9 Proven Ways to Lower Your Life Insurance Premiums in Canada
See affordable life insurance quotes from PolicyMe and other top companies.
1. Choose term life instead of permanent insurance
Term life insurance is the most affordable life insurance option for Canadian families.
Permanent life insurance policies, like universal or whole life insurance, cover you for your whole lifetime (as long as premiums are paid) so there’s a 100% chance of death during the term. This guarantees the insurance company will have to pay a death benefit to your beneficiaries, which drives the cost up.
Because term life insurance only covers a portion of your lifetime — for example, the 10-30 years when your children are still at home and you’re paying off your mortgage — it carries less risk for insurers, which means lower premiums for you.
Premiums for a standard permanent life insurance policy start between $100 and $450 per month, on average. The cost of an average 20-year term life insurance policy, on the other hand, is around $20–$30 per month.
By opting for term life insurance over whole or universal life insurance, you could save $70–$430, on average, per month. Over the life of a 20-year policy, your total savings could be $8,600 or more.
2. Buy sooner rather than later
Your age is one of the most significant determinants of how much your life insurance policy will cost, because age is a key indicator of life expectancy. With every year you age, your potential life insurance rates typically rise by around 8%.
If you know you need life insurance, there’s no need to wait. Buying early is often a good savings strategy, even if your financial plans and life goals aren’t set in stone yet.
Not only will your premiums be lower, but competitive pricing might allow you to purchase a larger amount of coverage at a low rate that may be fixed for the length of your policy, even if you develop health issues later on.
Most Canadians buy life insurance in their 30s or 40s in response to major life milestones like having a baby or buying a home. But how much could the average Canadian save by purchasing life insurance 5 to 10 years earlier?
A healthy, non-smoking individual in Ontario could save roughly $21/year by purchasing a 20-year, $500,000 term life insurance policy at age 25 rather than age 35. That’s nearly $425 over the life of the policy. But the savings are more significant if we look at a larger policy — say, $1M. For that amount of coverage, a 35-year-old pays nearly $44 more per year, or $879 more over the life of the policy.
“Buying life insurance early — before health or age catch up — is one of the easiest ways to save thousands over your lifetime.” — Andrew Ostro, CEO, PolicyMe
3. Quit smoking (and stay tobacco-free for 12 months)
When you apply for any life insurance product, you’ll see some version of this question:
“Have you used nicotine or tobacco products in the last 12 months?”
You must answer truthfully in order to avoid insurance fraud. But answering “yes” to this question could raise your premiums significantly. If you’re an occasional (or habitual!) smoker, consider cutting tobacco and nicotine products out entirely for at least 12 months before applying for life insurance.
Average monthly life insurance premiums for 35-year-olds who report nicotine or tobacco use in the previous 12 months are around $54/month for women and $74/month for men.*
By waiting 12 months without nicotine or tobacco use, women could save an average of $33/month, or $660 over the life of the policy, while men could save $45/month, adding up to $900 over 20 years.
* Average PolicyMe monthly rates for a 20-year term policy with $500,000 of coverage.
4. Pick the right coverage amount
The easiest way to overpay for life insurance is to overinsure — that is, to buy more coverage than you really need.
You may have heard that your life insurance coverage should equal 10-15x your income, but while that figure can be a good starting point, it’s often a recipe for overpaying. Your coverage amount should be based on a detailed analysis of your debts (including both mortgage and non-mortgage debt), income, and costs associated with your dependents, like education.
PolicyMe offers two ways to calculate your life insurance needs: using our free online calculator, which recommends three different levels of term insurance coverage depending on your priorities and budget, and a team of licensed insurance advisors available by phone and email Mon-Fri, 9AM-5PM EST.
To see how much a financial analysis could lower your life insurance costs, let’s use an example.
Ravi is 35 and lives in Toronto with his wife and 2 kids, aged 1 and 6. Ravi makes $90,000 per year as a software engineer, while his wife makes about $37,000 as a part-time dance teacher.
Using a simple 15x income multiplier, Ravi buys $1,300,000 of life insurance coverage in a 20-year term policy, with a monthly premium of $75. But if he uses PolicyMe’s life insurance calculator, which takes into account his wife’s income and their monthly rent, student debt, and overall savings between retirement accounts and other savings, Ravi gets a recommendation for a budget-friendly policy with just $825,000 in coverage for just $51/month.
5. Choose a shorter term (or ladder your policies)
Your life insurance should only cover the period of your life when you have major financial obligations and dependents whose financial security would be seriously impacted by your death.
Don’t just buy a 20- or 30-year term policy because it’s offered; these policies will cost more than shorter terms, especially if you’re over 30. Instead, aim to have your policy end when you no longer have dependents and have dealt with any major debts such as a mortgage or student loan debt.
What if your financial responsibilities don’t line up neatly with a single term? That’s where laddering comes in — a strategy which involves buying multiple policies with different coverage amounts and term limits. For instance, let’s say you just bought your first home with a 30-year mortgage, but your children are already in grade school and will be financially independent within 15 years. By purchasing two separate life insurance plans with coverage for 15 and 30 years, you can address these needs individually without overpaying for coverage after your children are out of the house.
For a 35-year-old non-smoker in good health, a 30-year term policy worth $500,000 costs $20 less than a 20-year policy, $23 less than a 15-year policy, and $27 less than a 10-year policy per month.
6. Improve your lifestyle and medical profile
Life insurance quotes are based primarily on an insurance company’s estimate of your overall life expectancy — that is, the risk that you’ll die within the policy term and require a payout.
A healthy lifestyle can save you money on life insurance in three situations: at your initial application, at renewal, or when you reapply for life insurance down the line. Improved health history could help you pass a medical exam or even qualify for lower rates without one.
Remember, lifestyle is about more than exercise and diet — high risk hobbies like skydiving or a high-risk job like construction can also raise your rates and limit your life insurance options.
Every insurance company uses different underwriting methods to calculate risk, and each individual’s health conditions are unique, so it’s hard to put a dollar amount on the money you could save by maintaining good health habits. However, high-risk applicants may pay between 25% and 250% more for life insurance than their healthier peers.
7. Compare providers (and go digital)
Whenever you’re shopping for an insurance product, it’s worth comparing rates from a few different companies.
Why? Because every company that sells insurance follows a different pricing strategy. Some insurance providers, such as big financial services companies that offer premium term and permanent policies, may be trying to attract high-income clients who are likely to purchase other products from them. These companies are more likely to work with an in-person network of agents and financial advisors and have higher overhead costs to win back through premiums.
PolicyMe offers a big advantage here as a digital-only insurance distributor with low overhead costs. Our pricing model puts a priority on affordable life insurance coverage for Canadians in good health and uses tech-powered accelerated underwriting to pass savings on to you and your loved ones.
A 20-year term life insurance policy for a 35-year-old, non-smoking applicant with $500,000 of coverage costs around $25/month from PolicyMe. The same policy from a large traditional insurer like Manulife, Sun Life, or Canada Life would cost $27-$29/month for the same applicant. While these savings are small, they’ll add up over the timeline of the policy.
8. Skip unnecessary (and expensive) riders
Most life insurance companies in Canada offer riders, optional add-ons you can attach to your life insurance policy for additional benefits. Examples of riders include accelerated death benefit riders, which allow you to access part of your death benefit during life if you’re diagnosed with a critical illness or disability, or child riders, which offer term coverage for your children.
The problem with riders: they can add considerably to the cost of life insurance without adding much value to your policy. To solve this dilemma, PolicyMe takes a different approach to riders. Instead of offering them at an extra cost, we selected the riders we believe matter most for families, such as child coverage, and included them in our coverage without extra charge.
The cost of life insurance riders varies widely. If you’re considering a policy that includes optional riders, take careful note of how your premium changes with and without the rider attached, and consider whether the ultimate benefit is worth the cost of the rider over time.
9. Reapply or switch if your situation improves
Life changes; so can your life insurance.
One of the biggest life insurance mistakes that Canadians make is sticking with an old life insurance policy with higher premiums out of habit.
If you’re overpaying for life insurance, you don’t need to stay with the policy you initially bought. If your health improves, you quit smoking, or your debts shrink, getting a fresh quote could get you the best rate available now while maintaining all of the coverage you need.
Depending on how much you were paying for life insurance before, you could save anywhere from a few dollars a month to hundreds of dollars per year by reapplying for better life insurance. PolicyMe’s streamlined online quote process makes it easy — most applicants get approved in 20 minutes or less!
The bottom line: Small changes, big lifetime savings
When it comes to saving on life insurance, details matter. A small change — whether it’s going for a daily walk, opting for a 15-year term instead of 20 years, or sitting down today to buy a policy instead of waiting for “a better time” — could save you hundreds of dollars on this essential expense. By taking care of the little things, you can improve your overall financial picture and make room in your finances for the things that matter to you most.
FAQs
Helene Fleischer is Content Marketing Manager at PolicyMe, with 9 years in content marketing and 4 in Canada’s insurance industry. She works with skilled writers and licensed insurance advisors to create useful resources that help Canadians navigate insurance decisions with confidence and clarity.
Helene Fleischer is Content Marketing Manager at PolicyMe, with 9 years in content marketing and 4 in Canada’s insurance industry. She works with skilled writers and licensed insurance advisors to create useful resources that help Canadians navigate insurance decisions with confidence and clarity.