How to update your life insurance policy in Canada after major life events

Life insurance is a financial safety net for the people who depend on you. If you pass away, the payout from your life insurance policy can ensure your family has the money they need to cover everyday expenses, pay off debts, and maintain their quality of life. 

Unfortunately, many Canadians don’t take advantage of this critical layer of protection. According to a 2024 study by LIMRA, just 57% of Canadian adults say they have life insurance, leaving many either without coverage or underinsured. This means their families would be left unprotected in the event of their death.

Updating your life insurance policy after significant milestones such as getting married, buying a house, or having kids helps make sure your family will be taken care of if the unthinkable happens. After all, the life insurance policy you bought when you were a single renter in your twenties probably won’t cut it once you’re juggling a mortgage, car payments, and toddlers with expensive snack preferences.

What are the major life events that require a life insurance polixy update?

Life changes fast, and your insurance needs can change just as quickly. Here are some major life events that should nudge you to take another look at your policy:

• • • You get married or divorced
    • You have a baby or are adopting a child
    • You buy or sell a home
    • You change jobs or lose workplace coverage
    • You become ill or disabled
    • You’re nearing retirement

 

Marriage

When you get married, your financial priorities shift from just looking after yourself to planning a future with another person. This milestone is a great time to consider a joint life insurance policy. 

Joint life insurance policies are appealing for many couples because they are usually less expensive than buying two separate policies. However, choosing this type of coverage can come with less flexibility and complications if there is an age gap, health differences or if the marriage doesn’t work out. There is also only one death benefit paid in a joint policy, either after one partner passes (joint first-to-die) or after both pass (joint last-to-die). 

If you’re getting married, consider your financial situation and goals to help you decide which policy is best for you. 

Also read: What’s the point of joint last-to-die life insurance? 

Divorce

Divorce is one of those life changes that makes updating a life insurance policy essential. If your marriage ends, you want to ensure that you update the beneficiary listed on your life insurance policy. Most people don’t want their ex-spouse to be the primary beneficiary when they pass away.

Birth of a child

Babies bring joy, and bills. Becoming a parent is a significant life change, as it means you’re now responsible for another human being. That’s why this is such a necessary time to review your policy and consider making changes to include your child.

This can include adding a child term rider (CTR) to your existing life insurance coverage. Riders are often an inexpensive way to get insurance for your child and guarantee their insurability. When they reach the required age, they can then convert the rider into a permanent policy. 

Also read: How life insurance for children works in Canada

Buying a home

Buying a home is a significant life event, and taking out a mortgage is a huge commitment. Ask yourself: if something happened to you, could your family afford to keep the house? 

Becoming a homeowner is one of those major milestones that causes many to rethink their life insurance coverage. You may decide to opt for mortgage life insurance or purchase extra term life insurance that lasts as long as your mortgage. This added layer of protection helps ensure your loved ones won’t have to worry about losing their home if you die.

Downsizing or selling a home

If you’ve sold your home or paid off your mortgage, you may not need as much life insurance. This could be a good time to reduce your coverage and save on premiums. But before you make changes to your policy, consider your financial situation. Do you want your partner to receive a death benefit to cover funeral expenses or other costs? In this case, consider converting your life insurance coverage into a smaller plan that still offers some protection. 

Job changes

If you’ve switched jobs, don’t forget about your group life insurance benefits at work. Group life insurance plans usually only cover one to two years of your salary, which may not be enough, and they don’t follow you when you leave. 

To ensure you have adequate coverage, consider taking out your own life insurance policy that stays with you no matter where your job takes you.

Critical illness or disability 

Getting diagnosed with a critical illness or disability is a significant event that can drastically change your life and your coverage needs. ​​Even if it’s not you who becomes ill, but someone close to you, it can prompt you to think about your future. While unfortunate, it’s a good opportunity to review your coverage and ensure you’re financially protected. 

You may want to consider purchasing additional insurance products, such as critical illness, no-medical and disability insurance.

• Critical illness insurance covers you if you develop an illness such as cancer, stroke, or a heart attack. However, it will not cover you for pre-existing conditions, only future unforeseen circumstances.
• No medical insurance is an option if you have a pre-existing condition, you’re looking for coverage that doesn’t require a medical exam. It’s typically easier and less time-consuming to get, but it often comes with higher premiums.
• Disability insurance provides income replacement if you’re unable to work because of physical injury, health condition or mental illness. You might have coverage through your employer, but it likely has limits. 

If you’re thinking about how to protect yourself financially in a worst-case scenario, consider purchasing insurance sooner rather than later. Premiums tend to become more expensive with age, as the risk of a payout increases.

Retirement

When you retire, your needs change. You may not need a big policy anymore if your kids are grown and the house is paid off. However, some retirees maintain a smaller senior life insurance policy to cover final expenses or to leave a legacy for their family.

Why do you need to update your policy?

Your life today probably doesn’t look the same as it did when you first bought your life policy. Here’s why it’s important to keep it current:

Avoid underinsurance

Underinsurance means you don’t have enough coverage to cover your family’s needs in the event of your death. According to LIMRA, nearly one-third of Canadians are living with a life insurance gap, with 31% of Canadian adults saying they need or need more life insurance coverage. That’s millions of people whose families could be in real trouble if the worst happened.

Life gets more expensive

Marriage, kids, and mortgages make life more expensive, and your family will need to cover these costs on their own if you pass away. If your policy hasn’t changed in years, it probably doesn’t cover what your family would need today.

Also read: The cost of living is rising: Do you have enough life insurance?

How to update your life insurance policy

Updating your life insurance policy doesn’t need to be complicated. A few simple steps can keep your coverage in line with your recent life changes and the life events that are sure to follow.

Step 1: Figure out what you need

Think about your current situation. Do you have a new mortgage? A bigger family? More debt? Add up what your family would need to stay afloat if you weren’t here.

Step 2: Review your policy

Check your current policy. How much does it pay out? Who gets the money? Does it have any extra features, such as riders? Determine if you require additional coverage or a different type of policy.

Step 3: Shop around

Use online tools to compare life insurance quotes and get an idea of how much extra coverage would cost and whether it makes sense to adjust your policy or get a new one.

Step 4: Talk to an expert

A licensed broker or advisor can walk you through your options and explain how any changes will affect your costs.

The bottom line

Life changes, and so should your life insurance. Whether you’ve tied the knot, had kids, changed jobs, or bought a house, updating your life insurance policy is one of the simplest ways to protect the people you love.

Dealing with life insurance isn’t fun for anyone, but avoid the temptation to put this off. Take a few minutes to review your policy, compare quotes online, and make sure your life insurance policy is still doing its job. Your future self (and your family) will thank you.

Also read: 

• Top 8 biggest myths about life insurance debunked
• How much does life insurance cost in Canada?
• Life insurance in Canada: An overview of market trends and costs