Different Types of Life Insurance Explained And How To Choose
Choosing the right life insurance is crucial to protecting your loved ones and ensuring their financial security. Whether you're seeking temporary coverage or a lifelong policy with investment potential, understanding your options can make all the difference.
This guide breaks down the different types of life insurance in Canada, helping you compare plans, calculate needs, and select a policy that aligns with your unique goals. With tailored advice and our free comparison tool, we make it easy to find the best policy for you.
Types of Life Insurance: Key Points
- Life insurance breaks down into two main types: term and permanent.
- Term life insurance covers a specific period and is affordable.
- Permanent life insurance provides lifetime coverage with no term limit.
- Certain policies build cash value, creating accessible savings over time.
- Flexible premium options allow for fixed or adjustable payments.
- Some policies offer investment growth opportunities within the plan.
- Estate-planning policies help secure a financial legacy for beneficiaries.
- Whole life insurance guarantees a payout upon the policyholder’s death.
- Universal life insurance also guarantees a payout, linked to investments.
What are the different types of life insurance in Canada?
In Canada, several types of life insurance policies are tailored to meet diverse financial needs. Here are the most common ones.
| Type of Life Insurance | Coverage Length | Cash Value | Death Benefit | Best For |
|---|---|---|---|---|
| Term Life Insurance | Fixed term (10-30 yrs) | No | Fixed, only if death occurs during the term | Temporary needs (e.g., mortgage, dependents) |
| Whole Life Insurance | Lifetime | Yes | Guaranteed | Long-term protection, estate planning |
| Universal Life Insurance | Lifetime | Yes (interest-based) | Adjustable | Flexibility in coverage and premium |
| Variable Life Insurance | Lifetime | Yes (investment-based) | Variable, depends on investments | Investment growth with higher risk |
| Final Expense Insurance (Also known as Funeral or Burial Insurance) | Lifetime | Yes (small) | Fixed, for end-of-life costs | Covering funeral and end-of-life expenses |
| Group Life Insurance | Term (while employed) | No | Fixed, often limited amount | Basic employer-provided coverage |
| Mortgage Life Insurance | Linked to mortgage | No | Decreases with mortgage balance | Paying off the home mortgage if the policyholder passes |
| Joint Life Insurance | Lifetime (2 people) | Yes | Paid after one/both policyholders pass | Estate planning, inheritance for heirs |
Before we dive into these types individually, you can use our free comparator below to compare all kinds of life insurance policies and get free quotes online, so you can find a policy that truly fits you.
Beneva's Term Life Insurance offers a flexible and affordable way to secure financial protection for dependents, making it particularly attractive for first-time buyers or those managing a tight budget. Coverage is available up to $10 million, with term lengths of 10, 15, 20, 25, 30, or even 40 years, and eligibility spans from ages 18 to 75. One of its key strengths lies in its adaptability: policyholders can switch to a longer term or even to permanent insurance without undergoing a new medical exam within the first five years. Customers can also choose between fixed or decreasing benefit structures, depending on their evolving needs. Premiums stay constant during the initial term, simplifying financial planning, although they may rise upon renewal. Additional features include optional riders like critical illness coverage and disability waivers. However, while the product is solid and backed by Beneva’s 75 years of industry experience, its online resources are relatively sparse, potentially requiring more direct interaction with an advisor to fully understand all options.
Ideal profile: This policy is best suited for young professionals, new parents, and individuals taking on major financial obligations like mortgages or business loans who need affordable, predictable protection over a defined period. It also appeals to those who value future flexibility without the risk of repeated health underwriting.
- Very broad choice of terms, from 10 to 40 years, adapting to many life stages
- Premiums remain fixed during the term, helping with predictable budgeting
- Option to switch to a longer term or permanent insurance without a new medical exam
- Choice between fixed and decreasing capital based on personal financial strategies
- Add-ons like critical illness or disability coverage can further customize protection
- Beneva's extensive experience (over 75 years) adds a layer of credibility and stability
- Premiums may increase substantially upon renewal after the initial term
- Decreasing benefit may not meet long-term protection needs for everyone
- Limited information available online, requiring direct consultation for complex cases
SunSpectrum Term Life Insurance from Sun Life offers a flexible and robust term life solution with term lengths of 10, 15, 20, or 30 years, accommodating a variety of short- to medium-term protection needs such as income replacement, debt coverage, or business continuity planning. Policies are available to applicants aged 30 to 60, with coverage amounts reaching up to an impressive $15 million, ensuring substantial financial protection. A standout feature is the guaranteed premium structure, providing cost predictability throughout the initial term, and the built-in option to convert the policy to permanent insurance without medical requalification before the insured's 75th birthday—an attractive benefit for those wanting lifetime coverage eventually. Additionally, the plan includes living benefits for terminal illnesses and disability waivers, catering to both personal needs and business applications, such as key employee coverage. However, it is important to note that premiums can rise sharply after the initial term, and conversion opportunities diminish with age, necessitating careful timing and planning.
Ideal Profile: This product is especially well-suited for business owners needing succession planning, middle- to high-income professionals seeking high coverage amounts for family security, and individuals aiming for flexibility now with the possibility of permanent coverage later. It is also a strategic fit for those who prioritize guaranteed insurability without future medical exams.
- Guaranteed premiums and ease of conversion to permanent insurance
- High coverage limits up to $15 million accommodating major financial responsibilities
- Flexible term options (10, 15, 20, or 30 years) to suit different planning horizons
- Living benefits included for terminal illness and total disability
- Tailored add-ons for personal and business needs, such as child and partner protection benefits
- Significant premium increases after the initial term
- Fewer conversion and longer-term options available as the insured ages
- Complex range of options requiring careful matching to specific needs
Pick-A-Term from iA Financial Group is a highly flexible term life insurance solution designed to meet the evolving needs of individuals and families across different life stages. Offering term options from 10 to 40 years, it aligns perfectly with financial obligations such as mortgages, education funding, or business needs. The product guarantees fixed premiums for the chosen term, simplifying budgeting and financial planning. Additionally, policyholders have the option to renew coverage annually or convert to permanent insurance without requiring new medical evidence, providing valuable adaptability as circumstances change. It also includes access to additional benefits like critical illness and disability coverage for more comprehensive protection. However, at renewal, premiums can increase sharply, and the decreasing benefit option may not be suitable for those needing stable, predictable coverage. The wide array of optional features, while a strength, could overwhelm clients unfamiliar with life insurance choices.
Ideal profile: Pick-A-Term is ideal for young families, professionals, and pre-retirees seeking flexible, cost-effective coverage tied to specific financial milestones, such as paying off a mortgage or raising children. It’s perfect for those who prioritize simplicity upfront but may want the option to secure lifetime coverage later without new health checks.
- Wide selection of term durations (10 to 40 years) for customized financial protection
- Guaranteed premiums within the term for budgeting predictability
- Easy conversion to permanent life insurance without a new medical exam
- Renewable annually after term expiration, maintaining access to protection
- Access to optional critical illness and disability coverage for added security
- Renewal premiums can be significantly higher than initial premiums
- Decreasing benefits option may not suit clients who need stable coverage
- Broad range of optional features could complicate decision-making for some applicants
What is Term Life Insurance?
- How It Works: Term life insurance provides coverage for a specific period or “term,” such as 10, 20, or 30 years. If you pass away during the term, your beneficiaries receive the death benefit. Once the term ends, coverage stops, unless you renew or convert it.
- Pros:
- Affordable premiums for straightforward coverage.
- Ideal for temporary needs like income replacement or mortgage coverage.
- Cons:
- No payout if you outlive the term.
- Lacks cash value or investment component.
- Best For: If you need affordable, temporary protection (say, while raising kids or paying a mortgage), term life is an economical choice that meets those needs.
You can read our full guide on Term Life Insurance to understand the details of its workings, cost, coverage, and more.
You can use our free tool below to compare term life insurance quotes online. It's easy to use and gives you quick results.
Compare the top term life insurance options today
What is Whole Life Insurance?
- How It Works: Whole life insurance provides lifetime coverage with fixed premiums. It has a cash value component that grows over time, allowing you to build savings within the policy. The cash value grows at a guaranteed rate and can be accessed if needed.
- Pros:
- Lifetime protection as long as premiums are paid.
- Builds cash value that you can borrow against.
- Cons:
- Higher premiums than term life.
- Limited flexibility and investment growth.
- Best For: Whole life insurance suits those looking for lifelong coverage with a savings element. It’s often chosen for estate planning or to leave an inheritance, as it guarantees a payout.
You can read our full guide on Whole Life Insurance to understand the details of its workings, cost, coverage, and more.
You can use our free tool below to compare whole life insurance quotes online. Compare quotes from the best providers in Canada using our special partner links.
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How does Universal Life Insurance work?
- How It Works: Universal life insurance offers lifetime coverage with flexible premiums and death benefits. It includes a cash value component that earns interest, and you can adjust the policy over time based on your needs and market performance.
- Pros:
- Flexible premiums and death benefits.
- Cash value has growth potential.
- Cons:
- Cash value depends on market or interest rates.
- Premiums may need to be adjusted to keep coverage in place.
- Best For: This policy is for those who value flexibility. If you want lifetime coverage with adjustable features and the chance for cash value growth, universal life insurance can meet both protection and investment goals.
You can read our full guide on Universal Life Insurance to understand the details of its workings, cost, coverage, and more.
What is Variable Life Insurance?
- How It Works: Variable life insurance offers permanent coverage with a cash value component that you can invest in different market options like stocks and bonds. Your cash value and death benefit vary with the performance of these investments, so there’s potential for higher growth—and higher risk.
- Pros:
- Offers growth potential based on investment performance.
- Lifetime coverage and flexible death benefit.
- Cons:
- Cash value and death benefit can decrease with poor market performance.
- Requires active management.
- Best For: Variable life insurance is suitable for those with a high-risk tolerance who are comfortable investing. It’s a good choice if you want both protection and the potential for investment growth.
What is Final Expense (or Burial) Insurance?
- How It Works: Final expense insurance is a small whole-life policy designed to cover end-of-life costs, like funeral expenses and medical bills. It has a guaranteed payout and builds a small cash value, but it’s primarily focused on providing for funeral costs.
- Pros:
- Easy to qualify for, even with health issues.
- Provides peace of mind by covering funeral expenses.
- Cons:
- Limited coverage amount.
- Higher cost per dollar of coverage compared to larger policies.
- Best For: This is ideal for seniors or those with end-of-life planning needs who want to ensure their family isn’t left with funeral expenses.
Good to know
Final expense insurance is also referred to as Funeral Insurance or Burial Insurance. Some plans may also cover medical bills associated with death. Read our full guide on the best funeral insurance plans in Canada and also get instant quotes.
How does Group Life Insurance work?
- How It Works: Group life insurance is typically offered by employers as part of a benefits package. It provides term coverage, and the employer pays all or part of the premium. Coverage is generally limited and may not stay with you if you leave the job.
- Pros:
- Often free or low-cost coverage through work.
- Requires no medical exam.
- Cons:
- Limited coverage amount.
- Usually terminates if you leave the job.
- Best For: Group life insurance is a good starter policy, especially if you’re young or on a budget. While it’s usually not enough for comprehensive protection, it’s helpful to have while you build additional coverage.
What is Mortgage Life Insurance?
- How It Works: Mortgage life insurance is designed specifically to pay off your mortgage if you pass away before it’s fully paid. Coverage decreases over time as you pay down the loan, and the payout goes directly to the lender to cover the balance.
- Pros:
- Protects your family’s home by ensuring the mortgage is paid off.
- Provides targeted coverage for a major expense.
- Cons:
- Decreasing payout as the mortgage balance declines.
- Can be limited to mortgage payoff with no flexibility.
- Best For: If you’re a homeowner with concerns about leaving a mortgage burden, this policy offers peace of mind by securing your family’s home.
How does Joint Life Insurance work?
- How It Works: Joint life insurance insures two lives, usually spouses, under one policy. There are two main types:
- First-to-Die: This policy pays out after the first policyholder dies. Once the payout is made, the policy expires and no longer covers the second person. This type is relatively rare, as it doesn’t provide coverage for the surviving partner.
- Joint Last-to-Die (Second-to-Die): This policy pays out after both policyholders have passed away. It’s commonly used for estate planning, as it helps beneficiaries cover estate taxes or other financial obligations.
- Pros:
- More affordable than purchasing two separate policies for each partner.
- Joint Last-to-Die policies are especially beneficial for estate planning, as they help reduce the financial impact on heirs.
- Cons:
- First-to-Die policies end after the first death, leaving the surviving partner without coverage.
- Joint Last-to-Die policies only provide a payout after both individuals pass, meaning there’s no immediate financial support for the surviving partner.
- Best For:
- First-to-Die: This type may suit couples who need coverage for specific financial obligations upon the first partner’s death, though it’s rare due to limited demand.
- Joint Last-to-Die: Ideal for couples focused on estate planning who want to leave an inheritance or ensure funds are available to cover estate taxes after both partners have passed.
Each type of life insurance has a specific purpose, and understanding how they work can help you pick the policy that fits your goals and budget. Whether you need short-term protection, long-term savings, or specialized coverage, there’s an option designed for you.
Can I get life insurance for my child?
Yes, you can get life insurance for your children in Canada. These policies provide lifelong coverage with low, locked-in premiums and build cash value over time. The savings component can be used for future needs like education or emergencies, offering financial security as they grow. Learn more in our guide on the Best Life Insurance for Children in Canada.
What are the best life insurance companies in May 2025?
| Life Insurance Company | Key Coverage | Get A Quote |
|---|---|---|
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| Get a Beneva Quote |
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| Get a Sun Life Quote |
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| Get a Empire Life Quote |
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| Get an iA Quote |
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| Get a Manulife Quote |
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| Get an RBC Quote |
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| Get a Canada Life Quote |
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| Visit Desjardins' website |
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| Get a BMO Quote |
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| Get a Foresters Quote |
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| Visit Wawanesa's website |
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| Get an Equitable Life of Canada Quote |
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| Get an Ivari Quote |
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| Get a TD Life Insurance Quote |
Expert advice
Weigh options from multiple companies to get the best rates. Use our free comparator below to get the best life insurance quotes and compare them instantly online. Get quotes from over 20 life insurance companies for free.
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FAQs on Life Insurance in Canada
The cost of life insurance depends on factors like age, health, gender, coverage amount, policy type, and term length.
For example, a healthy 30-year-old non-smoker might pay about $15-$25 per month for a 20-year term policy with a $500,000 death benefit. In contrast, a 50-year-old with the same policy could pay $80-$100 per month due to increased age and health risks. To keep costs manageable, it’s often best to buy sooner rather than later, as premiums rise with age and potential health changes.
The best life insurance depends on your goals and budget:
Term Life is affordable and ideal for temporary needs, like covering a mortgage or raising young children.
Whole Life offers lifetime coverage with cash value growth, suitable for those looking for a long-term financial safety net.
Universal Life provides flexible premiums and an investment component, appealing to those who want more control.
Joint Last-to-Die (Second-to-Die) policies are beneficial for couples focused on estate planning and leaving an inheritance.
A common guideline is to have coverage that’s 7-10 times your annual income, though personal factors matter too. Consider debts (like a mortgage), future expenses (like education), and your family’s financial needs. You can also work with a financial advisor to determine an amount that aligns with your goals.
Life insurance is essential if you have dependents, debts, or want to leave a legacy. It provides financial security for your loved ones, covering expenses like mortgages, education, and daily living if you’re no longer there to provide for them. Even without dependents, it can be valuable for estate planning, covering final expenses, or leaving a charitable donation.
Permanent life insurance policies like Whole Life, Universal Life, and Variable Life generate cash value. This cash component grows tax-deferred, allowing you to borrow against it or even use it in retirement. Term life policies, however, do not have a cash value component.
The main types of permanent life insurance in Canada are:
Whole Life Insurance: Lifetime coverage with guaranteed cash value growth and fixed premiums.
Universal Life Insurance: Flexible premiums and potential for cash value growth based on interest rates or market performance.
Variable Life Insurance: Cash value is invested in market options, with a higher potential for growth but also higher risk.
Joint Last-to-Die Life Insurance: Covers two people and pays out only after both have passed, commonly used for estate planning.
