Matt Hands, VP, Insurance and MoneySense
A life insurance policy is essentially a contract between you – the policyholder – and your insurance company. By paying regular premiums, either monthly or annually, your provider agrees to pay a lump sum of money to your dependents after you pass away. So if you have loved ones around you that rely on you financially, a life insurance policy can provide peace of mind as they'll still be covered after a worst-case scenario.
If you're looking to purchase life insurance – or to simply find out how much you could be paying – we make it extremely easy for you to do so. In just a few steps, we can show you life insurance quotes from over twenty top providers across Canada. That way, you can secure the coverage you need, knowing you're getting the best offer on the market.
The money your beneficiaries receive after your passing is also known as a death benefit. This reserve can generally be used for anything they wish – so life insurance can cover a variety of needs, such as:
If the home hasn't been paid off yet, a life insurance policy can cover the remaining payments needed.
If your family relies on your income for everyday expenses (e.g. groceries), life insurance can step in to help.
The death benefit can be used to cover end-of-life expenses, such as funeral, burial, or cremation fees.
If you have debt that will be passed on to your loved ones, life insurance can help pay it off.
Life insurance can help fund your child's education in the event you're no longer there to do so yourself.
Even if there's no specific need, a life insurance policy can be a gift for your loved ones.
Term life insurance
Whole life insurance
Universal life insurance
Critical illness insurance
Mortgage life insurance
Family plan insurance
How much life insurance do I need?
The amount of life insurance you should purchase will vary on a case-to-case basis. Aside from the needs of your dependents, a few things to consider include your current income, your remaining debts, and your outstanding mortgage. By comparing quotes with us, we can connect you with a licensed broker who will guide you through the process of finding the right policy for your needs.
Looking for affordable life insurance in Canada?
We've got you covered – compare the market with our life insurance calculator to find your lowest rate today.
The cost of life insurance will differ based on your needs as a policyholder, as well as the risk you bring. For reference, here are a few rates we pulled from the market in January 2024. To find out the exact cost you'll be paying, be sure to compare life insurance quotes with us today.
20-year term policy with $500,000 coverage
for a 35-year-old, non-smoking male
Whole life policy with $400,000 coverage
for a 40-year-old, non-smoking male
Universal life policy with $700,000 coverage
for a 50-year-old, non-smoking female
There are many individual factors life insurance companies take into account when calculating your quote. Here, we cover a few main ones, so you can better understand the ins and outs of your coverage.
The older you are, the more expensive your life insurance policy will be. And some insurers won't offer you coverage after passing a certain age.
Males generally pay more for life insurance than females – statistically speaking, men are at higher risk of passing away earlier.
Health & lifestyle
A pre-existing condition, family history of illness, or participating in activities like heavy drinking and smoking, can come with higher premiums.
Term life insurance is generally much more affordable than permanent life insurance, simply because the death benefit could potentially expire.
A 5-year term policy will cost less than a 30-year policy because you're far less likely to pass away during a short period of time.
It's no surprise that the larger the benefit you choose, the more you'll be paying in premiums during your lifetime – added protection comes at a cost.
In Canada, life insurance can be purchased as an individual plan or a group plan. According to the Canadian Life and Health Insurance Association, over 80% of policies are purchased independently through an agent or advisor. While 2022 life insurance premiums totalled $27 billion, 83% of this came from individual life insurance while 17% of this came from group life insurance.
of life insurance premiums are from individual policies
of life insurance premiums are from group policies
On the other hand, group term life insurance made up 35% of the value of total policies in-force within 2022. Individual policies made up 65% – with a breakdown of 40% term life insurance, 12% whole life insurance, and 13% universal life insurance. Individual life coverage continues to grow as compared to a decade ago in 2012, these policies took up just 58% of the market.
40% of the total policies in-force value were individual term life insurance in 2022.
12% of the total policies in-force value were individual whole life insurance in 2022.
13% of the total policies in-force value were individual universal life insurance in 2022.
The coverage on a life insurance policy can be an indication of many factors, including age, income level, and dependent needs. So while the amount of protection you need will differ based on your own circumstances, taking a look at the market trends can be insightful. The table below outlines the average protection per insured household, as well as the median age of policyholders in each Canadian province – all data was sourced from the Canadian Life and Health Insurance Association.
Ready to secure life insurance in Canada?
We've got you covered – compare the market with our life insurance calculator to find your lowest rate today.
Who needs a life insurance quote?
If you're a multi-millionaire with no dependents and no debt, you may not need life insurance. However, if you're like most of us, and you have some debt and people who depend on you financially, you should consider purchasing a life insurance policy. It ensures your loved ones won't suffer financial hardships after you pass – even a small death benefit can help offset the cost of your funeral, making a stressful and emotional time a bit easier on your family.
What is the difference between whole life and term life insurance?
Neither term life insurance nor whole life insurance is the superior option – they are different products for different jobs. And sometimes, you'll want to have both.
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 monthly or annual payment amount 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 often be converted to permanent insurance, regardless of any changes to your health, job, or lifestyle.
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 fresh. So if you’re young, healthy, and are looking for simple coverage to protect your family, this type of policy may be just the way to go.
Permanent life insurance, on the other hand, is coverage that lasts for an entire lifetime. The cost of permanent life insurance is generally significantly higher than a term policy, given that the payout is guaranteed – while the life insurance company might not know when they’ll have to pay out, they do know that they will eventually. Common types of permanent life insurance in Canada include whole life insurance, universal life insurance, and term to 100 life insurance.
Before you jump into signing up for a permanent life policy, be warned that these can get expensive. Because the annual cost of permanent insurance is so much greater than term life, it's often not possible for younger individuals to pay into the high premiums. Instead, it can be a good idea to buy term life insurance and invest the difference in an RRSP, TFSA, or mutual fund. If you’ve managed to save up a good nest egg later in life, and you're maxing out your annual investment contributions, it might be a good time to look into a participating life insurance policy then. Of course, if you have a term life plan already, you want to make sure that you’re able to transfer it to a participating policy.
For more information, be sure to check out our blog: Term life vs. whole life insurance – which one is right for you?
What other types of life insurance are available?
While term and whole life are amongst the most popular policies, here is a brief overview of some specialized types of life insurance plans in Canada.
- No medical life insurance is exactly what it sounds like – a kind of life policy you can buy without having to undergo a medical examination. Many people prefer this kind of insurance because it's easier and less time-consuming to get and because it's a viable option for those with pre-existing conditions. No medical life insurance is often more expensive than a standard policy as insurance providers have less information to evaluate your health. People in good health tend to opt for standard policies, instead.
- Guaranteed life insurance falls under the category of no medical life insurance – the coverage is available without having to complete a medical questionnaire or undergo a physical exam. This type of insurance generally costs more than term coverage, and the payout is usually maxed out at a much lower rate (typically between $25,000 and $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 those who are seeking coverage to cover potential funeral costs, and it is generally sought by elderly individuals.
- Mortgage life insurance is effectively a form of guaranteed life insurance. This type of coverage uses 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's 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 your death benefit. For this reason, mortgage insurance is more restrictive than traditional life insurance – it's 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 plan. 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 it's also 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, they will have to re-apply individually.
What is a life insurance 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, or even a charity. And if you want, you can even name more than one beneficiary, as well as instruct the insurance company on how to allocate the premiums.
Your beneficiary can be either revocable or irrevocable – if your beneficiary is irrevocable, you need their signed agreement to change who is named. With life insurance in Quebec, if you name your spouse as a beneficiary, they automatically become irrevocable unless you explicitly designate otherwise.
Can you get life insurance with pre-existing conditions?
Although life insurance companies may deny you traditional coverage if you have a pre-existing condition, you can look into other options, such as a guaranteed life insurance policy. These policies are designed for those who typically won't qualify for other types of life insurance. Keep in mind that the death benefit is generally capped much lower while premiums will be much higher due to the added risk your condition brings.
At what age should a person get life insurance?
There isn't a designated age at which you should purchase your life insurance policy – it all depends on your own needs (and the needs of those that depend on you financially). The general rule of thumb is that life insurance will be cheaper the younger you are, so purchasing coverage early can help lock in cheaper premiums.
However, you might not need life insurance in your 20s if you don't have a mortgage or children. Once you do start accumulating debt and providing for other people, you may want to consider life insurance – you wouldn't want to leave your loved ones in financial trouble in the event of your passing.
How long does it take life insurance to pay out?
After a valid death claim is made, it generally takes between 14 and 60 days for a life insurance policy to pay out. Most of the time, however, you'll receive the benefit within 30 days.
What doesn't life insurance cover?
While life insurance covers most causes of death, here are a few situations in which a payout could be denied:
- Risky activities – Deaths due to high-risk jobs and activities, such as scuba diving, may not be covered, depending on the circumstances. If you engage in these, be sure to inform your insurer ahead of time.
- Suicide – While life insurance does generally cover suicide, there is usually a set period of time in which the death won't be covered – typically within the first two years of an active policy.
- Murder – If your beneficiary commits your murder (or is closely tied to it), they won't be receiving your death benefit. Instead, the money goes to either your contingent beneficiary or your estate.
- False information – Lying to your insurance company during the application process can be grounds for denying a payout when your beneficiaries need it the most. So it's best to stay truthful, even if you'll face higher rates.