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How Life Insurance Differs From Home and Car Insurance

When you buy insurance for your home or car, the contract typically lasts one year. You’ll likely be offered insurance for another year but the premiums and coverage can change—even if you don’t make a claim. Life insurance is quite different. Let’s compare.


Home and car insurance premiums increase with inflation and claims. Coverage tends to remain affordable if you’re a good risk.

If you bought life insurance for one year at a time, your premiums would become less affordable each year because your chances of dying increase with age. If your health deteriorated, your premiums would increase even more and you might not qualify for insurance from another company. Fortunately, life insurance is designed to prevent these problems and provide peace of mind. Premiums are usually guaranteed and options such as term 100 have level premiums for life.


You can easily change your home and car insurance company. Switching life insurance companies is much more difficult. If your health has deteriorated, you may not qualify for new coverage.


Home insurance companies can change the terms of your contract at each renewal. For example, after floods in your area you might find that your coverage is reduced or your premiums are increased even if you never had a claim.

Life insurance contracts tend to have many guarantees that prevent the insurance company from modifying your coverage. Guaranteed premiums are available to prevent surprises.


Home and auto insurance isn’t portable. The coverage is for a specific property or vehicle. Life insurance is portable. The coverage is on your life. You can move to another city, province, or country and still maintain your benefits.


Your home/auto insurance company can cancel or refuse to renew your coverage. For example, an Ottawa family lost their home insurance because they have foster children. Common reasons include: Repeated claims, missing payments, or a drop in your credit rating.

With life insurance, your credit rating doesn’t matter after purchase and you’ll only have one death claim. You can skip payments if you have permanent life insurance with sufficient cash value.

If an insurance company decides to exit a market segment, you can lose your home/auto coverage but not your life insurance. For example, RBC Insurance stopped selling permanent life and health insurance in 2012 but the contracts in place continue.


Your home insurance does not depend on your health. The asset being protected is a property. With life insurance your health is essential to the question of whether you qualify and how much you pay.

Home insurance pays based on damage to a property. Life insurance pays upon the death of a person. It’s the most personal of coverages available.

Tax-sheltered growth

Permanent life insurance can allow tax-sheltered growth, much like an RRSP or TFSA. Home and auto insurance never does and it isn’t permanent.

Inflation protection

Home and auto insurance tends to keep pace with inflation (and your premiums increase accordingly). Term life insurance has a fixed coverage amount and loses value to inflation unless:

  • You add more coverage later
  • You buy enough life insurance at the outset

With permanent life insurance, you can select options with increasing death benefits.

Who gets the money?

Home and auto insurance benefits are payable to you or the repair shop. Life insurance benefits are payable to your beneficiaries. You can’t receive a penny because you’ll be dead. Life insurance is very selfless as you’re looking after your obligations and dreams after you’re gone.

The fine print

Home and auto insurance tends to have limits and exclusions. Life insurance tends to be black and white. The full death benefit gets paid. There are exceptions during the first two-plus years for suicide and at any time for fraud.

Legal requirements

Buying home insurance may be legally required. Buying car insurance is legally required. Buying life insurance is optional. How strange. Protecting yourself is optional but protecting property is not. Which is more valuable?

Get a life insurance quote now.

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Flickr: David Hilowitz