Life insurance in Canada: Why you should buy a policy in 2025

With files from Samantha Kohn

This article was published on May 21, 2025 and was updated on September 23, 2025.

For many Canadians, life insurance is a basic element of responsible financial planning. While purchasing a policy is especially important for people with children or other dependents, it’s also smart for anyone focused on building a solid financial future. Yet, many Canadians are living without life insurance or with gaps in their coverage.

It’s no secret that the cost of living in Canada has skyrocketed in recent years. With everything from food and housing to insurance premiums on the rise, it makes sense that you may be delaying purchasing a life insurance policy right now. However, gaps in financial protection can leave you and your loved ones vulnerable in the event of a worst-case scenario. 

This article breaks down the current landscape of life insurance in Canada and explains why coverage still matters, despite rising costs.

What does life insurance in Canada look like?

A new report from PolicyMe reveals that almost half of Canadians don’t have life insurance or don’t know if they do. Let’s break down key statistics from the report: 

• 42% of Canadians don’t have life insurance
• 65% of uninsured Canadians are unlikely to get coverage in the next 5 years
• 34% of Canadians say life insurance is too expensive (42% with children also say this)
• 27% of Canadians don’t believe they need life insurance
• 10% of Canadians say high living costs delayed their insurance plans

Most shockingly, 1 in 4 Canadians aren’t confident their families would be financially secure if they passed away. 

Looking at the data, it’s clear that the cost (or perceived cost) of life insurance is the biggest deterrent for Canadians purchasing coverage. With more strain on wallets across the country, additional monthly premiums can seem like an unnecessary expense. However, skipping out on a policy means most Canadians are living in financial limbo. 

The consequences of not having life insurance could mean:

• Your family can no longer afford to live in your house
• They take on your student loans or credit card debt
• They file for bankruptcy to keep up with bills, funeral costs, mortgage payments, child care and other everyday expenses

Other reasons for not having coverage, according to the survey, include:

• 26% of Canadians feel discouraged by the medical tests required to get a policy
• 21% of Canadians believe that insurers only pay out half of claims or less. 

So, are the worries true? Let’s address common myths about life insurance.

Life insurance has benefits even when you’re young and healthy

It’s clear that cost is a concern for many Canadians. However, the reality is that purchasing a life insurance policy can be affordable and offer peace of mind – especially for young and healthy individuals. 

In fact, delaying the purchase of a policy can actually cost you more. Life insurance premiums increase by 8% each year you get older. Therefore, putting off coverage will make the policy even more expensive in the future.

Beyond affordability, a new study from Blue Cross reveals that purchasing life insurance can have a positive impact on mental health. Key statistics from the survey show:

• 89% of insured Canadians say life insurance supports their mental health. 

• 68% feel prepared for unexpected events
• 62% say having coverage reduces their worry about the future. 

The survey highlights stress among Canadians due to financial challenges, which is felt most by younger generations: 79% of millennials and 89% of Gen Z respondents. 

While 61% of total respondents have some form of life insurance, most come from workplace group benefits, and 89% worry that coverage isn’t enough. 

Also read: Why aren’t more Millennials and Gen Z buying life insurance?

Even with rising living costs nationwide, having a small amount of coverage is better than being unprotected. 

Purchasing short-term coverage, such as a 10-year term insurance policy, is an excellent step to enter the life insurance market. You’ll set up financial protection for yourself and your family, while locking in a lower rate that can be renewed or converted later in your life, offering you security in the meantime. 

So, which policy type is right for you?

Common types of life insurance policies

Most Canadians choose between three main types of coverage, each with its own pros and cons. Remember, there’s no one-size-fits-all option. The right policy depends on your budget, your long-term goals, and who you're trying to protect. 

Term life insurance

Term life insurance is the most affordable and straightforward option. It covers you for a set period – usually 10, 20, or 30 years – and pays a benefit if you pass away during that time. It’s ideal for temporary needs, such as a mortgage payments, credit card debt, or raising kids.

Whole life insurance

Whole life insurance is a type of permanent coverage that lasts your entire life. Premiums are fixed, the death benefit is guaranteed, and the policy builds cash value at a steady rate over time. Some policies also pay dividends.

Universal life insurance

Also, permanent, universal life insurance policies offer more flexibility. You can adjust your premiums and death benefit as your needs change, and the cash value grows based on investment performance. You manage the investment side yourself, so it requires more attention.

The main differences between whole vs universal life insurance (both permanent forms of coverage) comes down to control. Whole life is fixed and predictable, while universal life offers flexibility but demands more involvement.

How to find affordable life insurance coverage in Canada

Here are steps you can take today to minimize your premiums and maximize your coverage:  

Think about how much coverage you need

Identifying what coverage you actually need will help you avoid overpaying. The first step in finding affordable life insurance in Canada is determining how much coverage you need to ensure your loved ones are protected if you pass away.

One rule of thumb is to use the DIME formula, which adds the sum of your existing debts, income, mortgage payments, and education costs. Use that value as a guideline to take out a policy that covers it all and more. 

Also read: How much life insurance do I need?

Choose the right type of policy

Term life insurance is usually the most affordable, especially if you’re under 40 and healthy. It gives you solid coverage at a lower price that you can convert into a long-term policy when you’re ready. Whole and universal life insurance policies cost more, but they last forever and have a savings component. 

Do your research to determine which type of policy makes the most sense for your lifestyle and budget. 

Also read: Term vs. whole life insurance: which one is right for you?

Start small with a 10-year policy

A short-term policy is a smart way to get coverage while on a budget. Ten-year term policies are affordable, as low as $10/month for $100,000 coverage, and can be renewed or converted into a long-term policy when you’re ready. (The quote sample is based on a 40-year-old non-smoking male in Toronto, Ontario.) 

An added benefit is that if you choose to renew your coverage, you will not be required to complete a medical exam, which is ideal for older individuals who will face higher premiums. 

Starting with a short-term policy keeps you protected without locking you into expensive long-term rates, which is a great option when waiting for the economy (or your budget) to stabilize. 

Compare quotes before buying

Prices for life insurance vary between insurers, so comparing quotes will help you avoid overpaying and find the lowest rate with the best coverage for your needs. 

Use Ratehub.ca's life insurance quote tool to shop the market and find the best life insurance policy in Canada based on your needs, health status, and budget. Research may save you thousands of dollars in premiums over the life of your policy.

The bottom line

Buying life insurance in Canada is a smart financial move. In a world where costs are rising and the future feels unpredictable, having the right coverage in place can offer real peace of mind. Buying early while you’re young and healthy will help you lock in lower rates.

Whether you're just starting your career, raising a family, or thinking about long-term goals, now’s a great time to explore your options. With the right policy, you can feel confident knowing your loved ones will be looked after if something happens to you, without spending a fortune. Compare life insurance quotes online and discover how affordable it can be.

Also read:

• Do you need life insurance under 35?
• The top benefits of life insurance for Canadians
• How does age affect life insurance rates?