Whole Life Insurance: What is it? How it works? Get free quotes

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Whole life insurance is a lifelong financial companion providing a safety net for your loved ones in case the unexpected happens. It also has a savings component for your own goals. It's a commitment to safeguarding both your family's future and your present financial well-being.

But how does it work? How is it different from term life insurance? Which one should you choose? Find out all this and more in our guide.

Explore the best whole life insurance Canada plans using our free comparator, compare the options, and get over 20 free personalized quotes in a few moments right here.

Whole Life Insurance in Canada: 5 Key Takeaways

  • Lifelong Coverage: The insurance lasts your whole life and supports your family financially after you pass away.
  • Part of your payment goes into a savings account that grows tax-free and you can use the money when needed.
  • The amount you pay for the insurance doesn't change over time, making it easier to budget.
  • You might get extra money (dividends) from the insurance which can lower your future payments or be saved for later.
  • You can use the saved money for big expenses like education costs or retirement.

What is whole life insurance in Canada?

Sometimes called “traditional life insurance” or “whole of life insurance”, whole life insurance policies provide beneficiaries with a payout after the policyholder passes away. This lets you ensure that loved ones will be taken care of in your absence.

As a form of permanent life insurance, whole life insurance is also an investment that you can use during your life. Many whole life insurance policies include a cash savings component. A portion of the monthly premium is set aside in a savings account where it accumulates, tax-free, for the policy's life. 

Similar to a registered retirement savings plan (RRSP), you can access these accumulated savings - often called the Cash Surrender Value (CSV) of the policy - in the form of a loan against your policy or a withdrawal. You’ll also receive dividends, which you can either receive in cash, re-invest or use to purchase additional coverage. 

Unlike term life insurance, which guarantees coverage for a fixed period of the policyholder’s lifetime, whole life insurance provides lifetime coverage.

Do I need a Canada whole life insurance plan?

Wondering who should buy whole life insurance? Most adults, particularly those with dependent children or other family members will benefit from life insurance.

While it is unpleasant to consider, imagine what would happen to your spouse and a child if you were to lose your life to an unexpected illness or an automobile accident. Would they be able to keep up with the mortgage and stay ahead of bills? A whole life insurance policy can make all the difference in maintaining their standard of living and being able to go to university.

Before we jump into more details, you can use our comparator below to explore the best options. You can compare the best Canadian plans and get personalized quotes on whole life insurance for free right here.

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Speak with a life insurance expert

How does Canada whole life insurance work?

When you purchase a whole life insurance policy, you’re buying two things: a guaranteed benefit paid at the time of your death and a cash investment account that grows, tax-sheltered, over your lifetime.

Each month, a portion of your premium goes towards the cost of the insurance, including administrative fees, while another portion goes straight to a cash savings account. Early on, the amount deposited in the savings account might be small, however, it increases over time.

At the time of your death, your beneficiaries receive the benefit coverage you initially purchased and the accumulated cash value of the policy.

What is whole life insurance cash value?

Cash value in life insurance refers to the savings component of a permanent life insurance policy. Over time these savings accumulate giving you a lot of financial flexibility. A principal advantage is that it grows tax-free and gives you an asset to draw upon.

This amount can be accessed in a few different ways.

  • A loan: borrowing against your policy makes for an easy, no-credit-check loan. Because you’re borrowing from yourself, you may not even have to reimburse it.
  • Paying premiums: Miss a payment? No problem, it’ll be deducted from your policy’s cash value.
  • Cash surrender value (CSV): Finally, if you cancel your policy you can cash out the cash value minus surrender fees.

Is whole life insurance worth it?

While the high cost of whole life insurance policies may not always match every budget, for many the peace of mind associated with a guaranteed benefit may be worth the higher premiums.

Other people who might benefit from whole life insurance coverage include:

  • High net worth individuals. A whole life insurance policy can help you to defer taxes while maintaining access to the policy’s CSV.
  • People who need help with savings. The cash savings portion can help you set aside money for retirement.
  • People with a substantial legacy. The benefit associated with this policy can be used by your beneficiaries to offset inheritance.

What do Canada's whole life insurance plans cover?

Whole life insurance provides your beneficiaries with a one-time, tax-free payment. The amount depends on the insurance policies. Beneficiaries can use this money towards nearly any expense. This could help them to cover:

  • Funeral expenses
  • Existing debt
  • Mortgage payments
  • Home repairs
  • Bills and living expenses
  • Tuition
  • A nest egg

Assuming the account was in good standing, it is rare to have problems claiming benefits from a life insurance policy.

How much does Canadian whole life insurance cost?

A woman in her thirties who does not smoke can expect to pay around $140 per month for $250,000 worth of coverage. A man in his forties with a taste for cigars might pay closer to $300 per month for similar coverage.

Life insurance premiums vary depending on many factors, including your age, gender, health, and smoking status.

Because premiums for whole life insurance policies stay the same for the entire term of the policy, it makes good financial sense to purchase a policy sooner, rather than later. It’s the best way to get the cheapest life insurance rates.

The table below shows how premiums increase as you age:


Benefit amount
SexAgeMonthly premium
$250,000
MaleMid-30s$161
$250,000
MaleMid-40s$266
$250,000
FemaleMid-30s$139
$250,000
FemaleMid-40s$221
Whole life insurance quotes by age and sex

Ready to find out how much life insurance will cost you and lock in a price now? Do it right here using our comparator below. Get over 20 personalized whole life insurance quotes in no time.

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How much whole life insurance do I need?

Determining how much whole life insurance you need involves considering factors like your current and future financial obligations, including debts, funeral expenses, and income replacement for your dependents.

The HelloSafe whole life insurance calculator can help assess these factors and then get a customized coverage recommendation using our comparator. By inputting details such as your age, income, outstanding debts, and desired coverage, the calculator can estimate the appropriate coverage amount to ensure comprehensive protection for your loved ones.

What is whole life vs universal life insurance?

Whole life or universal life insurance are both types of permanent life insurance that will ensure the financial security of their beneficiaries. Let’s explore the benefits of whole life vs universal life insurance

Insurance typeWhole Life Insurance PoliciesUniversal Life Insurance Policies
Permanent?
Yes. Beneficiaries receive a payout, no matter when the policyholder passes.Yes. Beneficiaries receive a payout, no matter when the policyholder passes.
Fixed Premiums?
Yes. Premiums are set at the time of purchase and remain the same for the life of the policy.No. Premiums vary depending on the type of investments chosen and their performance.
Investment Account?
Sometimes. Cash surplus value does not accrue interest, but participating policies may receive policy dividends if the insurance company's assets turn a profit.Yes. The policyholder may invest in any way they like tying the value of the policy to the success of their investments. Cash savings will accrue interest, but losses are also possible.
Tax benefits
Yes. Dividend payments are tax-sheltered.Yes. Market gains earned by investments are tax-sheltered.
Borrowing?
Yes. Many policies permit the policyholder to borrow up to 90% of the accumulated cash value of the policy.Yes. Many policies permit the policyholder to borrow between 50 and 90% of the accumulated cash value of the policy.
Missed payments
Automatic premium loans are triggered by unpaid premiums. If loans surpass the cash surplus value, the policy will lapse.The value of the account is instantly deducted for missed payments. If account value can't cover the payments, the coverage will cease.
Whole life insurance vs universal life insurance

What is term vs whole life insurance?

The biggest difference between whole and term life insurance is that the former will pay a death benefit no matter when the policyholder dies. A term life insurance policy will pay a benefit only if the policyholder dies during the term of the policy.

Here's a look at the key differences.

Type of life insuranceTerm lifeWhole life
Length
A set term: usually between 10 and 30 yearsLifetime coverage, assuming premiums are paid
Cost
Starts low and increasesMore expensive, but offer level premiums
Dividends possible
Cash value
Complexity
Easy to understandCan be confusing
Flexibility
Easy to cancelCancellation may incur a fee
Whole life insurance vs term life insurance

Now, let’s take a look at a few examples.

A whole life insurance policy, on the other hand, covers your entire life and ensures that your beneficiaries receive a benefit no matter when you pass away. Here's an example of how whole life insurance works:

What are the benefits of Canadian whole life insurance?

Given that any type of life insurance - whole, term, or universal - can protect your loved ones from financial hardship in the case of your death, it may seem as though they’re interchangeable.

From a financial planning and wealth creation perspective, whole life insurance offers unique benefits not available with other forms of life insurance. Thinking of whole life insurance as an investment can help clarify some of the most significant advantages.

  • No expiration date. Provided you continue to pay the premiums, your loved ones will receive a benefit no matter when you pass away.
  • Fixed premiums. While whole-of-life insurance may carry a higher price tag, the security of knowing that your premiums won’t dramatically increase from one year to the next can make it easier to plan financially.
  • Cash value. The CSV of your policy, which amounts to the cash savings accumulated over time, can play an important part in your retirement planning. You can also withdraw money from this fund earlier for any reason, such as a downpayment on a home.
  • Dividends. Many policies of this type pay cash dividends, which you can then reinvest in the policy or use to pay your premiums.

How do you get whole life insurance?

As with other types of life insurance policies, you can opt to purchase coverage directly from the insurer or through a qualified broker.

Researching and comparing plans means you can feel confident that the policy you purchase meets your needs and budget exactly. It can also, however, require a great deal of time and effort, as well as specialist knowledge.

Purchasing through a broker might seem more expensive due to fees, but can save you money in the long run. Most brokers and financial institutions can negotiate discounts and other advantages on your behalf, including lower premiums.

You could also simply use our free comparator below to compare plans yourself and get the best deals on various life insurance types and free personalized quotes right here.

Compare the best life insurance companies

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What is the best whole life insurance Canada plan?

The "best" whole life insurance plan in Canada depends on individual needs, preferences, and financial goals. However, the most well-known and reputable insurance companies in Canada offering whole life insurance plans include:

Insurance ProviderProduct NameOther FeaturesAction
Empire Life
Solution 100
  • Lifetime protection at a guaranteed rate
  • Guaranteed surrender values and guaranteed paid-up values
  • Up to $10,000,000
  • Age at issue: 0 to 75
Get a quote from Empire Life
Sun Life
SunUniversalLife II
  • For life coverage options

  • Tax-advantaged savings growth options

  • Range of options for death benefit, insurance cost, and investments

  • Up to $25,000,000
  • Age at issue: 0 to 80
Get a quote from Sun Life
iA Financial Group
Genesis
  • 10, 15, 20 years, and up to 100 years
  • Option of level costs or annually renewable term costs

  • Up to $10,000,000

  • Age at issue: 0 to 85
Get a quote from iA Financial Group
RBC Insurance
Whole Life Insurance
  • 10, 20 years or for life
  • Benefit in case of disability, and tax-free options

  • Option to guarantee a child's or grandchild's insurability

  • Up to $10,000,000
  • Age at issue: 0 to 80
Get a quote from RBC
Canada Life
Whole life insurance
  • Different options available
  • Guaranteed Surrender Values
  • Option to choose investment choices
  • Flexibility in premium payment
  • Up to $10,000,000
  • Age at issue: 0 to 85
Get a quote from Canada Life
BMO Insurance
Universal Life Insurance
  • For life coverage options
  • Flexible premiums, tax-advantaged growth
  • Wide range of investment options
  • Multiple policy choices
  • Access to liquidity

  • Up to $20,000,000

  • Age at issue: 0 to 80
Get a quote from BMO
Equitable life of Canada
Equation Generation IV
  • Cost of insurance increasing or uniform
  • Multiple investment options
  • Consultation service for grieving individuals
  • Up to $500,000
  • Age at issue: 0 to 80
Get a quote from Equitable Life
ivari
Ivari life insuranceEquitable Life of CanadaGet a quote from Ivari
Best Whole Life Insurance Canada Plans

What are FAQs on whole life insurance?

What is participating whole life insurance?

Whole life insurance is available in both participating and non-participating policies. Non-participating plans are the more common option.

With a participating whole life insurance policy, you participate in the company’s profits. When the insurer makes money they may pay out dividends. These policies are a more robust investment option and premiums are higher. Dividends are not guaranteed though, so evaluate your financial needs and risk tolerance before opting for a participating policy.

Expert advice

Participating whole life insurance policies can be a good option for investors who want fixed premiums and want to diversify beyond a TFSA, RRSP, and RESP.

How soon can I borrow against my whole life insurance?

You can start to borrow against your whole-life policy once it starts to build up cash value. Borrowing may be considered either a policy withdrawal or a policy loan if it’s from the insurer.

Alternatively, you may be able to use the cash value as collateral for a loan or line of credit from a third-party lender. In any of these cases, you will need to have accrued a significant enough sum to serve as collateral.

Expert advice

inform yourself of the tax implications before borrowing from your life insurance. Exceeding the policy’s ACB, or adjusted cost basis may be taxable.

How to cancel a whole life insurance policy?

You may decide to cancel your policy if your needs or situation changes. This could be because you found a better policy, because your dependents are now financially independent, or you because can no longer keep on top of the premiums.

Good to know

If you just took out your policy you may still be in the “free look” period. If so, may have the right to cancel and get a refund.

To cancel you will need to contact your insurer directly. This is usually done in writing, by phone or online.

If your policy has a remaining cash value, you can take some of that money with you. The cash value minus the fees is known as the cash surrender value. Early on, the fees can take up a significant percentage of the cash value, but it is less painful for an older policy. 

Good to know

Cash surrender value = cash value - surrender fees

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Alexandre Desoutter
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Alexandre Desoutter has been working as editor-in-chief and head of press relations at HelloSafe since June 2020. A graduate of Sciences Po Grenoble, he worked as a journalist for several years in French media, and continues to collaborate as a as a contributor to several publications.