What are the benefits of life insurance in 2024?

Life insurance provides financial security for loved ones, covering expenses and debts in the event of the policyholder's death. It ensures a tax-free payout to beneficiaries, offering peace of mind and long-term stability.

Having a life insurance plan is crucial for safeguarding family finances and securing a legacy. So what are all the benefits of life insurance? What are the different types? How do you avail them? Read this guide for all this and more.

Then, use our comparator to compare the best life insurance plans in Canada and get free personalized quotes right here in seconds.

What are the types of life insurance benefits? 

We have two main types of life insurance and their related benefits:

1. Term life insurance: It provides you with coverage for a specific period of time — 10, 20, or 30 years. If the policyholder dies during the term of the policy, the beneficiary receives the death benefit. If the policyholder outlives the term of the policy, the policy expires and the beneficiary receives nothing.
2. Permanent life insurance: It offers coverage for your entire life, as long as you continue to pay premiums on time. Permanent life insurance policies come with a cash value component that you can borrow against or withdraw.

If you are considering purchasing life insurance, it is important to explore different options to get the best deal. You can do it right here using our comparator below. Compare the best plans and get over 20 personalized life insurance quotes in seconds.

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What are the key benefits of life insurance? 

Life insurance has a number of benefits. Here are the top benefits of life insurance in Canada:

1. Financial security for loved ones: Life insurance can provide financial support for your loved ones after your death and help them maintain their standard of living, pay off debts, and cover funeral expenses.
2. Tax-free death benefit: The death benefit is paid out to your beneficiaries tax-free. They will receive the full amount of the benefit.
3. Cash value (permanent life insurance only): Permanent life insurance policies have a cash value component. This means that the policy builds up value over time, which you can borrow against or withdraw. You can use the cash value for any purpose, such as to supplement your retirement income or to pay for unexpected expenses.
4. Estate planning: Life insurance can be used as part of your estate planning. You can also use life insurance to fund a trust to benefit your children or other dependents.

Another benefit of life insurance in Canada is that it can be used to supplement your retirement income. The Canada Pension Plan (CPP) and Old Age Security (OAS) benefits may not be enough to cover all of your expenses in retirement. Life insurance can help to bridge the gap between your government benefits and your retirement income needs. How? 

• You can use the cash value to supplement your retirement income in a number of ways. 
• You can withdraw cash from the policy, borrow against the policy, or purchase an annuity with the cash value.

What are the living benefits of life insurance?

Living benefits (or benefits of a life insurance policy while alive) are benefits that you can access from your life insurance policy while you are still alive. They are typically available on permanent life insurance policies, such as whole life insurance and universal life insurance.

Some of the most common living benefits of a life insurance policy include:

Benefit	Explanation
Accelerated death	Allows you to access a portion of your death benefit while you are still alive if you are diagnosed with a terminal illness. Can be used to pay for medical expenses, debt, or other living expenses.
Chronic illness	Allows you to access a portion of your death benefit while you are still alive if you are diagnosed with a chronic illness that meets certain criteria, such as requiring long-term care.
Critical illness	Allows you to access a portion of your death benefit while you are still alive if you are diagnosed with a critical illness, such as a heart attack, stroke, or cancer.
Living benefits rider	This is a rider that can be added to a life insurance policy to provide additional living benefits, such as coverage for long-term care expenses or a guaranteed income stream in retirement.

What are the benefits of life insurance at a young age? 

There are several benefits to purchasing life insurance at a young age, including:

• Lower premiums
• Longer coverage period
• More time for your policy to grow

Here are some specific examples of how life insurance can be beneficial for young people:

• A young couple with two young children can use life insurance to ensure that their children will be financially secure if either parent dies unexpectedly.
• Young adults who are just starting out in their careers can use life insurance to protect their parents or other loved ones from having to pay off their debts if they die suddenly.
• Young entrepreneurs can use life insurance to protect their business partners and employees in the event of their death.
• A young person who is planning to have children in the future can use life insurance to ensure that their children will be financially secure if they die before their children are grown.

You can compare the benefits offered by Sun Life and other companies right here using our comparator below. Get personalized quotes for free in seconds.

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What are the tax benefits of life insurance? 

There are two main tax benefits of life insurance in Canada:

1. Tax-deductible premiums: The premiums you pay for life insurance are tax-deductible, up to a certain amount. This means that you can reduce your overall tax liability by claiming your life insurance premiums as a deduction on your income tax return.
2. Tax-free death benefit: The death benefit from life insurance is paid out to your beneficiaries tax-free. This means that they will receive the full amount of the benefit, without having to pay any taxes on it.

In addition to these general tax benefits, life insurance can also be used to reduce your estate taxes. Estate taxes are taxes that are paid on the value of your assets after you die. If you have a large estate, life insurance can help to reduce the amount of estate taxes that your heirs will have to pay.

What are the benefits of term life insurance?

With term life insurance, you get coverage for a specific period of time — 10, 20, or 30 years. If the policyholder dies during the term of the policy, the beneficiary receives the death benefit. If the policyholder outlives the term of the policy, the policy expires and the beneficiary receives nothing.

Here are some of the benefits of term life insurance investment:

• It's very affordable, especially for young and healthy people.
• You can choose the term length that best meets your needs.
• You can customize or change the coverage amount as needed.
• Term life insurance policies are relatively simple to understand.

Also, term life insurance policies do not have a cash value component, which means that all of your premiums go towards providing coverage. This can be a good thing if you are looking for the most affordable coverage possible.

What are the benefits of permanent life insurance?

Permanent life insurance is a type of life insurance that provides coverage for the policyholder's entire life, as long as the policyholder continues to pay premiums. Unlike term life insurance, permanent life insurance comes with a cash value component that you can borrow against or withdraw.

Benefits of permanent life insurance include:

• Lifelong coverage: It provides coverage for the policyholder's entire life, as long as the policyholder continues to pay premiums. This can be beneficial for people who want to ensure that their loved ones will be financially secure after they die, even if they live to be a very old age.
• Cash value: The cash value of a permanent life insurance policy grows over time, and it can be used for a variety of purposes, such as supplementing your retirement income, paying for your child's education, or covering unexpected expenses.
• Estate planning: Permanent life insurance can be used as part of your estate planning. For example, you can use permanent life insurance to leave a legacy to your loved ones or to charity. You can also use permanent life insurance to fund a trust to benefit your children or other dependents.

What are some good options for life insurance in Canada?

There are many good options for life insurance in Canada. Some of the most popular providers include:

1. RBC Insurance
2. Canada Life
3. Sun Life Insurance
4. Manulife Financial
5. TD Insurance

When choosing a life insurance provider, it is important to consider your individual needs and budget.

You should also compare policies from different providers to find the best coverage for your needs — and get quotes to get an idea of the cost. You can use our comparator to get personalized life insurance quotes here.