How to find the best life insurance policies in Canada ?

Alexandre Desoutter Alexandre Desoutter  updated on 2021-06-10

After witnessing a global pandemic and slowly reaching normalcy, one thing has become obvious: life insurance is a necessity. Whether you want life insurance policies for your kids, family or yourself, finding the best life insurance coverage requires meticulous research. You need to do your due diligence by ensuring that you make an informed decision to protect your family.

You are therefore looking for the best life insurance options in Canada ?

When it comes to finding the best life insurance Canada, you should definitely consider how much you want the policy for, and what kind of benefits you would like to receive. We are breaking it down for you with a list of essential questions that will give you more insight on which life insurance policies will work best for you and your family.

Life insurance in Canada : how does it work ?

Life insurance is a contract between an insurance policy holder and an insurance company. The life insurance contract holder designates a beneficiary, who receives an amount of money agreed in the contract upon the death of the insured person. Terminal of critical illness are sometimes situations in which the payment can be triggered, depending of the terms of the contract.

Basically, the life insurance policy holder pays to the insurance company a monthly premium in most cases, but the contract can also be paid as one lump sum. Life insurance contracts usually cover funeral expenses, so that they are not a burden for the contract holder’s family.

Why should I take an insurance life policy ?

You may have heard the old saying: “An ounce of prevention is worth a pound of cure.” The same applies to your life insurance policy. That’s because taking out a life insurance policy can decrease costs that you and others will incur when it is time to collect the benefits payable. This in turn can save you thousands over the course of your lifetime.

In addition, some life insurance policies may offer tax savings by shielding your estate from any taxes due on cash distributions in excess of amounts payable under the policy.

Why do life insurance cover ?

You may need a life insurance policy to ensure your family is looked after if anything happens to you.

A life insurance payout could cover:

  • paying the mortgage on your family home, if you’re the sole breadwinner or you need both incomes to be able to keep up the payments;
  • looking after a dependent partner if you have very young children;
  • paying for university tuition for your children;
  • paying for full time childcare if a non-earning partner dies;
  • looking after an aged parent or disabled child, if you’re a carer;
  • repaying debts.

You may also be concerned that if you die, your family might have to give up on some of the better things in life – music lessons, horse rising, or holidays. A life insurance policy will ensure your loved ones don’t have to make those sacrifices.

If on the other hand you’re single, without debts and fancy free – you can probably do without, at least for now! (Though since life insurance is cheaper to buy when you’re younger, you might consider getting it arranged now if you see a spouse, mortgage and kids in your crystal ball.)

What are the different types of life insurance policies in Canada ?

When you make a decisive choice, you have to know all the options that are available. However, choosing from different types of Canada life insurance must be executed after a thorough study that reflects on your income, personal requirements and preferences. Moreover, the amount of money you receive will depend on the type of policy you have purchased. You pay a monthly premium for life insurance. Your age, health, lifestyle and the amount of coverage you need, as well as your life insurance policies will determine how much you pay.

Term life insurance

This is a low-cost but limited coverage policy that is designed to provide protection for a specific length of time or “term.” Term insurance does not build any cash value or accumulate new benefits over time. Term life insurance covers a predetermined period of time that can range from 5 to 30 years. Once your term is up, you’re done paying premiums and will not be able to renew the policy. Term insurance provides a death benefit to your beneficiaries, typically in the form of a lump sum cash payout or with regular payments over time.

Whole life insurance

This is a long-term policy that provides coverage for your entire lifetime. These policies build cash value and accumulate new benefits over time. You are able to build up money in your policy through premium payments, which gives you the option to draw on these funds depending on your needs in the future.

Universal life insurance 

Universal life insurance is a popular policy that combines many of the features of permanent life insurance with the flexibility of term life. Term policies offer a highly affordable way to get started with life insurance coverage, but don’t provide much flexibility for changing your mind down the line about your coverage needs. Universal life insurance, on the other hand, provides some flexibility in how you use your policy’s benefits (you can even borrow against it), while still providing solid protection.

How to choose between term life insurance and whole life insurance ?

One of the main reasons to choose a term policy over your whole life is because you will get no investment in it. You are also required to make regular premium payments. On the other hand, whole life insurance offers a certain amount of investment by purchasing stocks and bonds. However, there is one more important factor: term insurance works when you need it and if you want to start making investments, take a much larger risk and cannot calculate all costs that accumulate and may lead to the complete ruin of your family. (E.g. In case of single parents applying for term insurance, the death benefit is calculated with little consideration about the cost of raising children).

Here below is a table comparing the term life insurance and permanent life insurance :

SituationsTerm life insurancePermanent life insurance
DurationLimitedAll life
Target
  • People with limited means
  • Homeowner with a mortgage
  • All adults wishing to protect their loved ones
  • People who have reached the limits of their savings accounts
InvestmentNoYes
Advantages
  • Low premium when you take it quite young
  • Easy policy to understand
  • Lifetime protection no matter when you die
  • The cost of premiums is guaranteed
  • The cash surrender value increases
  • Advantageous taxation
Life insurance policy types recommandation

What is the cost of insurance life in Canada ?

Obviously there are a lot of factors affecting life insurance costs in Canada. However, as a rule of thumb, a healthy person can usually secure around $250,000 of cover for $15-20 a month.

The exact life insurance price will depend on:

  • Your age
  • Your state of health and medical history
  • Your weight,
  • Whether you smoke or not
  • How much you drink
  • Your lifestyle
  • The sum you want to insure
  • The term of the insurance
  • Any ‘extras’ such as critical illness cover that you want added to the policy.

If you have a critical illness, such as cancer, you may find that it’s more difficult and more expensive to get life insurance. Sometimes insurers may want to exclude your pre-existing condition. Most insurers will want an in-depth medical report so it’s worth talking to your consultant to see what kind of report you’ll get and how that might affect your insurance.

Below are examples of monthly premium amounts for term and permanent life insurance based on age for the same underwriter profile.

Term life (premium increase per level)Whole life insurance
No smoker woman – 30 years old – $100,000 policy Femme non-fumeur de 30 ans pour 100,000 $10 $50 $
No smoker woman – 60 years old – $100,000 policy 64 $178 $
Usual life insurance prices in Canada

How much life insurance do I need?

Getting how much life insurance you need is a tough question. We looked at some of the best life insurance policies for different types of life insurance and different profiles of people. But of course, it very much depends on everyone’s particular needs.

In particular your age will have a major impact on how much life insurance you need, as the table below shows. Here below are some indicative life insurance premiums in Canada for a 100,000$ death benefit. Of course, the more you will be covered, the more your life insurance premiums wil go up.

Age at start of policyMonthly premium
20-30$12
30-40$15,5
40-50$30
Over 50$60
10 years term life insurance rates for a $100,000 death benefit contract (May 2021)

How can I get life insurance quotes in Canada ?

This question is entwined with how much life insurance coverage do you need and it boils down to factors such as how many dependents you have and whether or not you have a mortgage. You can get life insurance quotes online by filling out an application form and sharing your information. You can do this for free. This will provide you with multiple quotes.

Life insurance companies also offer in-person help to get the right plan at the right price. Some life insurance companies have representatives visit your home or place of work to meet with you and help you understand the offerings they have. A representative can review your situation, needs, budget and personal preferences to find affordable coverage options that best suit your needs. 

How to proceed to find life insurance near me ?

Life insurance companies have to provide you with a free quote and then you can compare and choose the right company for your needs. Life insurance can be affordable if you know your options, and the first step is knowing where to look for life insurance quotes in Canada. Choose from a variety of different companies and plans. You can compare prices, coverage and benefits. Look at each company’s website for more information on premiums, plan features, exclusions, riders etc. Once you’ve collected several quotes or rates, choose the one that suits your needs best.

How to find the best life insurance rates online ?

While getting life insurance quotes online offers convenience, it’s important to remember that you must know exactly which type of policy you need before submitting your information online. If you submit personal information to an insurance company without knowing what type of policy is right for your particular situation, the company may be able to locate a suitable plan but at a cost that is higher than the one you would likely qualify for if you had done your research and found a company that specializes in the type of plan you want.

Life insurance is a critical component of financial planning. While one’s estate planning should be the first step towards securing one’s future, there are many situations where it is not feasible or practical to create a Last Will and Testament. This could be the case when one merely wishes to provide for his assets upon their loss; as the owner of a small business; or if the owner has reached a certain age and has no child, grandchild, heir or next of kin that may be able to inherit.

Is there a tax on life insurance benefits in Canada ?

Life insurance proceeds are exempt from taxes under the Income Tax Act. But, if you receive additional income benefits from your life insurance policy, such as monthly cash payments or the accelerated payout of the remaining balance in your policy, those benefits will be considered income and will be taxable.

Mortgage insurance vs. life insurance : which to choose ?

There are many factors to consider when choosing between life insurance and mortgage life insurance is intended to protect your financing in the event you are unable to make payments on your loan.

Mortgage insurance is a permanent life insurance policy that automatically covers the outstanding balance of the mortgage if you die. Mortgage life insurance provides coverage for your outstanding debt, protecting your family from foreclosure or having to sell their home. Life insurance is temporary coverage for a specific time period to provide protection against financial hardship for your family. While both can be helpful when it comes to protecting a major asset, there are some crucial differences between the policies that make them suitable for different situations.

How to calculate the cash value of my life insurance policy ?

When a life insurance company does their calculations, they use the cash value of your policy. This is because the term cash value relates to how your life insurance premiums are collected and paid out over time. It guarantees that you will be able to receive a certain amount of money at a certain time when you decide to make a claim. The amount your policy would be worth after it ceased to pay benefits and if your policy had matured it is referred to as recoverable value.

Therefore the cash value of your life insurance policy is the remaining amount of money that will be left to you. Insurance companies compute this by multiplying the total face value of coverage by an interest rate, subtracting any outstanding loans on the policy, and then dividing the remainder by a specific number of years.

Is there a specific life insurance policy for seniors ?

Yes, in the case of life insurance for seniors, there are policies that start at a lower premium rate and they have extra benefits like travel insurance or reduced deductibles.

Another question you might have is whether life insurance costs more for seniors. No at all. Rates depend on the condition of your health and lifestyle, but there is not an age-based premium adjustment to take into account the greater risk of claims in older people. There are policies designed specifically for life insurance seniors if your needs change due to age or need long-term coverage during retirement years. Life insurance costs much less than funeral expenses or debts left behind by sudden death or disability.

What does life insurance not cover in Canada?

Life insurance will generally not pay out in the following circumstances:

  • If you commit suicide, 
  • If your death occurs due to drink or drug abuse, 
  • If you are killed while committing a reckless or dangerous act. (If you fancy sky-diving without a parachute you’re unlikely to be covered. However, normal sports like skiing are not normally excluded).

If you have a pre-existing medical condition you may also be asked to take a life insurnace policy which excludes that condition.

Should I take out single or joint life insurance policy?

This isn’t quite as easy as it looks, because two single life policies aren’t quite the same as a joint policy. If you and your spouse or partner take out a joint policy, it will only pay out when the first partner dies (a ‘first-death’ policy – ‘second-death’ policies are also available but they are generally used for the specific purpose of insuring against inheritance tax liabilities). That might be all you need if it’s to pay off the mortgage, but then again, you might need more protection if you have young children.

What is a single life insurance policy?

A single life policy covers one individual only. If you have a single policy, and your partner has a single policy, then if either of you dies, the relevant policy will pay out and the other policy will be unaffected.

What is a joint life insurance policy?

A joint life insurance policy covers two lives but will only pay out on one death.

  • First-death policies pay out on the first partner’s death. This is the kind of policy you’ll need to provide for mortgage repayment or for the living expenses of a young family.
  • Second-death policies don’t pay out on the first partner to die, but on the surviving partner’s death. Usually, this kind of policy is used to help the children pay the inheritance tax bill where there’s likely to be a large amount of tax to pay.

All our guides on life insurance in Canada

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