The Couple’s Guide to Life Insurance in Canada

Why should couples consider life insurance?

Death tends to throw life into chaos. With life insurance, a couple gains a financial safety net for themselves, their dependents, and the life they’ve built together. Should one or both partners pass away, the survivor(s) and beneficiaries can use the payout, or death benefit, to keep the family home, pay off loans, put children through school, and more. 

"When two people commit to building a life together—whether that means marriage, buying a home, or starting a family—the focus is rightly on hopes and dreams. But true commitment also includes planning for the unexpected. Life insurance is not about being pessimistic, it's about being responsible, loving, and forward-thinking. You're not planning for death; you're planning for life to keep going for the one you love." — Ivana Govedarica, Licensed Advisor at PolicyMe

Put another way, life insurance is probably worth it if you or your partner don’t have the means to replace the other’s income after a loss. If you’re young, so much the better: you could lock in low life insurance rates for the rest of your life. 

What is the best life insurance for couples in Canada?

Couples usually consider life insurance to provide for the surviving spouse or partner if one of them passes away, or to provide for their children or dependents if one or both of them pass away.

To meet either of these goals (or both!), you have two choices: joint or combined life insurance.

Joint life insurance is a single policy with coverage for two people that results in one death benefit. Combined life insurance is a bundle of two or more individual policies purchased from the same company, each with their own coverage details and death benefits.

The best plan for you depends on your goals, your ages, and who your desired beneficiaries are. In this guide, we’ll give you everything you need to choose between joint or combined life insurance and term or permanent policies.

What is joint life insurance?

Joint life insurance is a product you and your co-insured apply for together. Your chosen coverage, term lengths, and insurance riders apply to both of you, and you pay one premium on a monthly or yearly basis.

When it comes to the death benefit, you have two choices:

• With joint first-to-die life insurance, the death benefit goes to the surviving partner, and the policy ends.
• With joint last-to-die life insurance, there is no death benefit paid upon the death of the first partner. Instead, it passes to a named beneficiary (or beneficiaries) only when the second partner passes, at which point the policy ends.

The deciding factor is whether you and your partner have or plan to have children (or other dependents). First-to-die policies prioritize the surviving partner, while last-to-die policies (also known as survivorship policies) prioritize the couple’s chosen beneficiaries. 

The former can help keep a family afloat after tragedy; the latter is useful for covering estate taxes, inheritances, and other costs associated with transferring wealth.

How long does joint life insurance last?

A joint life insurance policy can cover either a fixed term of 10-30 years or permanently last the entirety of one or both of your lives.

Term life insurance is an affordable way to secure your finances against specific liabilities, such as a mortgage or the cost of sending children to school. Permanent life insurance is more expensive, but you’re certain to leave something behind for inheritances, estate taxes, and funeral expenses as long as you keep paying your premiums.

Read more about term versus permanent life insurance here

How much does joint life insurance cost?

Joint life insurance is generally cheaper than combined life insurance, but not always. A couple with a pair of life insurance policies can tailor their coverage to their individual needs, and if one partner is in poor health, it won’t affect the other’s premiums.

A partner who smokes, is older, leads a high-risk lifestyle, or lives with pre-existing health conditions may drive up premiums on a joint first-to-die policy. On a last-to-die policy, a low-risk partner’s inclusion can bring costs down.

Beyond that, permanent plans are more expensive than term plans because they cover a longer length of time, while last-to-die policies are cheaper than first-to-die ones because the payout is delayed.

What happens to a joint life insurance policy after divorce or separation?

The biggest disadvantage of joint life insurance is dividing it can be a hassle. Because you have joint ownership, both of you must agree to any changes in order for them to take effect. 

Depending on your preferences, you can:

• Cancel the policy
• Change the policy so the surviving partner becomes a trustee, not a beneficiary
• Keep the policy as-is
• Split the policy into two individual policies whose premiums you each pay separately
• Transfer the policy to one partner who agrees to pay the premiums

Couples who sign up for joint life insurance may wish to include a provision for divorce or separation while the contract is being drawn up. Otherwise, you’ll have to rely on internal review, third-party mediation, or legal arbitration for a solution.

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What's a trustee

In Canada, minors under the age of 18 aren’t allowed to receive life insurance payouts. To pass a death benefit to a minor, you can name a person, financial institution, or government as a trustee. The trustee receives the payout and transfers it to the child once they reach the age of majority.

What is combined life insurance?

Combined life insurance is a bundle of two or more individual life insurance policies. You and your partner(s) individually apply and choose your own:

• Beneficiaries
• Coverage amounts
• Insurance riders
• Term lengths

Buying the policies from different companies means you’ll have to pay separate premiums. However, if you bundle products from a single company under one account, you’ll only have to pay one premium—and you could be eligible for a discount, too.

If one partner passes, the beneficiaries named on their policy receive a death benefit without affecting the surviving partner’s coverage or premiums. If the second partner passes, their beneficiaries receive another death benefit.

Combined life insurance can offer couples more customization, more flexibility, and more total coverage. For example, a joint life policy may max out at $5 million, but a combined life insurance package can double it to $10 million.

“Combined life insurance is individual coverage, but the plan is combined, saving the couple some money on admin fees, discounts, etc.” — Ivana Govedarica, Licensed Advisor at PolicyMe

How long does combined life insurance last?

Like joint life insurance, combined life insurance policies can be permanent or cover a specific term. Unlike joint life insurance, each member of a couple can choose their own term length. This can be helpful if one partner wants to cover a private debt with a longer or shorter life than the couple's shared debt.

How much does combined life insurance cost?

Combined life insurance means two separate policies and two separate premiums, which may cost more than joint life insurance. Bundling products from the same company, lowering coverage, and shortening your terms can help you find affordable life insurance.

For example, PolicyMe offers couples a 10% discount on their first year of premiums.

Take note

Although joint life insurance policies are often cheaper, combined life insurance can save you money in the long run. If one partner passes, the survivor doesn’t have to apply for a new policy and pay higher rates for their increased age.

What happens to combined life insurance after a divorce or separation?

Combined life insurance is generally easier to split—you take your policy, your partner takes theirs, and you go your separate ways.

There are exceptions, of course. A permanent life insurance policy’s cash value (formed by savings and/or investments) may be considered matrimonial property and need to be split. Or, as part of a divorce settlement, one parent may request the other to name them as a beneficiary so they can receive child support if they pass.

Whether you choose joint or combined life insurance, we recommend seeking legal counsel should divorce or separation occur.

Read more about single vs joint life insurance for couples in Canada.

Joint versus combined life insurance: which is better?

In summary, joint life insurance is a single policy limited to a single death benefit. It’s easier to apply for and cheaper to buy, but harder to divide and customize.

First-to-die and last-to-die policies let you prioritize either the surviving partner or other beneficiaries, making them more suitable for:

• Couples using last-to-die joint life insurance for coverage for orphaned dependents
• Couples with a large gap in age, health, lifestyle, or risk (if applying for last-to-die)
• Couples with a large shared debt, such as a mortgage

Although combining two or more policies results in increased costs, it also gives couples more customization, coverage, and flexibility should they split. Because of that, it’s better for:

• Couples in average health
• Couples age 40 or less who want to lock in low rates, or who don’t want to worry about splitting a policy if they break up
• Couples with a large gap in age, health, lifestyle, or risk (who want to insure the riskier partner)
• Couples with children from different relationships looking to individually customize beneficiaries
• Couples with private and mutual debts
• Relationships with more than two partners

While applying for more than one policy can be more work, you can eliminate the difference with the help of an insurance advisor. PolicyMe’s expert team helps customers assess their needs, understand their options, and make an informed choice.

How much life insurance coverage do couples need?

How much life insurance you need depends on your financial goals, your assets, and your budget. If you were put it into a formula, it would look something like this:

You can also get a personalized recommendation in just a few clicks by using the PolicyMe term life insurance calculator. There are no signup requirements or obligations, and you’ll also receive 3 cost estimates with your results. 

FAQ: Life Insurance for couples