Your Guide To Life Insurance In Canada

Getting protection for your family in the event of your death seems to make a lot of sense.  It may not be fun to think about — but if you pass away, your family might be relieved you signed up for a policy.

What is life insurance?

In its simplest form, life insurance is a security blanket for your loved ones. It is there to protect anyone who depends on you financially in the worst-case scenario.

Types of life insurance in Canada

There are two main types of life insurance: term & permanent.

Term life insurance is the simplest and most affordable form of life insurance. It pays out a benefit to your beneficiaries only if you die within a specified timeframe, usually 10, 20, or 30 years. This is the best option for 95% of young families.

The alternative (permanent policies) are much more expensive – we are talking hundreds of dollars a month more expensive.  Why? Because it guarantees that your beneficiaries will receive a death benefit. You can die young or die old, and your insurance company will still pay out.

These policies generate high commissions for advisors.  But we don’t like them. For most adults, by the time they’ve reached retirement, they have decided that their savings are enough to support themselves & their families for the rest of their life.  So why do they need life insurance at that point?

So which one makes sense for me?

For most young families, term is the way to go. Having life insurance protection for longer than you actually need it for may not seem like such a bad thing. But why pay for something you don’t need? Term life insurance lets you pay for coverage only during the years when it really matters (when your mortgage is at its highest & you have young kids).

If you’d like to read up on why we almost always recommend term life insurance to our customers, start here.

Comparison of types of life insurance in Canada

Term life insuranceWhole life insurance
Low prices
Choice of policy length
Never expires
Rates locked in
Guaranteed death benefit
Accumulates cash value

Cost comparison of term vs. whole life insurance

$250,000 20-year term life insurance$250,000 whole life insurance
Male, aged 30$18/month$135/month
Female, aged 30$15/month$121/month
Male, aged 40$28/month$204/month
Female, aged 40$22/month$178/month
Male, aged 50$72/month$327/month
Female, aged 50$51/month$279/month

Who needs life insurance?

If you have a partner, children or ageing parents who depend on you for financial support – life insurance is essential.  It could be the difference in your family being able to keep their house & pay their day-to-day expenses vs. dealing with a huge financial burden if something were to happen to you.

But not everyone needs life insurance.  Remember, we only recommend it for people who have loved ones who depend on them financially.  Who wouldn’t need it?

  • Anyone who is single with no dependents (i.e., if your death will not have a financial impact on your parents & or other family members)
  • Anyone who has managed to build up enough savings to provide the safety net on their own (think older parents whose kids are out of the house & who are pretty close to retirement)

How does life insurance work?

​​The structure of a life insurance policy is pretty simple. You pay premiums each month to an insurance company over an agreed length of time. In return, the insurance company promises to give your loved ones a tax-free lump sum cash payment (the “death benefit") if you die.

Life insurance benefits are paid in one full lump sum. In other words, if your policy provides $500,000 of coverage, your beneficiaries will receive $500,000 all at once, and it’ll be tax-free.

This gives your family the option to use the money however they want to. Some people use it to pay off a mortgage. Others use it to continue making rent payments. And in many cases, people use life insurance to care for children, fund educational expenses, and cover day-to-day living costs.

How much does life insurance cost?

Like we said, term life insurance only pays out if you die within a specified timeframe, usually 10, 20, or 30 years. As you can guess, the probability of you filing a claim (because you die before you turn 65, for example) isn’t that high. As a result, the prices for term life insurance also aren’t that high either. This works for you!

A 20-year, $500,000 term life insurance policy costs around $35/month for someone in their 30s. For a lot of people, that can be enough coverage to keep their families protected.

$250,000 of coverage for 20 years$500,000 of coverage for 20 years$750,000 of coverage for 20 years
Male, aged 30$18/month$30/month$46/month
Female, aged 30$15/month$23/month$34/month
Male, aged 40$28/month$49/month$72/month
Female, aged 40$22/month$35/month$53/month
Male, aged 50$72/month$130/month$195/month
Female, aged 50$51/month$85/month$129/month

Your personalized life insurance rate will depend on a few different things including:

  • Coverage amount, or the amount of insurance you want to be covered for
  • Your policy type (term vs. permanent)
  • Your age
  • Your smoking status
  • Your health status
  • Your driving record & hobbies

All of these will go into your final price.  If a major health issue is identified in your application, your life insurance price could go up.  But most younger people won’t see a change from what they were originally quoted. Get an instant quote here.

When is the best time to get life insurance?

The best time to get life insurance is when someone depends on you. For most people, this is when they get married or when they start having kids.

We know what you’re thinking: “But I just got a mortgage, and having kids isn’t cheap! How am I supposed to afford life insurance?"

Fortunately, the younger you are, the more affordable your life insurance will probably be. In most cases, it’s smart 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.

How to buy life insurance in Canada

There are three main ways to buy life insurance:

  1. Directly with a life insurance company online (like Manulife CoverMe)
  2. Through an independent local insurance agent
  3. Through independent broker online

Whats the pros and cons of each option?

Always consider going with someone who can help you compare quotes across a variety of insurance companies. Life insurance rates, surprisingly enough, can vary quite a bit across companies (even for the exact same policy).

Evaluating a life insurance company

Life insurance is a permanent purchase – you are getting into a contract with a company for 20 years or more, so it is important to choose the right company! The good news is that every big life insurance company in Canada has a  long track record of financial strength. You can check out our life insurance reviews to make sure you are comfortable with your pick for your life insurance company!

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