Best Life Insurance Rates

In today's day and age, life insurance is a necessity. Shopping around and getting a quote online can help make sure you're getting a fair price. We compare the most competitive providers, to bring you the best life insurance rates in Canada.

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Who needs life insurance?

The short answer: you do.

If you’re a single, multi-millionaire with no dependents and no debt, well, then you may not need life insurance. If you are - congratulations. You can stop reading now.

But if you’re like most of the population, you have some debts and have people who depend on you in one way or another. This is why you buy a life insurance policy. It’s a way of ensuring that your loved ones won’t be faced with financial hardships following your passing. Even if you have a small life insurance policy, this can help offset the cost of a funeral, making a stressful and emotional time a bit easier for your loved ones.


What types of life insurance can I buy?

There are two types of life insurance sold in Canada - term and permanent. So, what’s the difference between the two?

Term Life Insurance is a policy that covers the insured for a specific period of time. Whether you select coverage for ten, twenty, or thirty years, the cost to you will remain the same - premiums are fixed regardless of any changes in your health. This makes term life insurance a cost-effective solution for individuals looking for coverage. Another advantage of term life insurance is that many policies can be converted to permanent insurance regardless of any changes to your health, job, or lifestyle. If you’re young, healthy, and are looking for simple coverage to protect your family, convertible term is likely the way to go.

A term life insurance plan is generally very affordable, and you can always customize it to the amount of coverage you want. For less than a cup of coffee a day, you could get coverage of up to $500,000 by some providers (based on being a male, non-smoker, under 30 years of age).

So what’s the advantage of this? For one, getting coverage when you’re young and healthy makes it easier to continue being insured as your life goes on. If you get sick, and then want to apply for coverage, it’s going to be a lot more difficult to get. Likewise, if you want to “graduate” to a whole life or participating life policy, it’s generally pretty easy to switch a term life plan over, rather than start afresh.

Permanent Life Insurance is coverage that, as the name suggests, is coverage for an entire lifetime. The cost of permanent life insurance can be significantly higher than term, given that the payout is guaranteed - while the insurance company might not know when they’ll have to pay out, they do know that they will. Permanent life insurance in Canada can take one of three forms - Whole, Universal, or Term to 100.

Before you jump into signing up for a whole or universal life policy, be warned that these can get expensive. Because the annual cost of permanent insurance is so much greater than term life, it is not often possible for younger individuals to pay the high yearly premiums. Instead, it is often a better idea to pay for the term insurance, and invest the differences something like an RRSP, TFSA, or mutual fund. Later in life, if you’ve managed to save up a good nest egg, and are maxing out your yearly contributions to RRSP and TFSA, it might be a good time to get in the game with a participating life insurance policy. Of course, if you have a term life policy already, you want to make sure that you’re able to transfer it to a participating life policy.


What is the difference between whole, universal, and term to 100 insurance?

Whole Life Insurance is one of the most popular forms of permanent life insurance. Regardless of your state of health, with whole life insurance, your premiums will never change. This form of coverage can be beneficial in estate planning, since you can account for your policy to pay out. One of the most popular forms of whole life insurance is called participating whole life. The most attractive part of these types of policies are the different ways the policy can be used for financial planning and investing.

The investment component of participating whole life insurance primarily functions through two mediums. First, the insurance company will pay out a dividend to the policyholders each year. The premiums in participating policies are collected from all the policyholders and placed into an account. After the necessary policies are paid out, the returns the insurance company gains from investing the premiums can be paid back to policyholders. While dividends aren’t guaranteed, participating life insurance provides a great opportunity to use the profit to pay future premiums, increase your insurance coverage, or simply have some extra pocket cash. The second medium through which whole life insurance policies function as an investment is that policyholders can pay into the policy over-and-above their premiums and further contribute to the cash value. The benefit of doing so is that it allows the policyholder to invest the policy in a tax-deferred way within the policy - so for individuals who have maxed out their RRSPs and TFSAs, having the ability to invest in the policy can be a smart tax planning move.

Universal Life Insurance is arguably one of the most sophisticated insurance products on the market. Unlike whole life insurance, premiums in universal life insurance can change over the course of a policyholder’s life. While purchasers of universal life insurance can buy policies with fixed (level) premiums, policies with premiums that increase with age (stepped premiums) are the most common. Like whole life insurance, however, the payout of universal life insurance is guaranteed to payout at any age, so long as premiums continue to be paid.

The other primary differentiator between whole and universal life is the way that the investment component works. Unlike the dividends in whole life insurance, with universal life insurance the policyholder gets to choose how the funds in the policy are invested. Whether the policyholder wants to invest in stocks, bonds, mutual funds, or the money market, universal life insurance allows the policyholder flexibility. Like whole life insurance, policyholders of universal life insurance also have the ability to pay into the policy over-and-above the premiums to accumulate a “cash value” that can be invested in a tax deferred way. While the cash value can be accessed by the beneficiaries at the time of death, the funds are not locked away forever. Should a policyholder want to access the funds accumulated in the policy while they’re still alive, this is possible through several techniques - simply withdrawing the cash (with tax implications) or taking a low-interest loan putting up the policy as collateral, allowing policyholders to access their cash value in their lifetime in a tax-favorable way. So fear not - the funds you put into the policy can still be used in your lifetime.

Term to 100 is an exclusively Canadian product and the simplest form of permanent life insurance. Unlike whole and universal life, term to 100 has no investment component. For higher premiums, it simply guarantees that a policyholder will see their policy pay out should they die before the term (usually 100). The simplest way to think of term to 100 is as term insurance with a longer time horizon.


Are there other types of life insurance?

You bet there are! Guaranteed Life Insurance is insurance that is available without having to complete a medical questionnaire or undergo a physical. This type of insurance generally costs more than term-coverage, and the payout is usually maxed out at a much lower rate (typically $25,000-$50,000). Because there is a lower payout, guaranteed life insurance is generally for people who have not been able to obtain alternate insurance. It’s ideal for people who are seeking coverage to cover potential funeral costs, and is generally sought by elderly individuals.

There’s also Mortgage Life Insurance, which effectively is a form of Guaranteed Life Insurance. Mortgage life insurance will use your life insurance policy to pay off your remaining mortgage upon your death. This can be a great option if you want to ensure that your dependents are able to remain in your house upon your demise – especially if they are unable to make the payments independently. With a mortgage life policy, your premiums will often be used against your mortgage as well, but when and if your mortgage is paid off, your premium will remain the same. It is important to note that your mortgage lender will be listed as the beneficiary in a mortgage life policy. So even if you pay off your mortgage in advance of your death, your dependents will not be entitled to any of your death benefit. For this reason, mortgage insurance is more restrictive than traditional life insurance - it is not advisable to purchase mortgage life insurance before other forms of life insurance.

Joint First-To-Die Term Life Insurance is a policy that covers two individuals under one policy. As the name suggests, the policy pays out when one of the two named individuals dies. This term policy is generally cheaper than two individual life insurance plans, but is terminated after the first individual passes away. In this event, if the surviving party named in the insurance policy wants to continue to have coverage, she will have to re-apply individually.


Does life insurance require a medical exam?

While it’s true that most life insurance providers require a medical exam, a Harvard Law test this is not. Think of it as a trip to your doctor’s. An appointment will be scheduled, you’ll show up to an office, and you’ll pretty much have a full check-up. Things that might be out of the ordinary are a blood, urine, and saliva test, and an electrocardiogram. You’ll answer some questions, and the whole thing should be done in 30-60 minutes. Easy enough, and no studying before hand necessary.

As with every test, though, it’s important not to cheat. If you lie during the questionnaire, for instance saying that you don’t smoke, and your tests indicate you do, you could be disqualified from receiving any insurance coverage, or have to face much higher premiums than anticipated. Honesty is always the best policy.


How much coverage do I need?

That all depends. How many dependents do you have? What types of debts? Do you have a mortgage?

A lot of insurance companies offer an insurance calculator to help you determine the amount of coverage you’ll require. This is a helpful way of determining what you possibly need, and how much the premiums will cost.


Who should I name as my beneficiary?

The beneficiary is the person who will receive the payment of your insurance policy. You can name anyone you want – your partner, a family member, a dependent, even a charity. If you want, you can even name more than one beneficiary, and instruct the insurance company on how to allocate the premiums.

Your beneficiary can be either revocable or irrevocable, and the designation is exactly what it sounds like. If your beneficiary is irrevocable, you need their signed agreement to change who is named. In Quebec, if you name your spouse as beneficiary, they automatically become irrevocable unless you explicitly name them as otherwise.


Compare life insurance policies

You’ve made it this far, which is a great start. A next great step is to compare life insurance policies, to find out what type of plan works for you, and how much coverage you might need.

After you fill in the necessary applications and take the necessary exams, it’ll take about a month or so for your coverage to be put in place. But once that’s done, you’re off to the races. As long as your premium is paid up, you’re covered.

Life insurance doesn’t need to be complicated or intimidating. By doing your research, comparing life insurance rates, and knowing what it is that suits your needs, you can find a policy that provides you with suitable coverage, and ensures your loved ones have a bit of financial security in the event of your death.


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