Can you get family life insurance in Canada?

Jordann Brown
by Jordann Brown March 11, 2021 / No Comments

If you have a family, odds are, you need life insurance. If you die, your designated beneficiary will receive a lump sum death benefit. This benefit helps pay for any financial obligations your partner can’t manage on their own. Optionally, it can cover education and living expenses for your children.

You’ll generally purchase a life insurance policy for yourself, and your partner will buy their policy. Sometimes, situations warrant extra coverage for events beyond your death, like coverage if you become disabled or critically ill. Sometimes you’ll even need coverage for your children.

In these cases, a bundled insurance policy called family life insurance is available. This insurance policy covers the needs of you, your spouse, and optionally your children. Here’s everything you need to know about family life insurance in Canada.

What does family life insurance in Canada mean? 

Family life insurance is the name for a bundle of insurance policies that ensures protection for your family in all possible disaster scenarios. Family life insurance usually includes the following insurance coverage:

  • Life insurance: Usually term life insurance, which gives your beneficiaries a lump sum death benefit if you die unexpectedly within the term. You and your spouse would both have life insurance policies. 
  • Disability insurance: You and your spouse would each have individual policies to provide income if you become disabled. Insurance offered by your employer may supplement this policy.
  • Critical illness insurance: You and your spouse would each have individual policies that would offer a lump sum payout if either of you becomes critically ill. The payout would help with medical expenses, additional care and supplement your income if you cannot work.
  • Optional: Children’s term insurance riders: Essentially, a life insurance policy for your child that pays if your child dies before the age of 17. Coverage is generally between $5,000 and $30,000. It’s meant to cover a child’s funeral expenses but may also cover your financial commitments for a bereavement period.
  • Optional: OPCF 44R is an optional auto insurance coverage for Ontario drivers that covers you when the at-fault driver’s insurance coverage is not enough to compensate the injured driver.

If you buy full coverage family insurance, it typically includes life insurance, disability, and critical illness for both spouses. You may also add children’s term insurance riders for your children and possibly OPCF 44R insurance if you live in Ontario. )The same auto coverage endorsement exists in other provinces, known as SEF 44. )

There may be some instances where you would modify your life insurance coverage to a first-to-die policy, which is coverage that insures the lives of two people together and pays a death benefit when the first person dies. This coverage is less expensive and you must convert it to individual policies if there’s a family unit breakdown.

How long should my family life insurance policy last?

Term life insurance doesn’t last forever. Instead, you’ll pay premiums for a specific period (the term), and once that period ends, so does your coverage. Alternatively, you can convert to a whole life policy or buy a new term policy. A new policy will cost more due to your older age. With term insurance, there is no cash payout at the end, which makes this type of insurance so affordable.

When you apply for your family life insurance, you’ll need to select the term for your policy. Typical term length varies from 10 to 25 years. You’ll usually want to choose a term life insurance policy that expires when your family is no longer reliant on your financial support. An excellent example of this time is when both of your children are self-sufficient, you’re mortgage-free, and both you and your partner have sufficient savings for retirement.

There is one exception to this rule, and that’s if you expect to bequeath your children with a large inheritance. Some families choose a more extended life insurance term or even have a separate policy with a term long enough that the death benefit will cover the taxes associated with an inheritance.

How much does family life insurance cost?

Your family’s life insurance will be highly dependent on several factors. Here’s what insurance companies consider when determining the cost to insure you:

  • Coverage amount
  • Term length
  • The health of the insured person
  • Any additional riders or add-ons like disability or critical illness insurance

The most significant determinant of the cost of your family life insurance bundle is the amount of coverage you’ll need to cover your family in the event of your or your spouse’s death. You’ll need enough coverage to pay off any debts you may have, including your mortgage, provide for your children’s educations, and optionally provide for your spouse. 

How much insurance is needed to cover all of these variables depends on your financial habits and life stage. If you have toddlers and a new mortgage, for example, the amount of life insurance you’ll need is much higher than someone who already has well-funded RESPs and a paid-off mortgage.

If you aren’t sure what level of life insurance, disability insurance, or critical illness insurance is enough for your family, there are many online calculators to help you get started.

The bottom line

If you have a family, it’s essential to ensure they can continue without you. For this reason alone, family life insurance should be a must-have part of your household expenses. Family life insurance is an excellent, low-cost way to protect your family from the worst. The cost of family term life insurance is low enough that it won’t be a significant financial burden. And it could have enormous benefit when your family needs it the most. If you aren’t sure where to start, consider getting a life insurance quote through Ratehub.ca. We’ll connect you with a preferred and licensed insurance broker who can help with any questions you may have. 

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