2. The policy length you choose

If you buy a policy at age 20 and want coverage for 30 years, you'll pay more than choosing coverage for just 10 years i.e. until you're 30 years old. 

This is because you're more likely to die between age 20 to 50 than between age 20 to 30. Statistically, that’s just the cold hard reality.

In other words, if your coverage extends into the later years of your life, you’re going to pay more every month.

3. Your personal characteristics

We’re not talking about whether you enjoy craft beer or have a terrible sense of direction or speak three languages. 

We’re talking about: how risky are you to insure.

Meaning: is there anything that would increase the likelihood you’d die while holding your policy.

Here’s what can make your rate go up (or down):

  1. Age: Your premiums increase as you age. If you buy a policy at age 40, you're more likely to die during a 20-year term then if you buy the same policy at age 20.
  2. Gender: Men pay higher premiums than women do because, statistically, they tend to die at a younger age.
  3. Health: If you have a pre-existing condition that increases your risk of dying early, you'll pay higher premiums. This could include diabetes or a heart condition. Or perhaps you have a family history of illness.
  4. Risky hobbies: Anything that increases your chance of accidental death, like frequent skydiving.
  5. Smoking Status: In general, smokers are more likely to die earlier than non-smokers, so they are charged higher premiums.

There’s no reason to guess what your cost might be. Our life insurance calculator empowers you to make confident coverage decisions for your family.

What kind of person is term life insurance for?

Life insurance is for anyone who has a spouse, partner, or kids who rely on them financially.

On the other hand, if you’re retired or don’t have any financial dependents, a term life insurance policy might not benefit you.

What are the advantages of term life insurance? 

The main advantage of term life insurance it’s an affordable way to protect your family’s financial future. Because term life insurance offers protection for a predetermined time, premiums are more affordable than whole life premiums. 

Term policies are also more flexible, you can choose the coverage amount and term length that suit your particular needs. Other advantages of term life insurance include: policy terms are easy to understand and beneficiaries can use the tax-free payout for what suits their financial situation.

What about pre-existing health conditions?

Sometimes you can be eligible for term life insurance policies without a medical exam. 

You’ll likely have to pay much higher premiums, though. And you’ll still need to answer medical questions. This option is usually called “no medical life insurance” or “simplified life insurance.”

It’s a good idea to apply for a traditional policy first. With streamlined life insurance like PolicyMe, most eligible applicants are approved instantly. In fact, 52% of applicants weren't required to do any additional medical follow-ups.

Even if you are flagged as high risk, it’s a good idea to do the medical exam. You could still qualify for lower rates and higher coverage than with simplified life insurance.

Plus, the cost of medical exams is covered by the insurer in Canada. Even if you’re declined for coverage, you don’t need to pay for the 20 to 30 minute exam.

Why term life insurance works best for the average Canadian family

Term life insurance is gaining popularity in Canada because it’s designed to give you financial security during the years when you really need it.

In a recent PolicyMe survey, we found that 33% of Canadian parents with kids under the age of 18 have term life insurance, 25% have mortgage life insurance and 22% have permanent life insurance.

One of the key differences between term life insurance versus permanent life insurance is in the premium cost over time.

Chart detailing main types of life insurance for life insurance Canada article

Usually, you need term life insurance if:

  1. You have young kids who depend on you financially
  2. A mortgage that would be hard for your family to pay without your income
  3. You take out a large loan to start a new business, for renovations to your home etc.

Many Canadians decide to buy term life insurance when they start having kids or when they buy their first home. Which are two life events that many Canadians experience!

Read more: Term vs. Whole Life Insurance, Explained.

Can I really afford to add life insurance to my list of expenses?

At first, it may seem overwhelming to buy life insurance when you've just added mortgage payments or a diaper subscription to your monthly expenses.

But, because how term life insurance works is by giving you coverage for a fixed period of time only, it's the most affordable type of insurance on the market. 

At PolicyMe, we’re intentional with the life insurance we offer, because we know that parents are intentional with how they spend, save and invest their money.

That means we choose to sell an affordable product that works well for most Canadian families: term life insurance. Simply put, term life insurance gives you financial security during the years when you really need it.

Every life insurance solution is different, but for PolicyMe, the average cost of life insurance for a man is $32 monthly for a 20-year term for coverage of $500,000.

What term life insurance coverage is right for you?

When you buy term life insurance, you'll want to choose a term length and coverage amount based on:

  1. The amount of financial protection your family needs
  2. The length of time they need it for

For many people, this ends up being equal to their expenses they need to pay until their kids have moved out and their mortgage is paid off.

That said, your needs might differ from others, depending on your family's situation and your preferences. 

For example, if you want your kids' post-secondary education to be covered, you'll need a longer policy term.

When you're thinking about your coverage amount, it's also important to consider expenses that may not be a factor right now.

Real-life example: term life insurance in Canada

Kaylee Giffin-Logan, wife, mom, and blogger at The Blondielocks, shares her experience with purchasing life insurance, in a blog post called “It All Started with A Motorcycle”. 

She explains that:

“It felt difficult to bring myself to invest in life insurance because it isn’t a tangible item that I can reap immediate benefits from.

All of that aside, having a child means protecting them at all costs. Whether that be holding their hand when they’re crossing the street, catching them before they fall, or helping them cope with big feelings, we want to protect our children from all of life’s unknowns.

One of the things we often don’t want to think about, but that we should, is protecting them financially…in case something happens to their protectors.” 

For example, for a term life insurance policy for a:

  • 30-year old woman 
  • Non-smoker 
  • 10-year term 
  • Coverage amount of $500,000

She could expect to pay monthly premiums of $14.78 with PolicyMe. That’s roughly one monthly takeout lunch, a cost that would cover your family in a worst-case scenario.

What's the best term life insurance in Canada?

Wondering how to find the best term life insurance in Canada? Here are some factors to consider when you’re considering different Canadian insurers.

Start by asking yourself these questions to compare term life insurance providers:

1. How trustworthy is the insurer?

Like a marriage, buying life insurance is a long-term commitment. You want to be sure that your insurer will be around to pay out your death benefit even if you don't die until you're 90% of the way through a 30-year term policy. 

That's why you want to choose an insurer that's financially stable enough to survive the test of time.

The good news is that life insurance is heavily regulated in Canada. This means that almost every Canadian life insurance company is in excellent financial health.

Plus, all Canadian life insurance companies are required by government regulators to be members of Assuris. If the insurer fails, Assuris will make sure you get 85% of your promised benefits.

PolicyMe is backed by Canadian Premier Life Insurance Company, which is an Assuris member.

We provide life insurance in Alberta, Ontario, B.C. and 8 other Canadian provinces and territories.

Learn more and get reviews of the best term life insurance companies in Canada.

2. What coverage options are there? What are the exceptions or exclusions for payout?

Different Canadian insurers will offer different features on their term life insurance policies. 

To make sure you get the best policy, look for one with robust coverage (i.e. coverage over $100,000), limited exceptions or exclusions and the option to renew your policy down the road.

At PolicyMe, we offer coverage from $100,000 to $5,000,000. The only exclusion is sucide within the first two years of the policy. And you can extend your coverage anytime within the first five years.

3. Do they accept electronic applications?

Online applications for life insurance aren't just easier to fill out, they also get processed more quickly. 

In fact, filling out a paper application can increase your application processing time by up to six to eight weeks. That’s just plain annoying.

Moral of the story: look for an insurer that offers online applications for a smoother, faster application process. At PolicyMe, most applications are approved in seconds, not weeks.

4. Are they competitive on price?

It's common in Canada to see a wide range of prices from different insurers for what's essentially the same term insurance policy. 

Thankfully, a lower price doesn’t mean the policy is a scam or the policy is inferior in some way.

There’s no reason to pay more than you need to for a term life insurance policy, regardless of what some insurers might claim.

For PolicyMe, cutting out the unnecessary steps in the traditional life insurance process doesn’t just make getting life insurance easier, it makes it more affordable. We offer families some of the lowest rates for term policies in Canada. Get the protection you need and at a price that you can afford.

We're devoted to removing barriers to financial protection that make buying life insurance tedious and expensive. Plus, we’re backed by Canadian life insurance giants, for your peace of mind.

FAQ: Term life insurance in Canada

Can I extend my term life insurance coverage in Canada?

Yes, you can extend your term life insurance coverage in the first five years of your policy (with PolicyMe). After five years, or when you reach the end of your term, you’ll need to reapply. 

If you renew your policy, it's almost guaranteed that you'll pay higher premiums. Why? Because now that you're older, your risk of dying is higher. And that makes it more likely that your insurer will have to pay a death benefit during your renewed policy term.

You can also apply for convertible term life insurance, which gives you the option to convert your term policy to a whole or universal policy.

Is my term life insurance worth anything?

Unlike whole or universal life insurance, term life insurance does not have a cash value. When your term ends, or if you cancel your policy before the end of your term, there’s no refund.

Sounds like a bad deal? Think of it this way: term life insurance is like auto insurance or home insurance. If you don’t make a claim on your car insurance, you don’t get your money back. Same deal with term life insurance.

What should you pay for term life insurance in Canada?

Here’s one thing for sure: you should pay less for term life insurance than you would for a permanent life insurance policy.

The exact amount you’ll pay for term life insurance every month will depend on your age, your health status, the insurer providing you a quote, as well as the length and amounts of your coverage.

From age 20 to 35, prices stay pretty similar. After that, they start increasing quickly. For example, a 35-year-old nonsmoking woman would pay $25.44 a month for $500,000 in coverage and a 20 year term. A 50-year-old woman buying the same policy would pay $93.28 a month.

What is the maximum age for term life insurance in Canada?

Most term life insurance policies in Canada will offer coverage up to the age of 65.

PolicyMe actually allows you to sign up for term life coverage until the age of 75, with coverage lasting as long as age 85 (a 10 year policy). 

If you’re 70 years old, you can buy a 10 or 15 year policy. If you’re 65, you can buy a 10, 15 or 20 year policy etc.

Laura McKay

COO & Co-Founder

About the Author

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