Guide to Life Insurance for Couples in Canada
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Do couples need life insurance in Canada?
Life insurance provides Canadian couples with a financial safety net for themselves and their loved ones if one or both partners pass away. The policy beneficiary (or beneficiaries) can use the 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
Couples should consider getting life insurance if they:
- Share major financial commitments, like a mortgage or other joint debts
- Rely on each others’ income to cover everyday expenses
- Have kids or are planning to start a family
- Want to leave an inheritance or legacy for the surviving partner or dependents
There are many other situations where life insurance can make sense for couples. Ultimately, the decision comes down to your unique needs, how much coverage you want, and what kind of protection will give you peace of mind.
Read more: Is life insurance really worth it?
What is joint life insurance?
Joint life insurance coverage is an insurance product that you and your co-insured apply for together. You pay one premium (either monthly or annually) and you both have the same coverage, term length, and insurance riders.
A key difference between joint policies and single policies is that there is only one death benefit. You have two choices:
- Joint first-to-die policy: The death benefit goes to the surviving partner, and the policy ends. Since the payout date is sooner, these policies tend to be more expensive.
- Joint last-to-die life insurance: No death benefit is paid upon the death of the first partner. It passes to a named beneficiary (or beneficiaries) when the second partner passes, at which point the policy ends. Since the payout date is further in the future, these tend to be more affordable.
The deciding factor in which death benefit you choose comes down to 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 and can help cover funeral costs. 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.
Insurance companies use equivalent single age (ESA) to calculate premiums for joint life insurance—another key difference between joint and single policies. It combines the ages of both people to assess the overall risk. The higher the ESA, the more you’ll pay for your coverage.
What is combined life insurance?
Combined life insurance refers to a bundle of two or more individual life insurance policies (often term life insurance). You and your partner apply individually and each choose your own:
- Beneficiaries
- Term lengths
- Amount of coverage
- Insurance riders
If you both purchase your policies from the same company, you may be able to pay one premium and you might even be eligible for a discount.
Combined life insurance can offer couples more customization, more flexibility, and more total coverage. While a joint life policy may max out at $5 million, 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
Significantly, combined policies have more than one death benefit; each policy has its own payout upon death. If one partner passes, the beneficiaries named on their policy receive a lump-sum death benefit. This doesn't impact the surviving partner’s policy. If the second partner dies, their beneficiaries receive another death benefit.
What is the best life insurance for couples in Canada?
The purpose of couples life insurance is usually to provide for the surviving partner and/or children or dependents if one of them passes away. Both joint and combined life insurance policies can meet this purpose, but the best plan for you will depend on your age, goals, and desired beneficiaries.
While applying for more than one policy can be more work, you can bridge the gap with the help of an insurance advisor. PolicyMe’s expert team helps customers assess their life insurance needs, understand their options, and make an informed choice.
Real-life scenario: Joint or individual life insurance policies?
Let’s look at an example to illustrate the pros and cons of joint vs. individual life insurance policies—and how the right choice comes down to financial planning and the intention behind the policy.
The couple: Sarah and Alex, both 35 years old, married couple with two children
The goal: Make sure their kids (and each other) are financially protected if one or both of them passes away.
The life insurance options:
The best choice: Since the goal of life insurance is to offer financial protection for the surviving partner and kids, individual policies are the best option. While a joint policy would be cheaper, it offers half the coverage of individual policies and leaves the surviving partner without coverage at an older age.
Read more: How to choose the best insurance policy for your family
How much does life insurance for couples cost?
Joint life insurance is generally cheaper than combined life insurance—but not always.
A couple with a pair of life insurance plans can tailor their coverage to their specific needs. If one partner is in poor health, it won’t affect the other’s premiums. But with joint life insurance, a partner who smokes, leads a high-risk lifestyle, or lives with pre-existing health conditions may drive up premiums on a first-to-die policy.
On a last-to-die policy, a low-risk partner’s inclusion can bring costs down. Last-to-die policies are typically cheaper than first-to-die ones because the payout is delayed.
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.
Combined life insurance means two separate policies and two separate premiums, which may cost more than joint life insurance. You can find cost-effective life insurance by bundling products from the same company, lowering your coverage amounts, or shortening your terms. Here are starting average premiums for $500,000 in coverage over 20 years for a relatively healthy non-smoker:
How much life insurance coverage do couples need?
How much life insurance you need depends on your financial obligations and goals, assets, and budget. You should also consider the financial impact of lost income, lost childcare/household labour, and other household payments that a death benefit must cover.
A simple formula for calculating life insurance coverage looks something like this:
You can 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 receive three cost estimates with your results.
What happens to life insurance for couples after a divorce?
The biggest disadvantage of joint life insurance is that dividing it can be a hassle. Because you have joint ownership, you must both agree to any changes in order for them to take effect.
Depending on your preferences, you can:
- Keep the policy as-is
- Cancel the policy
- Split the policy into two single life insurance policies with separate premiums
- Transfer the policy to one partner who agrees to pay the premiums
- Change the policy so the surviving partner becomes a trustee, not a beneficiary
If you sign up for joint life insurance with a partner, you 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.
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.
While there are exceptions, combined life insurance is generally easier to split—you take your policy, your partner takes theirs, and you go your separate ways. Individual policies offer greater flexibility, more customization, and two payouts with less rigid payout rules. In most circumstances, it’s a better choice than a joint policy.
The bottom line: Whether you choose joint or combined life insurance, we recommend seeking legal counsel in the event of divorce or separation.
Read more: The single parent’s guide to life insurance
5 common mistakes that couples make when they get life insurance
1. Choosing the wrong coverage amount. Many couples underestimate the coverage they need. Your insurance should be sufficient to cover your debts, income replacement, and support dependents—no more, no less.
2. Relying solely on employer-provided coverage. In most cases, group life insurance is 1-2 times your salary and ends if you leave the company. For this reason, it’s important to have a private policy that offers long-term financial security and fully meets your financial needs.
3. Not aligning policy length with real-life needs. If your mortgage is 30 years, your policy should last the duration of it. Choosing a term life insurance policy that ends before your financial responsibilities are over could leave you, your partner, or your dependents unprotected.
4. Only insuring one partner. While insuring the primary breadwinner is important, overlooking childcare, household tasks, and the cost of caring for elderly parents can leave the surviving partner struggling to cover these expenses. Since both partners contribute to the stability of the home, both should be protected.
5. Waiting too long to apply. The older you get, the more expensive your life insurance premiums will be. Securing coverage when you’re younger and healthy allows you to take advantage of the best rates for a longer term.
6. Not reviewing your policy periodically. As your life changes, your insurance needs may also change. If your family grows, you change jobs, or you move and have a new mortgage, it’s a good idea to review your coverage and make changes to ensure your loved ones are fully protected.
FAQ: Life Insurance for couples
