Term Life Insurance for Families: What Coverage Do You Need?

What are family term life insurance plans?

Family term life insurance plans provide life insurance coverage for the adults in your household, offering a simple, affordable way to protect your family’s financial security. You can choose between individual term life insurance or joint life insurance, depending on your needs and budget.

Individual term life insurance

Individual term life insurance is for one policyholder who decides on the term length and coverage amount. If the policyholder passes away during the term, the beneficiaries receive a tax-free payment called a death benefit. When the term ends, the coverage ends.

Best for: Couples who want flexible and customizable coverage

Pros:

• Each person can choose their own term length, coverage amount, and beneficiaries
• Two separate death benefits—one for each policy

Cons: 

• Typically more costly than a joint policy

Joint term life insurance

Joint life insurance has two policyholders—usually a couple. A first-to-die joint policy pays out when the first insured person dies, while a second-to-die policy pays out once both policyholders have passed away.

Best for: Couples who want shared coverage at a low cost

Pros:

• Usually cheaper than buying two individual policies
• Only one premium and policy to manage

Cons:

• Only one death benefit
• First-to-die policy leaves the surviving spouse without active life insurance coverage
• Second-to-die policy leaves the surviving spouse without immediate financial support after their partner’s death

Do two people make a family?

You don’t need kids to need life insurance. If you have significant co-signed debts or you want to ensure care for dependents like a spouse or aging parent, then a term policy can be a safety net for your loved ones.

Why term life insurance is ideal for families

Term life insurance delivers affordable, flexible coverage that meets the needs of families without overinsuring. Term policies have significantly lower premiums than permanent ones, and they offer coverage for the most vulnerable years when financial obligations are at their peak.

Permanent insurance, on the other hand, lasts your entire life—but so do the premiums. Costs are typically much higher than term policies and coverage extends well beyond your financial obligations.

“If you buy an expensive permanent insurance plan, it’s going to take money away from saving for a down payment, which might be more important. Maybe instead, you consider a cheaper term insurance policy that will get you what you want from an insurance perspective without jeopardizing savings for retirement, for a house, or whatever it may be.” —Erik Heidebrecht, Licensed Insurance Advisor

In other words, term life insurance is better than permanent insurance for most families because it matches the years you actually need protection. Your coverage stops once your term expires (when you’re free from serious financial obligations), and the premiums leave room in your budget to save for retirement or invest in an RESP for your kids.
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What about group life insurance?

Employer-sponsored life insurance is a great perk, but it covers just 1–2x your salary and usually ends when you leave your job. Family life insurance is stable, tailored coverage that isn’t tied to your employment.

How to assess your family’s life insurance needs

If you’re unsure how much life insurance your family needs, you can use a free online life insurance calculator to get started. You’ll need to decide on two things: coverage amount (dollars) and term length (years).

To find your coverage amount, add up the expenses your family will need help covering if you’re gone. Consider:

• Mortgage or rent payments
• Large consumer debts, like credit cards or lines of credit
• Income replacement for 1–2 years
• Final expense costs
• Dependent costs, like child care and future education

To find your term length, determine when your debts will be mostly resolved and when your dependents will be financially independent. Consider:

• How many years until your mortgage is paid off?
• When will your kids move out of the house?
• How close are you and your spouse to retirement?

Most families require 20-year or 30-year terms with between $500,000 and $1M in coverage—but your coverage should be specific to your family and your finances. If you’re close to retirement, it’s likely wise to choose a shorter term.

“Term insurance is generally for people who want to have their mortgage covered. If they pass away, they want to make sure that the debt does not fall on the family. Term insurance 100% is the way to go. If they're a young family and they want to be responsible and look after their kids, term insurance is the way to go. It's going to get you the most coverage and the biggest bang for your buck. Once your kids are all grown up and independent, you don't need to worry about insurance anymore.” —Erik Heidebrecht, Life Insurance Advisor

How much does term life insurance for families cost?

The cost of life insurance in Canada depends on the term length, coverage levels, and other personal factors, but the average premium is $20 to $30 per month per person for healthy 30-year-old policyholders.

Here’s what two parents could expect to pay per month for two individual policies with $500,000 each in coverage:

*Total monthly rates assume two individual policies for non-smoking individuals with $500,000 in coverage per person. Generally speaking, rates for women are lower than rates for men.

The best term life insurance for families

For Canadian families, the best term life insurance will be specific to your needs:

• A term length that covers your family until your financial obligations are complete 
• A lump-sum payment amount that ensures financial stability in the policyholder’s absence
• Affordable life insurance rates that don’t stop you from contributing to savings

The best life insurance companies in Canada all offer some type of term life insurance but the prices, customer service ratings, and optional riders vary from one company to the next. 

You can customize your term life insurance policy with riders, which offer extra benefits to fit your family’s specific needs. Here are some commonly available options:

• Guaranteed insurability: Allows you to buy more coverage in the future without another health check
• Accidental death: Pays an extra benefit if you die from a covered accident
• Accelerated death benefit: Pays part of the death benefit early if you're diagnosed with a terminal illness
• Child coverage: Provides life insurance for your kids, which they can later convert into permanent life insurance
• Long-term care: Allows you to use part of the death benefit for long-term care if you have a chronic illness or disability

The best way to find the right coverage for your family is to shop around and compare quotes. It’s free to get a term life insurance quote from PolicyMe—and the earlier you buy a policy, the less money you’ll spend to secure your family’s financial future.

FAQ: term life insurance for family