Life insurance Canada: your family’s financial safety net

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What is life insurance?

Life insurance is a safety net for your dependents.

It protects your family from financial hardship if you’re no longer there to support them.

If your policy is active, your loved ones get a death benefit from the insurance company.

The amount of the life insurance payout depends on the type of policy you choose.

How much is life insurance in Canada?

To give you an idea of the cost of life insurance, here’s a look at term policy quotes from Canada’s top providers.

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Sun Life

Competitor rates pulled from Compulife ® software for comparable policies to PolicyMe’s term life product.
Your price and policy features may vary based on selected policy and provider.

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The basics of Canadian life insurance

The amount of life insurance coverage needed by a Canadian family will vary. Why? Things like your debts, salary, financial obligations, and mortgage all factor into how much coverage you need. For starters, the average life insurance coverage per household in Canada is $458,000, says CLHIA. 

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term life insurance cost

What kind of life insurance do you need?

Let’s compare term life insurance versus whole life insurance to get things kick-started. 
Covers you for your entire life as long as you keep up the payments.

Whole life insurance

Term life insurance

Premiums are about 7.5x more expensive than term life insurance.
Premiums start at $20 to $30 per month.
Accumulates cash value over time.
Investment component that helps the policy build cash value over time.
Potential to use as collateral for loans.
Tax-free lump sum payment to beneficiaries. Can pay out dividends.
High-net-worth Canadians or those with permanent dependents.
Covers you for a specific period, typically 10, 20 or 30 years.
Doesn’t accumulate cash value.
No investment component.
Can be renewed or, at times, converted to permanent life insurance.
Tax-free lump sum payment to beneficiaries.
The average family with short-term responsibilities: mortgage, minor kids etc.
Usually fixed for the entire term and increase on renewal.
Usually fixed for the life of the policy.

Types of life insurance in Canada: A deeper look

Term life insurance

Temporary coverage that lasts for a fixed period of time, usually 10 or 20 years

Your loved ones receive a tax-free payment if you die during your policy term

The most affordable type of policy

No hidden fees or restrictions

Can be cancelled before expiry without penalty or loss of value

Whole life insurance

A type of permanent life insurance that provides coverage for your entire life

Has a cash value because some of the money you pay gets invested

Comes with surrender fees, taxes, interest, and other restrictions

8-10x the price of a comparable term life insurance policy

Universal life insurance

A highly flexible type of permanent life insurance

You can adjust your monthly payments and coverage amount based on your needs

Very complex because the policy always needs to be managed while active

8-10x the price of a comparable term life insurance policy

Mortgage life insurance

Your insurer pays off your mortgage if you die

Death benefit can only be used for your mortgage, not other expenses

Costs the same every month, even when your outstanding balance is less

Price essentially gets more expensive over time

Who needs life insurance in Canada? 

You’re expecting! Or you already have young kids.

As a new or expecting parent, your family's financial future is likely one of your top priorities (other than getting half a minute to yourself). If something were to happen to you, life insurance can provide your family with the financial resources it needs to cover living expenses, childcare and education costs.

You bought a house

Big investment, BIG mortgage payments. If you were to pass away unexpectedly, term life insurance can provide your family with the resources they need to keep the home, pay off the mortgage and continue with other financial obligations.

You’re a business owner

As a business owner, you may have employees or partners who depend on your income. Life insurance can provide the necessary funds to keep your business operating in the event of your death. It can also be used to buy out partners or to cover other business-related expenses.

You’re nearing retirement, but don’t have enough savings

If you're nearing retirement age and haven’t saved up as much as you’d like, life insurance can provide a safety net for your partner or any kids that depend on you financially. The term life insurance payout can be used to cover living expenses, pay off debts or provide an inheritance for your beneficiaries.

Couples who depend on each others’ income

Couples who depend on each other's income should consider buying term coverage as well. In the event of one partner's death, the surviving partner can use the payout to maintain their standard of living, pay for expenses or pay debts. Financial security is romantic, right?

Have questions? Ask our team of insurance experts.
Call our team of licensed Canadian advisors from 9AM - 5PM EST Monday to Friday. Ask us anything! We’re happy to help.

Learn more about life insurance in Canada

FAQs: Life insurance quotes

Is life insurance worth it?

Yes, if you have people who depend on you for financial security. It’s true that many people don’t die until they’re older and no longer need coverage. But because you probably don’t know when you’ll die, paying the cost of life insurance is worth it to ensure your family will be protected in case the unthinkable happens.

When should I get life insurance?

You should buy coverage as soon as you have anyone who depends on you financially. This includes people you support financially and people who could become financially responsible for your debt if you died. For most Canadians, this happens when they get married, have a baby or buy a home with someone else.

How does a life insurance policy payout work?

If you die while holding an active life insurance policy, your loved ones can submit an insurance claim to your life insurance company. Once your insurer processes and approves the claim, it’ll give your family the payout as a tax-free lump sum. Your family can use the money in any way they want.

What does life insurance cover in Canada? 

Life insurance can be used to cover things like funeral expenses, outstanding debts, and ongoing living costs for your family. This means that if something happens to you, your family can get a lump sum payment from the insurance company to help them stay financially secure in a difficult time. 

It's like a safety net for the people who matter most to you. Keep in mind that each policy can vary, so it's important to read the details carefully and understand what is and isn't covered.

How do you find life insurance of a deceased parent in Canada? 

To find out if a deceased parent has a life insurance policy in Canada, you’ll want to follow a few different steps:

  • Check your parent's personal documents and files for any paperwork or policy information. 
  • See if there are any specifications about a life insurance policy in the parent’s will.
  • If you can’t find the life insurance policy details, you can reach out to their employer, bank, or financial advisor. 
  • You can contact the Canadian Life and Health Insurance Association (CLHIA) for guidance on how to search for unclaimed policies. 

The bottom line here is that it's important to be patient and thorough in this process as you navigate through a challenging time.

How much life insurance should I have?

The right amount of life insurance coverage depends on your family’s needs. In general, you should have enough insurance to financially support dependents, pay off debt and cover any other expenses you want to take care of for your family.

How do you borrow against life insurance in Canada?

Borrowing against your life insurance policy is only possible with certain whole life insurance and universal life insurance policies in Canada. Essentially, as you pay your life insurance premiums, part of those payments go into building your policy’s cash value.

This cash value will grow at an interest rate determined by the terms of your specific policy. Once you’ve built up enough cash value, you’ll have the option to borrow against it. But this is loan is taken from the death benefit (the life insurance payout). The loan is borrowed directly from your insurer, using the cash value you’ve accumulated as collateral for payment. 

But a word of caution: most Canadians probably shouldn’t borrow against their life insurance policy. Why? Firstly, you have to pay interest on top of the loan amount. And if you don’t pay, your life insurance coverage may be lost. 

How much is life insurance per month?

It’s probably unsurprising that the cost of life insurance per month can vary a great deal based on several personal factors. Your age, gender, health, and policy type will all play a big role in the cost of your monthly life insurance premiums. 

For example, a small term life insurance policy for a young, healthy person can start at around $20 per month. On the other end of the spectrum, a large whole life insurance policy for an older individual can cost you hundreds every month.  

That’s one of the reasons why it’s so important to get covered early. The younger you are when you lock in your rate, the less you’ll pay. 

Where do you buy life insurance in Canada? 

You can buy life insurance in Canada from a variety of places. Some popular options include insurance brokers, banks, from insurance companies – some of which can be bought online. It's like shopping for anything else; you want to compare prices and coverage to find the best fit for your needs. 

You can also ask friends and family for recommendations or do some online research to explore different options. The important thing is to choose a reputable provider that you feel comfortable with and who can help you understand the policy details. It's all about finding the right balance of affordability and protection for your loved ones.

Who regulates life insurance companies in Canada?

In Canada, the regulation of life insurance companies is overseen by different provincial and territorial government bodies. Each province and territory has its own regulator that is responsible for ensuring that insurance companies comply with the laws and regulations specific to that area. 

These regulators aim to protect Canadian life insurance consumers by making sure that insurance companies are financially stable and that they conduct their business in a fair and transparent manner. 

How long does it take for life insurance to pay out in Canada? 

The time it takes for life insurance to pay out in Canada can vary. After a claim is submitted, the insurance company will typically review the documents and information provided (read: things like the death certificate or medical records). 

If everything is in order, the death benefit payout process usually takes a few weeks to a couple of months. But some companies may offer accelerated or fast-track options for certain situations. It's important to check your policy or speak with your insurance provider to understand the specific timelines and processes involved in the payout so that you and your loved ones can have a clear understanding of what to expect.

How do you choose a life insurance policy?

When choosing a life insurance policy, think about your current needs and future plans for you and your family.

Take stock on your whole financial picture, like your income, debts, and dependents. This will give you an idea of how much coverage you need to support your loved ones if something happens to you.

After that, you’ll be able to compare different types of life insurance policies (like term or permanent insurance) to see what fits your budget and goals. Don’t forget to check the financial stability and reputation of the insurance company.

Choosing the best life insurance policy is all about finding the right balance between protection and affordability for your peace of mind.

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