What are the best life insurance providers in Canada?

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Did you know that 22 million Canadians have a life insurance plan? The Canadian Life and Health Insurance Association says that the average household is protected for $442,000. That coverage totals an astounding $5.1 trillion!

Is your family protected by life insurance?

A good life insurance plan is one of the most powerful tools you have for assuring your family's financial stability. This guide decrypts what can seem like a confusing product. Continue reading to learn how life insurance works, why you want it, what to look out for, and who is the best provider for you.

What is life insurance?

Life insurance is an insurance product designed to provide for your loved ones financially after your death. You pay monthly, or more rarely annual, premiums. If you die while you are covered, your beneficiaries receive money. This helps ensure that they can continue paying off the mortgage, existing loans and afford a funeral.

There are several kinds of life insurance in Canada. These include term life and permanent life insurance. No matter your needs or budget, there are life insurance products designed for your family's needs. 

Why is life insurance important? Life insurance, no matter the type, is a critical tool in a family's financial planning. Do not leave major expenses behind for your loved ones.

How does life insurance work?

Life insurance works by spreading out risk over a large number of policyholders. This is the idea behind other types of insurance too. Some people will have a need, but most will not. Everyone pays a small amount in order to be protected. You buy peace of mind, knowing that in the event of a catastrophic need your family will be okay.

Life insurance provides financial payouts to the beneficiaries of someone who unexpectedly dies. This coverage is provided during a specific period (known as term life insurance) or for life (known as permanent life insurance). It is a powerful financial product for protecting your loved ones.

How much is life insurance in Canada?

How much life insurance costs depends on many factors. Age, health, gender, occupation and desired level of coverage all affect pricing. Prices can range from as little as $12 to several hundred per month.

See the table below for examples of monthly premiums: 

Profile of the insuredSmokerType of insuranceLengthCoverage AmountMonthly premium
40-year old mannoTerm20 years$75,000$14
40-year old womannoTerm to 100Life$250,000$258
60-year old womannoTerm to 100Life$75,000$175
60-year old manyesTerm10 years$250,000$109
Estimated monthly premiums for life insurance for various profiles

Here we see that a forty-year-old non-smoker man can purchase 20-year term life insurance with a $75,000 benefit for $14 per month. A 40-year woman looking for term to 100 coverage (a type of permanent life insurance) and a $250,000 benefit expects to pay $258 per month. 

As seen here, everyone's situation is different. Click on the link below to anonymously shop custom rates.

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How much life insurance do I need?

A good rule of thumb for calculating how much life insurance you need is to take your annual income and multiply it by ten.

Annual income x 10 = how much life insurance you need

This formula is, however, only a guideline. When deciding on coverage there is a lot to consider. The needs of a single parent with dependent children and a mortgage are not the same as someone with a financially independent partner, a paid-off mortgage and no dependents. The former might want considerable coverage. The latter could be okay with a minimal policy or none at all.   

Are you wondering how much and what type of life insurance to buy? 

Here are some good questions to ask yourself when considering life insurance:

  • What dependents do you have? Besides children and a spouse, some people help support their parents or siblings. 
  • Are you a single parent?
  • Will your children depend on you financially to be able to attend university or secondary education? 
  • What outstanding debt would you pass on to your family? 
  • How much do you still owe on your mortgage? 
  • Could your family stay in your house without you?
  • Do you want to leave a charitable contribution to an organization or religious group?
  • How much money do you have saved?

Why is life insurance important?

Getting life insurance is buying peace of mind. It is a tool that allows you to protect your family financially. 

While it is unpleasant to consider, imagine for a moment that you were to lose your life to an unexpected illness or an automobile accident. You leave behind a spouse and a child. There is still a decade remaining on your home mortgage. 

It is a tragic scene, but life insurance could allow your spouse and child to stay in their home and maintain their standard of life. It could be the difference between your child being able to afford university or not. This peace of mind is the main benefit of life insurance.

What is term life insurance?

Term life insurance is a flexible, relatively inexpensive life insurance product. It pays death benefits to beneficiaries if the insured dies within a specific period. 

This period, or term, could be almost any length of time. It is often 10, 20 or 30 years. Alternatively, term life insurance can cover you up to a specific age, say until 65 years old. If the policyholder passes away while the policy is active, their family receives a cash payout to pay for short-term needs like the funeral or long-term needs like their standard of life. The payout, or death benefit, is based on the coverage purchased. 

Getting a term life insurance policy is a great way to protect dependent children.

Term life insurance works differently from permanent life insurance. Whereas permanent life insurance pays out regardless of when the policyholder dies, term life insurance is limited to that specific length of time or up to a certain age.

Direct term life insurance, sometimes referred to as “direct-to-consumer” term life insurance, is simply term insurance purchased from a life insurance company or agency rather than through a middleman. It is fast and convenient to purchase and available online or by phone.

What is permanent life insurance?

Permanent life insurance is a type of insurance that pays out after the policyholder passes away. Unlike term insurance, permanent life insurance guarantees that you will leave behind money for your survivors. 

These products are more expensive than term life insurance if purchased later in life. They have the chief advantage of premiums that do not rise with your age. It can make sense to lock in a lower monthly payment for life by purchasing them when young. You may have expensive premiums early on, but it is an investment that can pay off. 

The main types of permanent life insurance are whole life, universal life and term to 100

While permanent life insurance plans tend to be expensive initially, they can provide better value in the long run. They grow in cash value. 

What is whole life insurance?

Whole life insurance, as implied by the name, is a type of permanent life insurance that provides a policyholder with lifelong coverage. Permanent life insurance pays out to beneficiaries regardless of when the policyholder dies. This is a key difference versus term life insurance, which expires at a specific length of time or age.

These plans are relatively easy to understand. They do not require you to balance assets like universal life insurance. 

They usually allow you to build cash surrender value (CSV). This can be a valuable financial instrument for cash withdrawal or loan collateral. 

What is universal life insurance?

Universal life insurance combines permanent life insurance with a tax-advantaged investment account. These plans have cash value, or cash surrender value, so withdrawals and loans may be permitted.

Universal life insurance’s value depends on how the investments have performed. They, therefore, come with some element of risk. There may not be much money in them to leave behind if investments perform poorly.

Some offer flexibility in the amount you contribute to premiums, unlike whole life insurance with locked-in premiums. You have wide freedom to choose your investments. 

What is term to 100 life insurance?

Despite the name, term to 100 life insurance is a type of permanent life insurance. Premiums are locked in at the time of purchase. It pays out at the time of death. If you live to 100 years old, the policy generally expires. It may pay at that point or continue without charging premiums. In other cases, it may be extendable. Check the fine print of your contract before you buy.   

There is one key difference with term to 100 life insurance vs other types of permanent life insurance. 100 to life insurance does not build up a cash value to borrow against or provide a cash surrender value if you discontinue payments.

What is mortgage life insurance?

Mortgage life insurance targets new home buyers. It protects most families’ most valuable asset, their home. If something were to happen to you, your mortgage insurance would pay off your mortgage. Any payout goes directly to the existing mortgage balance, unlike term or permanent life insurance, which provides a cash payment. Once you pay off your mortgage, the policy expires. 

Compared to other types of life insurance, mortgage life insurance usually offers smaller premiums. It is easy to purchase at the same time as a mortgage.

In Canada, buyers are not required to purchase a mortgage life policy. Note that both term and permanent life insurance plans can provide your family with similar financial protection. 

Mortgage life insurance keeps your family in your home even if you and your salary are no longer around to make the payments.

What does life insurance cover?

Life insurance provides a one-time, tax-free payment to your beneficiaries. The amount of this death benefit depends on the type of insurance and amount of coverage. Beneficiaries can use this money towards anything from living expenses, to paying off co-signed debt, to the funeral or something else entirely.  

Assuming the account was in good standing, it is rare to have problems claiming benefits from a life insurance policy. Nevertheless, some exclusions do exist. Your contract should clearly explain them. Life insurance plans usually include a contestability period of 1 to 3 years. The contestability period means that a death occurring in the years just after taking on the policy is likely to be scrutinized by the insurer. 

Here are examples of possible exclusions:

  • The policyholder dies or commits suicide during the contestability period.
  • The policyholder committed fraud or intentionally misinformed the insurer on their application by lying about pre-existing health conditions or risky behaviour.
  • The death occurred while committing a criminal act
  • The death occurred while taking part in an extreme sport such as heli-skiing, skydiving or similar. 
  • The death occurred in a high-risk area of the world.
  • The policyholder failed to pay their premiums.

What is the best life insurance in Canada?

Which life insurance provider and policy is best for you depends on your beneficiaries' needs, your risk tolerance, your age, health and ability to pay. 

Here are some commonly searched life insurance providers in Canada: 

Want to compare the top 10 life insurance providers in Canada? We've put together a list of our top 10 life insurance providers.

Looking for great quotes? Click on the link below to shop for your best life insurance.

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How do I get life insurance?

You can purchase life insurance through an agent, directly through financial and insurance agencies or online. Getting life insurance is a decision with ramifications for your finances now and your family’s future. Weigh your options carefully. 

Different policies require different processes. Instant policies exist, while others require a complex health questionnaire. Others yet require your consent for the insurance company to contact your medical providers to confirm your medical information. Expect more time-consuming, thorough applications for higher coverage.

  • Premiums are based on factors as diverse as your age, sex, medical history, your family’s medical history, occupation and financial situation. Smokers, moderate to heavy drinkers, and overweight applicants will pay more. Some occupations are considered higher risk and incur higher charges as well.

To begin getting life insurance quotes today, use our comparison tool at the top of this page.

When should you get life insurance?

You can purchase life insurance whenever you like, but it pays to be proactive.

It is cheaper to purchase life insurance when you are younger and healthier. Waiting until you are already sick may bar you from entering some programs or mean more expensive premiums and fewer benefits.

Your life situation plays a role in deciding when you should get life insurance. You may decide that you do not need life insurance at all if you have no dependents. On the other hand, if you have a spouse and children depending on you as a financial breadwinner, it is smart to protect them. 

It is cheaper to purchase life insurance when you are young. Waiting means higher premiums.

How long does a beneficiary have to claim a life insurance policy?

The sooner a beneficiary makes a claim, the better. 

With that said, as long as the policy was active and in good standing when the policyholder died, it should not have an expiration date. You could make a claim years after a policyholder died, but the documentation and process could be longer and more complicated.

What is dependent life insurance?

Dependent life insurance is a type of life insurance that benefits the spouse and dependent children of an employee. 

These policies are offered through some employers. Dependent children are defined as under 21 years old, or under 25 if they are full-time students. Rates are based on the age, sex and smoking status of the employee. Payouts are generally lower than separate term and permanent life insurance products. Some plans offer death benefits in the range of $5,000 to $10,000 for a spouse and $2,500 to $5,000 for children. 

Some dependent life insurance plans allow the employee to purchase additional supplemental coverage themselves. Check with your employer.

Is life insurance taxable in Canada?

Beneficiaries of a life insurance payment receive a one-time, tax-free payment. Neither term nor whole life insurance is declarable on Canadian tax returns. Similarly, the amount of the death benefit is irrelevant in regard to taxes. 

Take care to name your beneficiaries on your policy. Without named beneficiaries, your estate will receive the death benefit. From your estate, it may go to your existing taxes and debts before beneficiaries receive a distribution. It can also trigger estate administration taxes and probate fees. 

Name your beneficiaries and update them if they change. It will save them time and prevent complications.

What is return of premium insurance (ROP)?

ROP stands for Return of Premium. It is a type of life insurance policy which returns the premiums to the purchaser in the event that they outlive the term specified in the policy.

Let's take an example. Terrence purchases a life insurance plan which covers him up to the age of 80. Since Terrance has bought a Return of Premium policy, he will be repaid all of the premiums that he has paid into the insurance once he passes his 80th birthday.

What are the benefits of return of premium?

If you outlive the terms of your policy you will have your premiums returned to you, allowing you to use the money perhaps for the enhanced costs of late-life care or alternatively purchase another life insurance policy.

It can be a method of saving that prevents you from accessing the money for a set period of time.

What are the cons of return of premium?

ROP policies are priced significantly higher than standard term life insurance. The returns you make if you outlive the term are likely to be less than if you saved the money by purchasing a standard policy and invested the difference.

Return on Premium riders are far less common in Canada than in the United States; however, Sunlife offers ROP on policy expiry with its Critical Illness Insurance plan. If you outlive the expiry date of your plan then your premiums will be repaid to you.

All our guides on life insurance in Canada:

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