Whole life illustrations projects how your policy may perform over time, based on the insurer’s current dividend scale. It includes key details of the policy, including the premiums you will pay, guaranteed and non-guaranteed cash value, and death benefit growth. 

Whole life insurance illustrations are not a contract, and dividends can change, but they help you see how today’s assumptions could impact your policy’s growth in the future.  In this guide, we will explain these illustrations through an example, their importance, key things to look for, and things to keep in mind while reviewing whole life insurance illustrations in Canada.

Understanding whole life insurance illustrations

A whole life insurance illustration is usually presented in the form of a table. The table will include details of the premiums you have to pay, the guaranteed and non-guaranteed cash value, the death benefit (with and without dividends), and sometimes, a dividend projection. 

Let’s understand this better: 

• Annual premium: the amount you’re expected to pay each year
• Guaranteed cash value: the portion of cash value that grows at a minimum guaranteed rate
• Non-guaranteed cash value: potential extra growth based on dividends
• Guaranteed death benefit: the minimum amount paid to beneficiaries
• Total death benefit (with dividends): potential increased benefit if dividends purchase paid-up additions
• Dividend projection: an estimate of the annual dividend the policy may generate

Example of a whole life insurance illustration

The data below is sourced from Equitable’s Equimax Estate Builder plan. The calculations are based on the current dividend scale rate of 6.40%.

Paid-up additions in whole life insurance are a smart dividend strategy that lets you buy additional coverage without out-of-pocket expenses. The dividends that your par policy earns are used to pay for this coverage. It is one of the smartest ways for individuals who are looking at the long-term growth of their whole life policy to buy extra coverage. 

When your participating whole life coverage grows with paid-up additional insurance, it also:

• Increases your death benefit
• Builds cash value
• Earns future dividends (not guaranteed)

In this blog, we will explain how paid-up additions work, why they matter, and how you can use them to grow your whole life policy’s value.

How do paid-up additions work in Canada?

Let’s understand how paid-up additions work with an example: 

Mr. Oliver is a 40-year old business owner from Toronto who has a participating whole life insurance policy with a coverage of $100,000. His insurer has been performing well in the market, and he ends up earning dividends of $2,000 ((hypothetical, not guaranteed) at the end of the financial year. Instead of converting the dividends into immediate cash, Mr. Oliver uses them to reinvest through PUAs. Here’s what happens in this scenario:

• He earns $2,000 in dividends, which increases the overall death benefit and cash value in the first year
• In the next year, the increased coverage amount earns him even higher dividends, as paid-up additions are also eligible to earn dividends. He further buys more PUA in the 2nd year
• Over the years, say 10 years, he continues earning dividends and through the compounding growth, his death benefit increases to $120,000, along with a cash value growth

Mr. Oliver gets this compounded growth despite not paying any extra premium. In the event of immediate financial needs, he can also borrow against the policy’s cash value. 

Disclaimer: Please note that the above premiums are used for reference purposes only. 

Corporate owned life insurance (COLI) is one of the most effective financial planning tools available to Canadian business owners. Beyond providing a tax-efficient way to protect business continuity, COLI also supports long-term wealth accumulation within the corporation. 

Given that 98.1% of all employer businesses in Canada are small businesses, many depend heavily on one or two key individuals whose loss could significantly disrupt operations. For such companies, corporate-owned life insurance serves as a strategic safeguard, and ensures stability, liquidity, and financial resilience under current Canada Revenue Agency (CRA) guidelines.

What is corporate-owned life insurance in Canada?

Corporate-owned life insurance (COLI) is a life insurance policy purchased and owned by a Canadian corporation. In this arrangement, the business pays the premiums and receives the death benefit proceeds. Unlike personally-owned policies, the corporation is both the policy owner and the beneficiary, creating unique tax planning opportunities under the Income Tax Act.

In a typical COLI structure:

• The corporation owns the policy: The business, not the individual, holds all ownership rights and can access policy benefits
• The insured is a key person: Coverage applies to shareholders, partners, executives, or essential employees whose loss would have a significant financial impact on the company
• Premiums are paid with corporate after-tax dollars: Premiums are paid with corporate after-tax dollars: Premiums are typically paid from retained earnings and are not tax-deductible, except in limited cases where the policy is assigned as collateral for a business loan. In such cases, only the portion of the interest expense on that loan, not the premium itself, may be deductible, and only to the extent that the CRA deems it reasonably related to the loan security
• Death benefits flow to the corporation: Proceeds are paid directly to the business, not personal beneficiaries
• Permanent insurance is most common: Canadian corporations typically use whole life or universal life policies, which build cash value and provide lifetime coverage

The strategic value of corporate-owned life insurance (COLI) goes far beyond simple death benefit protection. Under Canadian tax law, insurance proceeds received by a corporation may qualify for preferential treatment through the Capital Dividend Account (CDA), allowing certain amounts to be distributed tax-free to shareholders. 

Policies must also meet the Income Tax Act’s exempt test to ensure that cash value accumulation remains tax-exempt within the policy, preserving its long-term tax advantages for the corporation.

In Canada, surrendering a whole life insurance policy means you’re ending or terminating your coverage and getting your cash surrender value (CSV). The cash surrender value is what your insurer will pay after deducting any fees or charges.

While the cash value component of your whole life insurance plan makes it feel like your policy is part investment and part protection, there might be circumstances where you simply do not need the coverage anymore. You may need funds to pay off debts, your children may be financially independent or you may simply feel the policy no longer fits your goals. This is where surrendering your policy comes into play. 

Before making the decision to surrender your whole life insurance in Canada, it’s important to understand how your cash surrender value is calculated, what charges and tax implications apply, and what other alternatives you can explore without losing lifelong coverage. 

This guide walks you through the potential costs involved when you surrender a policy and other smarter alternatives, so that you can make the decision confidently.

What does surrendering a whole life insurance policy mean?

When you surrender a whole life insurance policy, you’re essentially cashing it out and ending your coverage. It’s an irreversible decision that cancels your whole life policy and stops the death benefit protection for your beneficiaries. 

When you surrender your policy, the insurer pays out the accumulated cash surrender value; however, the amount you receive is typically lower than the total cash value due to deductions, including:

• Outstanding policy loans (principal plus accrued interest)
• Unpaid premiums
• Administration fees
• Surrender charges (if applicable for your product)

Running a business in Canada takes vision, discipline, and financial foresight. Yet, life insurance remains one of the most underused tools for entrepreneurs. Beyond personal protection, it serves as a corporate strategy for managing risk, optimizing taxes, and ensuring business continuity.

In the first half of 2025, Canada’s new annualized premium for individual life insurance rose by 9% year over year to $1.04 billion, with permanent life insurance such as whole life and universal life showing the strongest growth (LIMRA). This trend highlights how business owners increasingly view life insurance as a strategic business asset that builds liquidity, supports succession planning, and strengthens long-term corporate wealth.

This guide explains how life insurance for business owners in Canada can protect assets, reduce taxes, and enhance corporate stability through personal, business-owned, or corporate-owned policies.

Do business owners in Canada need life insurance?

Yes, every business owner in Canada faces financial risks that extend beyond daily operations. The death or disability of a key owner, shareholder, or partner can disrupt cash flow, debt repayment, and client relationships almost overnight. Life insurance provides a financial buffer that protects both the company and the people who depend on it.

Without proper life insurance for entrepreneurs and incorporated businesses, several issues can arise:

• Outstanding loans become payable: Lenders may demand immediate repayment of business debts guaranteed by the deceased
• Ownership disputes emerge: Shareholder or partnership agreements may trigger forced buyouts at unfavourable terms
• Client and supplier confidence declines: Uncertainty about leadership continuity can strain critical relationships
• Credit access is restricted: Banks may freeze credit facilities during estate or ownership transitions
• Liquidity pressure intensifies: Surviving partners or family members may struggle with cash flow issues such as to fund ownership transfers or maintain operations

A well-structured business life insurance policy ensures liquidity when it is needed most. It supports succession planning, protects corporate credit, and preserves the value of the business for successors or surviving shareholders.

For affluent Canadians, life insurance is less about replacing income and more about strategic wealth preservation. It serves as a cornerstone of estate planning, helping manage capital gains taxes, enable tax-efficient wealth transfers, and protect business continuity.

In 2025, the Canadian life insurance market reflects this shift toward permanent and participating solutions. According to LIMRA, new annualized premiums rose 13% year over year in the first quarter, with whole life policies representing 80% of all permanent insurance sales. Wealthy Canadians increasingly view whole life insurance not as basic protection but as a financial instrument for legacy planning and tax optimization.

The most significant tax exposure for high-net-worth families arises from capital gains on death. When a taxpayer dies, most assets are deemed disposed of at fair market value, and half the resulting gain becomes taxable. While the Lifetime Capital Gains Exemption (LCGE) set at $1.25 million per individual in 2025 can shelter qualifying business or farm property, many estates still face large unrealized gains that exceed this limit. Life insurance provides liquidity to pay those taxes without forcing the sale of investments, property, or shares in a family business.

In this guide, we explain why whole life insurance has become a key tool for high-net-worth Canadians in 2025, how much coverage affluent individuals typically require, and how leading insurers structure participating whole life policies to address complex capital gains and estate planning challenges.

Why high-net-worth Canadians need life insurance

Even for wealthy Canadians, life insurance is not just about income replacement, it is a strategic tool for preserving wealth, managing taxes, and ensuring smooth intergenerational transfers. Without proper planning, estates can face substantial capital gains taxes, forcing the sale of investments, real estate, or business interests at inopportune times, reducing the wealth ultimately passed to heirs.

Whole life insurance provides guaranteed liquidity, tax efficiency, and predictable outcomes, making it indispensable in comprehensive wealth planning.

Key reasons high-net-worth Canadians rely on life insurance:

• Immediate estate liquidity and tax mitigation: Capital gains on death are triggered through deemed disposition of most assets. Even with the Lifetime Capital Gains Exemption (LCGE) of $1.25 million per individual in 2025, many estates exceed this limit. Whole life insurance provides cash to pay these taxes, avoiding forced liquidation of core assets and preserving the family’s wealth.
• Business continuity and succession planning: Business owners use life insurance to fund buy-sell agreements, key person protection, and succession plans. The guaranteed death benefit ensures the family or co-owners can retain the business without scrambling for liquidity or selling under distress, protecting decades of value creation.
• Creditor and legal protection: Properly structured whole life policies bypass probate, delivering death benefits directly to named beneficiaries and shielding funds from creditors, lawsuits, or marital disputes. Policy cash value can also remain protected during your lifetime, offering a safe, tax-advantaged accumulation vehicle.
• Predictable, guaranteed outcomes: Unlike term or universal life, whole life insurance guarantees specific death benefits and cash values. This allows precise estate planning and removes reliance on market performance, interest rates, or economic volatility.
• Participating policy flexibility: Participating whole life policies provide dividends that can be used to:
  • Purchase paid-up additions to grow death benefit and cash value
  • Offset premiums, reducing out-of-pocket costs
  • Accumulate at interest, enhancing long-term policy value
  • Receive cash payments for supplemental income

For high-net-worth Canadians, a carefully designed whole life insurance strategy is more than protection—it is a tool to preserve family wealth, optimize tax outcomes, and ensure business and estate continuity.

Why whole life insurance is the preferred choice for high-net-worth Canadians

Understanding how whole life insurance differs from other options highlights why it is the go-to solution for estate planning, wealth preservation, and business succession.

Universal life insurance: Flexible but uncertain

• Adjustable premiums, variable death benefits, and investment-linked cash value
• Cash value growth depends on market performance; downturns can reduce policy value
• Coverage can lapse if premiums are insufficient or investments underperform, creating risk for long-term estate planning
• Requires active management, which can undermine certainty for multi-million-dollar estates or business succession plans

Term life insurance: Temporary protection, permanent risks

• Provides lower-cost coverage for short-term needs like mortgages or income replacement
• Policies expire, potentially leaving estates without liquidity when it matters most
• Renewal at older ages is expensive, and late conversions to permanent insurance are limited and costly

Whole life insurance: Certainty and permanence

• Guarantees a permanent death benefit and predictable cash value growth
• Fixed premiums keep coverage affordable over decades
• Provides reliable liquidity for capital gains taxes, inheritance equalization, and business succession, eliminating the timing and market risks that can undermine term or universal life policies

For high-net-worth Canadians, whole life insurance combines permanence, predictability, and strategic flexibility, making it uniquely suited to preserving wealth across generations.

How much whole life insurance coverage do wealthy Canadians need?

Determining the right amount of whole life insurance coverage requires analyzing your specific estate tax liabilities, business succession needs, wealth equalization goals, and legacy objectives. Unlike income replacement calculations for younger families, high-net-worth coverage focuses on estate liquidity and wealth transfer efficiency.

Estate tax and probate coverage 

Start with calculating your estate’s tax liabilities at death. Capital gains taxes from deemed disposition of investment properties, business interests, and non-registered investments can easily reach 25-35% of appreciated value. Add probate fees that range from 0.4% to 1.5% of estate value depending on your province. For a $10 million estate with $4 million in appreciated assets, total taxes and fees could exceed $1.5 million.

Whole life insurance covering these costs preserves your estate’s core assets for beneficiaries. Without insurance, estates must liquidate holdings to pay taxes, often at unfavorable times or through forced sales that realize below-market value.

Business succession and buy-sell funding

Business owners need coverage reflecting their ownership value and succession plans. Buy-sell agreements typically require coverage equal to each owner’s business interest. If you own 50% of a $10 million business, you need $5 million in coverage so surviving partners can purchase your shares from your estate.

Family business succession often requires even larger coverage. If your business is worth $8 million but only one child is involved in operations, you need additional whole life coverage to provide equivalent inheritance value for other children. This might mean $12-15 million total coverage making it enough for estate taxes, business transition, and fair inheritance distribution.

Wealth equalization and legacy planning

High-net-worth families often have assets that can’t be easily divided. A family cottage, art collection, or investment real estate might go to specific children based on their interests and circumstances. Whole life insurance provides guaranteed funds to equalize these inheritances fairly.

Calculate the value of indivisible assets going to specific heirs, then secure whole life coverage to provide equivalent value to other beneficiaries. This preserves family harmony and honors your intentions for fair treatment without forcing asset sales.

Leading whole life insurance providers for high-net-worth Canadians

High-net-worth Canadians seeking sophisticated whole life insurance for estate planning and wealth preservation typically turn to Canada Life, Desjardins, Manulife, and Sun Life. These insurers are recognized for strong financial strength, decades of consistent dividend performance, flexible premium structures, and expertise in structuring complex estate strategies.

Factors to consider when choosing whole life insurance for high-net-worth Canadians

For high-net-worth Canadians, whole life insurance is a strategic wealth planning tool, not just a protection product. Experts emphasize that selecting the right policy can preserve family wealth, optimize taxes, and ensure business continuity. To make an informed decision, the following factors are critical:

• Underwriting for multi-million-dollar coverage: Leading insurers such as Canada Life, Desjardins, Manulife, and Sun Life maintain specialized underwriting teams capable of evaluating complex financial situations, including business valuations and estate plans. This expertise ensures large policies, often exceeding $5 million, are approved efficiently and appropriately sized for the client’s long-term objectives
• Dividend performance and policy growth: While whole life insurance provides guaranteed cash value and death benefits, participating dividends can significantly enhance wealth accumulation over decades. Evaluating an insurer’s historical dividend scales, participation rates, and financial strength helps high-net-worth Canadians select policies likely to deliver consistent long-term growth
• Creditor and tax protection: Properly structured whole life policies offer protections that conventional assets cannot. Death benefits can bypass probate, shielding funds from creditors, professional liability claims, or marital disputes. Corporate-owned policies can leverage the Capital Dividend Account (CDA) to transfer wealth tax-free to shareholders or heirs, an essential consideration for business owners.
• Flexible policy structures: Life insurance options such as life-pay, limited-pay (5-, 10-, 20-pay), and additional riders for disability or critical illness allow wealthy clients to align premiums with cash flow and estate planning goals, while maintaining guaranteed coverage that will last for decades
• Integration with estate and business planning: Whole life insurance can seamlessly support wills, trusts, and succession strategies, providing liquidity to pay estate taxes, equalize inheritances, and fund business buyouts without requiring the sale of core assets. This ensures that family wealth and businesses are preserved across generations

Single parents in Canada face some of the most challenging financial planning decisions, with life insurance at the top of the list. With 1.84 million single-parent census families and 1.15 million children being raised by single parents, ensuring financial security is a nationwide concern.

Many families remain underinsured or without coverage, not due to neglect, but because parents are balancing mortgage payments, childcare, and daily expenses. Insurance professionals note that the parents who secure adequate coverage are not necessarily the wealthiest, they are the ones who understand that even a modest life insurance policy can protect their children from financial upheaval.

This guide explains what single parents in Canada need to know about life insurance in 2025. From calculating realistic coverage amounts to selecting policies that fit different budgets, our goal at PolicyAdvisor is to help families find protection that works without jargon, or one-size-fits-all solutions.

How to buy life insurance for single parents?

Buying life insurance for single parents in Canada comes down to five strategic decisions: calculating adequate coverage based on your family’s actual needs, choosing the right policy type, timing your application to secure better rates, naming appropriate beneficiaries who can manage funds for minor children, and keeping premiums affordable on a single income. 

These aren’t just administrative steps, each one directly impacts whether your coverage will protect your children’s stability, education, and housing if something happens to you.

Step 1: Calculate how much coverage you need

Getting the coverage amount wrong is probably the costliest mistake single parents make. Too little, and your family faces financial catastrophe. Too much, and you’re paying for protection you don’t need. The key is breaking down your actual financial picture rather than guessing or going with a rule of thumb that doesn’t fit your situation.

Income replacement

Start with the foundation: how many years of income does your family need to replace? A common starting point is multiplying your annual income by 10 to 20 years, but the right number depends on your children’s ages and your specific expenses.

If you’re earning $70,000 annually with toddlers at home, you’re looking at potentially 20 years of income replacement, that’s $1.4 million right there. Got teenagers who’ll be independent in five years? Your calculation looks completely different.

Debts and liabilities

Every dollar you owe is a dollar your family will need to cover without your income. Make a complete list: mortgage balance, car loans, credit card debt, lines of credit, even loans from family you’ve been paying back.  

The mortgage deserves special attention. For most Canadian families, it’s the largest liability by far. If you’re carrying a $300,000 mortgage with 20 years remaining, that needs to factor heavily into your coverage calculation.

Future child expenses

Future expenses for children is where parents often underestimate dramatically. Think beyond just keeping the lights on, what about childcare costs until your kids can stay home alone? Extracurricular activities, sports teams, music lessons that help them thrive? And then there’s post-secondary education.

Canadian university costs have been climbing steadily. Four years of tuition, residence, and living expenses can easily hit $80,000 to $120,000 per child at public universities, more for private institutions or specialized programs. Multiply that by the number of children you have, and the numbers get substantial quickly.

Existing assets

Now for the good news: you probably have some assets that can offset your coverage needs. RRSPs, TFSAs, savings accounts, existing insurance policies through work, all of these count. Remember, this simply allows you to reduce your coverage amount, it doesn’t mean you can go without insurance

If you have existing group benefits through work, factor in that coverage amount. Just don’t rely on it exclusively for the reasons mentioned earlier.

Inflation buffer

Most insurance calculators overlook a key factor: inflation. A dollar today won’t have the same value in 10 or 20 years. By adding a 10% to 20% inflation buffer to your total coverage needs, you can ensure your policy maintains its purchasing power throughout its term.

Step 2: Choose the right type of life insurance

Policy types aren’t one-size-fits-all, despite what some insurance sales materials might suggest. Each serves different needs, budgets, and financial goals. The trick is matching the policy to your actual situation rather than what sounds most impressive or what an agent earns the highest commission selling.

Term life insurance

Term life insurance covers you for a specific term, typically anywhere from 10 to 30 years. Think of it as renting protection for the years you need it most.

Best for: Single parents who need maximum coverage during their children’s dependency years without breaking the bank.

Pros:

• Significantly lower premiums compared to permanent insurance, often 5 to 10 times cheaper for the same coverage amount
• Straightforward coverage with no investment components to manage
• Can be converted to permanent insurance later with many policies
• Easy to understand and compare between insurers

Cons:

• Zero cash value accumulation, you’re paying purely for protection
• Coverage ends when the term expires unless you renew (usually at much higher rates)
• If you outlive your term and still need coverage, getting a new policy at an older age costs substantially more

Read more about the best life insurance companies in Canada 

Whole life insurance

Whole life insurance is permanent protection that lasts your entire lifetime, with premiums that build cash value you can borrow against or withdraw.

Best for: High-income single parents focused on estate planning, leaving a legacy, or those who want coverage that doubles as a savings vehicle.

Pros:

• Lifetime coverage that never expires as long as premiums are paid
• Builds cash value that grows tax-deferred
• Fixed premiums that never increase
• Can provide an inheritance regardless of when you die

Cons:

• Significantly higher premiums so you can expect to pay 5 to 10 times more than comparable term coverage
• Complex policy structures with surrender charges if you cancel early
• Cash value growth is typically modest compared to other investments
• Not the most efficient way to protect young children on a single income

PolicyAdvisor’s recommendation: For single parents in Canada seeking long-term financial security, whole life insurance provides permanent coverage, guaranteed cash value growth, and predictable premiums. It ensures your children and estate are protected for life, and participating dividends can enhance policy value over time. Unlike term insurance, it doesn’t expire, offering peace of mind that your protection will always be in place.

Read more about how term life insurance and whole life insurance differ

Step 3: Apply at the right time

Timing your life insurance application can save thousands of dollars over the life of your policy. Premiums rise with age and health changes.

Apply while you’re young and healthy

Life insurance premiums in Canada rise with age because mortality risk increases over time. Health changes, such as developing high blood pressure, diabetes, or other conditions can significantly increase premiums or limit policy eligibility. Applying early, while you’re young and healthy, helps you secure lower rates and broader coverage options.

Be completely transparent in your application

Full and accurate disclosure of your health and lifestyle is essential when applying for life insurance in Canada. Misrepresentation or omissions can result in claim denials during the policy’s contestability period, leaving your beneficiaries unprotected. Being upfront ensures your policy delivers the intended financial security when it’s needed most.

Enhance your life insurance with valuable riders

Life insurance riders in Canada are optional add-ons that expand your policy’s coverage and flexibility. By selecting the right riders, you can adapt your life insurance to major life events, protect against disability or unforeseen expenses, and ensure your family remains fully covered. Understanding the most useful life insurance riders Canada offers helps you get the maximum value from your policy.

Key riders to consider:

• Guaranteed insurability rider: Increase your coverage at major life events, such as marriage or the birth of a child without a medical exam
• Waiver of premium rider: Keeps your policy active if you become disabled and are unable to pay premiums
• Child term rider: Provides coverage for your children to help cover funeral expenses or other unexpected costs

Step 4: Name the right beneficiaries

Designating the right beneficiaries is a critical step in ensuring your life insurance proceeds are used exactly as you intend. Incorrect or outdated designations can delay payouts, create legal complications, or result in unintended recipients receiving your policy benefits. These guidelines help you structure your beneficiary designations effectively and securely.

Don’t name minor children directly: Minors cannot legally receive life insurance payouts in Canada. If a minor is named as a beneficiary, the funds may be held up in court or managed through a legal guardian process, delaying access when it’s needed most.

Use a trustee or set up a formal trust:

• Informal trustee: A trusted adult, such as a family member or close friend, manages the insurance funds until your children reach the age of majority. This provides guidance and access while keeping the process simple
• Formal trust: A lawyer-drafted trust specifies exactly how and when funds can be used, offering maximum control and protection for your children’s inheritance

Update beneficiaries after major life changes: Life events such as divorce, remarriage, the birth of a child, the death of a beneficiary, or children reaching adulthood can affect your estate plan. Regularly reviewing and updating your beneficiary designations ensures your life insurance proceeds are distributed according to your current wishes.

Step 5: Getting affordable life insurance as single parents

Ensuring your life insurance remains both adequate and sustainable requires a strategic approach. Here’s how single parents in Canada can balance protection with manageable payments:

Compare quotes from multiple insurers: Premiums can vary significantly between providers. Comparing quotes through independent life insurance advisors like our experts at PolicyAdvisor helps you find the best coverage at the most competitive rate

Consider annual payments: Opting for annual premium payments rather than monthly can help save on premiums over the life of the policy

Maintain healthy lifestyle habits: Healthy behaviors can significantly reduce premiums:

• Quit smoking
• Maintain a healthy weight
• Manage chronic conditions effectively

Evaluate riders carefully: Add only riders that provide meaningful value for single parents, such as:

• Waiver of premium: Keeps your policy active if you become disabled
• Guaranteed insurability: Allows future increases in coverage without a medical exam
• Child coverage rider: Provides protection for your children’s unexpected expenses

Best time to buy life insurance by age

The best time to buy life insurance in Canada is between 25 and 35 years old, when premiums are at their lowest and rates can be locked in for 20 to 30 year terms. Every year of delay increases premiums by 4–8% for ages 25–45, but can be as low as 3% or as high as 10% depending on age band and insurer.

In your 20s

• Premiums are at their lowest. A healthy 25-year-old male can secure $500,000 in 20-year term coverage for $25 to $35 per month
• Medical qualification is easier with fewer pre-existing conditions
• Longer coverage periods are available, including 30 to 40 year terms
• Ideal for covering student loans, a new spouse, or early career debt

In your 30s

• Rates remain favorable, though 15 to 25 percent higher than in your 20s
• Perfect timing if starting a family or buying a first home
• Most cost-effective decade to purchase permanent insurance and build cash value
• Critical window before health issues typically arise in your 40s

In your 40s

• Premiums increase 30 to 50 percent compared to your 30s
• Medical underwriting becomes stricter as health conditions emerge
• Conversion options from employer group coverage become important
• Last opportunity for affordable 30-year term policies before age 50

In your 50s and beyond

• Premiums rise sharply. Coverage can cost two to three times more than for a 30-year-old
• Many insurers limit term lengths to 20 years for applicants over 55
• Simplified or guaranteed issue policies may be necessary if health has declined
• Permanent insurance may be more suitable for estate planning than income replacement

For example, a 30-year-old non-smoking male in Ontario purchasing $500,000 in 20-year term coverage pays about $30 per month. Waiting until age 40 increases the cost to $48 per month, a 60 percent increase for a 10-year delay.

Understanding life insurance costs for single parents in Canada

Life insurance premiums in Canada are determined by several factors, including age, gender, health, lifestyle, occupation, coverage amount, and policy type. Knowing the typical costs can help families plan effectively and choose the right policy.

Average cost of term life insurance

Term life insurance is a budget-friendly way to secure financial protection for a fixed period, such as 10, 20, or 30 years. Premiums increase with age or health changes because the risk of payout rises over time.

Average cost of whole life insurance

Whole life insurance, a form of permanent insurance, provides coverage for your entire life. It is generally more expensive than term insurance because it includes a cash value component that grows over time. Participating policies allow policyholders to receive dividends, further increasing costs but also building long-term value.

Common mistakes single parents make with life insurance in Canada

Life insurance is essential for single parents in Canada to protect their children and secure financial stability. However, many make avoidable mistakes that can reduce coverage effectiveness or create complications. Understanding these pitfalls helps ensure your life insurance truly supports your family when it’s needed most.

Key mistakes to avoid:

• Underestimating coverage needs: Failing to purchase sufficient coverage can jeopardize your family’s financial security, including daily expenses, education costs, and outstanding debts
• Relying exclusively on employer group plans: Group coverage is often limited and non-portable, leaving gaps if you change jobs
• Neglecting to update beneficiaries: Outdated beneficiary forms can cause legal disputes and family conflicts
• Delaying your purchase: Waiting increases premiums and the risk of being uninsurable due to age or health changes
• Letting policies lapse: Missed premiums can terminate coverage, and reinstatement is not guaranteed

The best time to buy life insurance is now, especially when you’re young, healthy, and planning for long-term financial stability. In Canada, purchasing whole life coverage in your 20s or early 30s can significantly reduce lifetime premium costs while giving your cash value decades to grow.

Many Canadians postpone buying permanent coverage until a health scare or major milestone forces the decision. However, those who act early benefit from guaranteed lifelong protection, steady cash accumulation, and the flexibility to use policy loans or dividends to support future financial goals.

In this guide, we will take you through the optimal timing for whole life insurance, key life stages that justify permanent coverage, and the factors that affect your long-term costs and eligibility, helping you decide when to secure a policy that grows with you for life.

When should you get life insurance in Canada?

You should get life insurance as soon as someone depends on your income or you have financial obligations that could burden others after your death. For most Canadians, the best time to buy life insurance is in your mid-20s to early 30s, when premiums are lowest and health complications are least likely to affect eligibility.

Key reasons to buy life insurance

• Financial dependents: A spouse, children, elderly parents, or family members with special needs who rely on your income
• Mortgage or major debt: Outstanding balances that could transfer to your spouse or co-signers (spouses are not automatically liable for individual debts, but co-signers are. Joint debts and some provincial rules may create liability)
• Business ownership: Partners or employees who depend on your contribution for the company’s stability
• Loss of group coverage: Leaving an employer that provided life insurance benefits
• Estate planning needs: Wealth transfer goals or covering final expenses such as funeral costs

According to the Canadian Life and Health Insurance Association (CLHIA), 1 in 3 Canadian households would experience financial hardship within a month if a primary income earner died unexpectedly. Waiting for the “perfect moment” often leads to higher premiums or limited coverage options later in life.

Best time to buy life insurance by age

The best time to buy life insurance in Canada is between 25 and 35 years old, when premiums are at their lowest and rates can be locked in for 20 to 30 year terms. Every year of delay increases premiums by 4–8% for ages 25–45, but can be as low as 3% or as high as 10% depending on age band and insurer.

In your 20s

• Premiums are at their lowest. A healthy 25-year-old male can secure $500,000 in 20-year term coverage for $25 to $35 per month
• Medical qualification is easier with fewer pre-existing conditions
• Longer coverage periods are available, including 30 to 40 year terms
• Ideal for covering student loans, a new spouse, or early career debt

In your 30s

• Rates remain favorable, though 15 to 25 percent higher than in your 20s
• Perfect timing if starting a family or buying a first home
• Most cost-effective decade to purchase permanent insurance and build cash value
• Critical window before health issues typically arise in your 40s

In your 40s

• Premiums increase 30 to 50 percent compared to your 30s
• Medical underwriting becomes stricter as health conditions emerge
• Conversion options from employer group coverage become important
• Last opportunity for affordable 30-year term policies before age 50

In your 50s and beyond

• Premiums rise sharply. Coverage can cost two to three times more than for a 30-year-old
• Many insurers limit term lengths to 20 years for applicants over 55
• Simplified or guaranteed issue policies may be necessary if health has declined
• Permanent insurance may be more suitable for estate planning than income replacement

For example, a 30-year-old non-smoking male in Ontario purchasing $500,000 in 20-year term coverage pays about $30 per month. Waiting until age 40 increases the cost to $48 per month, a 60 percent increase for a 10-year delay.

When is the best time to get life insurance during life events?

The best time to get life insurance during life events is immediately before or during the event itself, particularly marriage, buying a home, or expecting a child. Securing coverage before these milestones ensures protection is in place when financial responsibilities increase, rather than scrambling afterward.

Critical life events that require immediate coverage:

• Getting married or common-law: Your partner now depends on your income for shared living expenses, debt payments, and future plans. Dual-income couples should each carry life insurance coverage equal to roughly 7 to 10 times their annual income, a common rule of thumb cited by FP Canada and major banks. While 10 to 12 times is often used as a benchmark, actual needs can vary based on lifestyle, debts, and long-term financial goals.
• Expecting or adopting a child: Purchase coverage during pregnancy or adoption proceedings, not after the child arrives. The sleep deprivation and adjustment period of new parenthood makes insurance shopping difficult. A $500,000 policy ensures your child’s education, childcare costs, and daily expenses are covered if you die prematurely.
• Buying a home: Your mortgage represents potentially decades of debt that shouldn’t fall entirely on your spouse. While mortgage life insurance exists, individual term life insurance offers better value, portability, and flexibility. Purchase coverage equal to your mortgage balance plus 5 to 7 years of living expenses. This is a common guideline, though some financial experts recommend 3 to 10 years depending on your family’s needs.
• Starting a business: Business owners need coverage that protects both personal and commercial obligations. Buy-sell agreements funded by life insurance ensure business continuity if a partner dies. Key person insurance protects the company from financial losses when crucial employees pass away.
• Career advancement: Major salary increases create lifestyle inflation that your family expects to continue. Always update your coverage after major life events and significant raises.
• Divorce or separation: Life insurance often becomes part of custody and support agreements. Courts may require coverage that guarantees child support and spousal support payments continue if you die before obligations end.
• Caring for aging parents: If you’re financially supporting elderly parents or they’ve co-signed loans with you, life insurance prevents their financial hardship if you predecease them.

Things to consider when buying life insurance

Buying life insurance in Canada is one of the most important financial decisions a person can make. The right policy protects your family from financial hardship, covers outstanding debts, and can even support long-term planning goals such as estate planning or education funding.

Before applying, Canadians should carefully evaluate four key factors: how much coverage they need, the type of policy that fits their goals, the term length or permanence of coverage, and how health and lifestyle affect premiums. 

Calculating your coverage amount

Income replacement method: A common approach is to multiply annual gross income by 10 to 12. For example, a $75,000 salary requires $750,000 to $900,000 in coverage to replace income through investment returns of 3 to 4 percent annually.

The DIME formula (Debt, Income, Mortgage, Education)

• Debt: Include all consumer debt such as credit cards, car loans, and personal loans
• Income: Factor in 10 years of gross salary to maintain your family’s lifestyle
• Mortgage: Include the outstanding balance on your home
• Education: Estimate the cost of your children’s post-secondary education, typically $80,000 to $100,000 per child in Canada

Adding these four components provides a minimum recommended coverage amount.

Types of life insurance policies you can choose from

Term life insurance

• Provides coverage for a fixed period, usually 10, 20, or 30 years
• Offers the lowest premiums, ideal for temporary obligations such as mortgage protection or dependent children
• Does not accumulate cash value
• Convertible to permanent insurance without medical underwriting within a set period
• Best suited for the majority of Canadian families focused on affordable protection

Whole life insurance  

• Provides lifetime coverage that never expires
• Builds cash value that can be borrowed against or withdrawn
• Premiums are typically five to ten times higher than term insurance
• Useful for estate planning, final expenses, or wealth transfer strategies
• Consider permanent coverage only after maximizing RRSP and TFSA contributions

Health factors that affect your rates

Your medical history, lifestyle, and family health background determine your premium classification: preferred, standard, or substandard. The common conditions that can increase your life insurance premiums are:

• Diabetes, especially with complications
• Heart disease, previous heart attacks, or cardiac procedures
• Cancer history, often requiring 2 to 5 years cancer-free for standard rates
• High blood pressure or cholesterol requiring medication
• Obesity (BMI over 30 to 32 depending on insurer)
• Sleep apnea requiring CPAP treatment
• Recent hospitalizations for mental health conditions
• Dangerous hobbies such as aviation, scuba diving, or rock climbing
• Tobacco use including smoking, vaping, or nicotine products, which can increase premiums by 150 to 200 percent

Key application considerations

• Apply before health changes: If you anticipate surgery, treatment, or a new diagnosis, apply beforehand. Once diagnosed, even treatable conditions can increase rates
• Timing and planning: While no season is better for applications, completing the process before year-end can help with financial planning. Avoid applying while experiencing an active illness since it may delay underwriting
• Multiple policy strategy: Consider laddering term coverage to reduce costs as obligations decline. For example, $300,000 for 30 years to cover a mortgage and $200,000 for 20 years to cover children until independence

Best time to buy term life insurance

The best time to buy term life insurance is when you have temporary financial obligations that will eventually disappear, typically in your 20s through 40s when you’re raising children, paying a mortgage, or building career momentum. Term insurance offers maximum coverage at minimum cost for time-limited protection needs.

Optimal scenarios for term life insurance:

• Mortgage protection: Align your term length with your mortgage amortization. A 25-year mortgage needs a 25 or 30-year term policy. As you pay down principal, your coverage decreases naturally while premiums stay level.
• Dependent children: Calculate years until your youngest child reaches financial independence (typically age 21-24). A newborn requires 25-30 year coverage; a 10-year-old needs 15-20 years. This ensures income replacement and education funding throughout their dependence period.
• Income replacement during working years: If you’re 35 years old and plan to retire at 65, a 30-year term policy provides protection through your peak earning years when your family depends most on your income.
• Business loan coverage: Business debt with personal guarantees requires term coverage matching the loan period. A 10-year business loan needs a 10 or 15-year term policy protecting partners and lenders.

Selecting the length of your term policy

Choosing the right term length is a key factor in buying life insurance in Canada. The decision impacts both premium costs and how long your family is financially protected. Shorter terms offer lower premiums for temporary obligations, while longer terms provide extended coverage for mortgages, children, or long-term income replacement. Here are the advantages of 10, 20, and 30-year terms to help you match coverage to your financial goals and life stage.

10-year term:

• Lowest premiums for short-term needs
• Ideal for covering temporary debt or business obligations
• Often used as supplemental coverage during peak expense years

20-year term:

• Most popular term length in Canada
• Balances affordability with long-term protection
• Perfect for young families or new homeowners

30-year term:

• Maximum term length for most applicants under 50
• Best value for long-term obligations
• Locks in rates through retirement age for younger buyers

Renewable vs. convertible life insurance: Choose policies with conversion riders allowing you to switch to permanent insurance without medical underwriting. This protects your insurability if health deteriorates before term expiry.

Best time to buy whole life insurance

The best time to buy whole life insurance is when you want lifelong protection and long-term wealth accumulation, ideally in your 20s to 30s when premiums are lowest and cash value growth has decades to compound. Unlike term coverage, whole life insurance never expires, making it ideal for estate planning, generational wealth transfer, and tax-efficient savings.

Key uses of whole life insurance

Estate planning: Whole life insurance ensures your heirs (named beneficiaries) receive a tax-free death benefit to cover final expenses, taxes, or equalize inheritances. The earlier you buy, the more your policy’s cash value can grow, providing liquidity later in life.

Wealth accumulation: Policies accumulate guaranteed cash value and potential dividends over time. Buying early maximizes compounding and creates a low-risk, tax-sheltered asset for future borrowing or retirement income.

Children’s or grandchildren’s insurance: Purchasing whole life for a child locks in their insurability and provides a lifetime of coverage. Premiums are minimal, and the policy can later fund education, a first home, or business startup through policy loans or withdrawals.

High-income earners or business owners: Whole life offers tax-efficient strategies for sheltering corporate retained earnings or supplementing retirement income. Policies can be corporately owned, providing long-term financial stability and estate advantages.

Philanthropic or legacy goals: Whole life insurance allows you to leave a charitable legacy or ensure long-term family financial security through a guaranteed payout, no matter when you pass away.

If you currently hold a term policy, choosing a convertible term plan lets you transition to whole life insurance later without a new medical exam, protecting your insurability. Paid-up additions and limited-pay options can help you grow value faster or finish payments early.

How health changes affect your life insurance timeline

Health changes can significantly influence life insurance costs and eligibility in Canada, which makes applying early an important financial decision. While minor medical diagnoses can raise premiums, serious or chronic conditions may lead to postponed or declined applications. Understanding how insurers assess common health issues helps you secure affordable coverage before risks develop.

Pre-existing conditions and waiting periods

Cardiovascular conditions: Heart attacks, strokes, or cardiac surgeries typically require a one- to five-year waiting period before standard rates are considered. Recent diagnoses can lead to substantial premium increases or table ratings that add 25 to 100 percent to the base cost.

Cancer history: Most insurers require applicants to be cancer-free for two to five years before offering standard rates. The required period depends on the type and stage of cancer. Early-stage cancers in complete remission may qualify sooner, while active or metastatic cases usually result in coverage denial.

Diabetes management: Applicants with Type 2 diabetes and well-controlled blood sugar levels (HbA1c under 7.0 percent) can often qualify for standard or slightly elevated rates. Type 1 diabetes or uncontrolled Type 2 diabetes with complications can increase premiums by 50 to 150 percent.

Mental health conditions: Stable cases of depression or anxiety with consistent treatment and no recent hospitalizations may qualify for standard rates. However, a history of suicide attempts, hospitalizations within the past two years, or multiple psychiatric medications can result in postponement or denial.

BMI and weight considerations: Obesity with a body mass index (BMI) between 30 and 35 can moderately increase premiums. Severe obesity (BMI over 40) may lead to significantly higher rates or coverage denial. A weight reduction of at least 10 percent can qualify you for a rate reconsideration with many insurers.

Things to consider when applying for life insurance in Canada

When planning to apply for life insurance, timing matters. Certain health events or medical procedures can temporarily delay approval or increase premiums, so consider the following before you apply.

• Apply before scheduled surgeries: Even minor elective procedures such as gallbladder removal or hernia repair can delay applications for three to six months after surgery. Completing underwriting before any planned medical procedure helps avoid interruptions.
• Secure coverage before genetic testing: Canadian insurers cannot use genetic test results you do not yet know. However, if you later receive a positive result indicating a hereditary condition, it can influence future underwriting decisions. It is advisable to obtain coverage before undergoing genetic testing if your family history suggests elevated risk.
• Pregnancy considerations: Pregnancy alone does not affect premiums, but applying early in pregnancy is recommended. Complications such as gestational diabetes or preeclampsia can affect eligibility or rates. Post-pregnancy complications may also impact future applications.

Guaranteed issue and simplified policies

If health has declined significantly, guaranteed issue life insurance may be the only option. These policies do not require medical exams or underwriting but provide limited coverage, typically between $10,000 and $50,000, at higher premiums. They are designed primarily for final expense protection when traditional life insurance is no longer available.

Life insurance plays a key role in helping Canadian farmers manage the financial realities of succession planning and estate transfer. When ownership of a farm changes hands, whether it is through retirement, sale, or inheritance, there are significant liquidity needs arising from taxes, debts, and operational needs that must be addressed.

Life insurance becomes an essential financial planning tool that helps farmers and their families retain control of the farmland through such transitions and helps protect long-term business stability. Rising farmland values and complex tax rules can create large tax liabilities at death or transfer.

Without proper planning, these costs may force the sale of land, equipment, or other assets to meet obligations. Life insurance can help enable the liquidity required to pay these taxes, ensuring that the farm remains intact and continues operating without financial disruption.

Beyond taxes, life insurance can also be structured to fund retirement for the outgoing generation, provide liquidity for capital reinvestment, or cover mortgages and equipment loans tied to the farm. This allows for a smoother, more predictable transition to the next generation.

Why Canadian farmers need life insurance in 2025

Canadian farmers face a unique mix of financial risks that can impact not just one season, but entire generations. Farmland has become one of the country’s most valuable assets, yet it’s also highly illiquid. If the person who runs the operation passes away, land, equipment, and livestock can’t simply be sold without disrupting the entire business.

Life insurance has become a critical planning tool in 2025, helping farm families protect their legacy, manage rising capital gains taxes, and maintain long-term stability. A well-structured permanent life insurance policy provides a tax-free death benefit that delivers immediate liquidity to cover large tax bills, pay off farm debts, and ensure the next generation can continue operations without a forced sale of land or equipment. It also supports smooth succession planning by giving heirs the financial runway they need to keep the operation running.

For incorporated farm businesses, life insurance can be even more powerful. When owned by the corporation, it can fund buy–sell agreements, redeem shares, or provide essential capital to surviving shareholders, all with significant tax advantages. The death benefit enters the corporation tax-free and can be distributed to the shareholder’s estate through the capital dividend account (CDA), often resulting in little or no tax paid. It’s important to bear in mind that only the amount minus the policy’s adjusted cost basis (ACB) can be credited to the CDA and paid tax-free to shareholders.

By integrating life insurance into their broader estate, tax, and corporate planning, Canadian farmers and farm corporations can maximize estate value, reduce tax exposure, and secure the long-term continuity of both the family and the business. In today’s environment of rising farmland values and increasing complexity around succession, life insurance is an essential tool for protecting your farm’s future.

How life insurance protects Canadian farmers

Owning a farm in Canada often involves significant financial commitments such as land, equipment, and debt. Life insurance plays an important role in protecting these investments by ensuring stability, liquidity, and continuity when an owner passes away. It helps families manage immediate expenses, settle taxes, and preserve the farm as a viable business for future generations.

Here are the key ways in which life insurance supports Canadian farm owners and their families:

• Protects family income: Replaces income to help loved ones manage ongoing living expenses and household costs
• Clears farm mortgage and other debts: Pays off equipment financing, outstanding mortgages and farm debts, preventing lenders from forcing asset sales
• Maintains farm continuity: Provides liquidity to keep the farm running by covering employee wages, supplier contracts, and buy-sell agreements among partners or heirs.
• Supports estate planning: Provides liquidity to cover capital gains tax from deemed disposition and provincial probate fees, ensuring farm passes intact to the next generation
• Covers end-of-life expenses: Helps pay for funeral costs and other final expenses
• Funds long-term family goals: Permanent insurance can fund long-term goals like children’s education or a spouse’s retirement
• Debt elimination for high-leverage farms: Addresses large farm debts, often more flexibly than creditor insurance
• Estate equalization: Creates liquidity to provide equal inheritances to non-farming children without forcing the sale of productive land
• Tax settlement: Ensures the estate can meet tax obligations, supporting smooth farm succession

Life insurance provides critical financial stability for farmers, but its true value becomes clear when you understand the tax consequences triggered when a farmer passes away. These tax rules can create major cash needs, often at the worst possible time.

Deemed disposition on death: How farm inheritance is taxed in Canada

Canadian tax law does not impose a traditional inheritance tax, but deemed disposition rules create a similar effect for Canadian farm estates. When a Canadian farmer passes away, the Canada Revenue Agency (CRA) treats all capital property, including farmland, as if it were sold immediately before death at fair market value.

This is called a deemed disposition. Even though no actual sale happens, the CRA “deems” a sale to calculate any capital gain or loss that has accrued during the deceased’s lifetime. Unless the farmland transfer qualifies for a spousal rollover, intergenerational rollover, or capital gains exemption, this triggers capital gains tax in the year of death. 

Farmland values in Canada have risen sharply over time, so the tax bill at death can be very large, even though the family hasn’t received any cash. Because this tax is due on the final tax return, the farming heirs may face a significant cash shortfall. If they don’t have readily available funds, they might be forced to sell part of the farm, land, or equipment just to cover the taxes,  which can disrupt the continuity of the farming operation or reduce the land base that has been built over generations.

Farm tax relief in Canada: Rollover rules and Lifetime Capital Gains Exemption

Canadian tax law recognizes the importance of helping family farms stay within the family. To support smooth transitions and reduce the tax burden at succession, the government offers several farm tax relief mechanisms, most notably the rollover provisions and the Lifetime Capital Gains Exemption (LCGE). These tools are designed to defer or eliminate taxes that would otherwise arise when farmland and other farm assets change hands. Key relief provisions include:

• Qualified farm property rollover to a spouse: When eligible farm property (such as land, buildings, machinery, shares of a family farm corporation, or a partnership interest) transfers to a spouse or common-law partner, a full tax deferral is available. The surviving spouse assumes the deceased’s adjusted cost base, postponing capital gains until they sell or pass away. This rollover occurs automatically unless the estate elects otherwise.
• Intergenerational rollover to children: Similar rules apply when qualified farm property is transferred to children or grandchildren who were Canadian residents immediately before the transfer. The property must have been actively used in the farming business by the transferor or family members, and the recipient must continue using it in the farming business. However, these rollovers postpone taxes but do not eliminate them. When the surviving spouse or next-generation farmer eventually disposes of the property, the full accumulated gain becomes taxable.

• Lifetime Capital Gains Exemption (LCGE): The LCGE allows eligible farmers to exempt up to $1.25 million in capital gains from tax when they sell or transfer qualified farm property. For a couple, that can mean up to $2.5 million in tax-free capital gains, providing a major advantage in farm succession planning. To qualify, the property must meet CRA’s “qualified farm property” criteria and have been used principally in farming by the individual, spouse, or family member. Many farms do not fully qualify, or the gains exceed exemption limits, making life insurance an essential tool to cover any remaining estate settlement obligations.

• Principal residence exemption: If part of the farmland includes the owner’s principal residence, that portion may qualify for the principal residence exemption. This can reduce or eliminate the taxable capital gain on that segment of the property, offering further relief during estate settlement.
• Other Tax Planning Tools for Farm Succession: In addition to rollovers and the LCGE, farmers can use:

• Capital gain reserves, to spread tax payments over several years;
• Estate freezes, to lock in today’s value and pass future growth to heirs;
• Federal and provincial transfer programs that encourage intergenerational farm transfers.

These strategies, often combined with life insurance, help families manage taxes, preserve liquidity, and protect the legacy of their farm.

Deemed disposition events and rollover rules for Canadian farmland

Navigating Canadian farmland transfers requires a clear understanding of tax rules, deemed disposition triggers, and available rollover or exemption strategies under the Income Tax Act. Common farm property events, such as death, gifting to family, sale, or change of property use, can result in a deemed disposition, sometimes triggering capital gains tax.

However, strategic planning using spousal rollovers and the Qualified Farm Property (QFP) deferral rules allows Canadian farmers and their families to minimize taxes and preserve farm equity when transferring ownership.

The table below summarizes when capital gains tax may apply and what rollover or exemption options are available to reduce or defer tax on farm property transfers.

How to calculate capital gains on farmland in Canada

When farmland changes hands, whether through retirement, sale, or family succession, understanding how to calculate capital gains is essential to avoid unexpected tax bills. Let’s walk through a simple example that illustrates how capital gains tax applies when transferring a family farm.

Here’s an example of the Smith family’s 2,000-acre farm:

The Smiths own a 2,000-acre (12 quarters) grain farm in Ontario, originally purchased decades ago for $50,000 per quarter section. Today, each quarter section is worth $500,000, making the total land value $6 million. As the parents prepare to retire and pass the farm to their children, their accountant helps calculate the potential capital gains.

Capital Gain calculation: ($500,000−$50,000)×12=$5,400,000

This represents the total appreciation in the land’s value over time. Because both parents are active farmers, they qualify for the Lifetime Capital Gains Exemption (LCGE), allowing them to shelter up to $2.5 million of gains from tax.

This example shows how even a modest change in land values can create significant tax exposure over generations. Without planning, families may be forced to sell assets to cover the tax bill. Many farmers address this by:

• Setting up succession and estate plans early
• Using life insurance to provide liquidity for future tax obligations
• Reviewing ownership structures to optimize use of exemptions and rollovers

Proper planning ensures the next generation can inherit the farm, not the tax burden. Since most farms do not maintain sufficient liquid assets, careful estate and succession planning is essential to manage these obligations effectively and protect the farm for future generations. 

How can life insurance help Canadian farmers in protecting against capital gains taxes

Life insurance can play a crucial role in protecting farm families from the financial impact of capital gains taxes. A well-structured life insurance policy provides the liquidity needed to pay these taxes, ensuring heirs don’t have to sell land, equipment, or livestock to cover the costs. The tax-free death benefit from the policy can be directed to the estate or a farming corporation, giving the family immediate access to funds without disrupting operations or ownership.

Beyond covering taxes, life insurance can also support intergenerational wealth transfer and business continuity. For example, parents can use it to equalize inheritances between farming and non-farming children, fund retirement income through a corporately owned policy, or secure financing for buy-sell agreements among family members.

In essence, life insurance turns a future tax liability into a predictable and manageable cost, helping ensure that the farm stays intact, the business remains viable, and the family legacy continues for generations.

In Canada, renewal premiums for a 10-year term life insurance policy can rise sharply, often doubling or more, depending on your age and health classification at the time of renewal. According to a 2024 LIMRA report, 31% of Canadians experience life insurance coverage gaps, often because they underestimate renewal costs or delay exploring alternatives.

That’s why it’s important to review whether renewing your existing term policy or applying for a new plan will give you better value and sustained protection. When a term policy renews, insurers recalculate premiums based on your attained age and their current rate schedule. While premiums remain fixed during the initial term, renewal almost always means significantly higher costs.

This guide explains how 10-year term renewals work in Canada, what to expect in terms of cost, and the best strategies to secure affordable coverage going forward.

How does term life insurance renewal work?

Renewing a term life insurance policy in Canada is usually straightforward, but it comes with specific conditions you should understand. Renewal works differently than buying a new policy. Premiums increase, but you don’t have to go through medical underwriting again.

Knowing how premiums are calculated, when renewals happen, and your eligibility can help you decide whether to keep your coverage, shop for a new plan, or convert to permanent insurance.

Key aspects of 10-year term life insurance renewal in Canada

• Automatic renewal clause: Most 10-year term policies include a guaranteed renewal option up to a maximum age (commonly 75–85). This means your coverage continues automatically as long as you pay the premiums. No new medical exam is required, and your current health won’t prevent renewal

• Guaranteed renewal rights: By law and contract, insurers must allow you to renew on the policy’s set renewal schedule until the maximum age stated in your contract. This holds true regardless of any changes in your health, provided premiums are paid on time

• Premium recalculation at attained age: Renewal premiums are based on your attained (current) age and your original risk class (smoker or non-smoker). Because you are older at renewal, premiums can increase sharply, sometimes doubling or more compared to the initial term

• Insurer notification: Canadian insurers typically send renewal notices 30–60 days before your policy expires. We recommend using this period to compare renewal costs against new quotes, consider conversion options, and decide whether to renew or switch

• Maximum renewal age: Most insurers allow renewals until age 75, 80, or 85, after which the coverage ends. Always check your policy’s maximum renewal age so you can plan ahead for future coverage needs

What happens when your 10-year term life insurance expires?

When a 10-year term life insurance policy reaches the end of its term, the coverage does not end immediately — but important changes occur. Understanding these changes can help you decide whether to renew, replace, or convert your coverage.

• Renewal notice: Most Canadian insurers send a renewal or expiry notice 30–60 days before the term ends. This notice outlines your renewal premium and any options available
• Renewal process: If your policy is guaranteed renewable, coverage continues automatically at the insurer’s set renewal rates unless you actively cancel. You do not need a new medical exam, but your premiums are recalculated based on your attained age and can increase significantly
• Lapse option: If you do not pay the renewal premium, the policy will lapse, and coverage will end. Unlike premium payments within a term, there is generally no “grace period” for choosing renewal once the expiry date has passed
• No-medical requirement: Most renewable term policies in Canada allow renewal without additional medical underwriting. This ensures you can maintain coverage even if your health has changed, though premiums may be much higher than buying a new policy if you are still in good health

Guaranteed renewable vs. non-renewable term life insurance

When a term life policy reaches the end of its term, the next steps depend on whether it is guaranteed renewable or non-renewable. Understanding the difference is essential for planning your long-term coverage, since it affects renewal options, premium costs, and your ability to maintain protection if your health changes.

• Guaranteed renewable term life insurance: These policies include a clause that allows you to renew for additional terms (often up to age 75, 80, or 85) without new medical evidence. Premiums are higher at renewal, but this guarantees continued coverage if your health has worsened.

• Non-renewable term life insurance: These policies expire at the end of the initial term with no option to renew. If you still want coverage, you must apply for a new policy and go through underwriting again. Premiums may be lower initially, but there is no protection against future health changes.

What is the cost of term life insurance renewal after 10 years?

Renewing a 10-year term life insurance policy in Canada is often significantly more expensive than your original premium. The renewal cost depends mainly on your age, coverage amount, and health status. Generally, younger policyholders renewing smaller coverage amounts will pay less, while older Canadians face sharply higher premiums.

For instance, a 40-year-old with $500,000 in coverage may see renewal premiums in the range of $1,200 to $1,280 per year, much higher than what they paid during the first term.

If you’re deciding whether to renew or purchase a new policy, it’s important to compare both options carefully. PolicyAdvisor’s licensed advisors can review your age, health, and coverage needs to determine the most cost-effective solution.

The table below illustrates estimated annual renewal premiums for a 10-year term life insurance policy from leading Canadian insurers, Empire Life, Desjardins, and Canada Life, based on coverage amount and renewal age.

Considering renewing your term policy?

Use our tool to instantly calculate your new premium and compare your options.

Renewal vs. new policy: term life insurance costs in Canada

When your 10-year term life insurance ends, you usually face two choices: renew the existing policy or apply for a new one. Renewal premiums are automatically higher because they’re based on your age at renewal and do not require new medical underwriting.

In many cases, however, buying a new term life policy at your current age can be more affordable, especially if your health has not changed. Comparing both options before paying the renewal cost is essential, as choosing a new policy can lead to substantial long-term savings.

What factors affect your term life insurance renewal premium?

Renewing a term life insurance policy in Canada is generally more expensive than purchasing a new policy at your current age. Renewal premiums are influenced by multiple factors, including age, health, coverage amount, and policy type. Understanding these factors can help you make informed decisions about whether to renew your existing policy or consider a new term plan.

While insurers set premiums, provincial regulations, economic conditions, and the company’s claims experience may indirectly influence pricing. Here are the main factors affecting renewal costs:

• Renewal age: Premiums increase with age. The older you are at renewal, the higher the cost of coverage

• Gender: In Canada, females typically pay lower premiums than males due to longer life expectancy, lower mortality rates, and generally lower exposure to high-risk occupations or lifestyles

• Medical status: Health conditions can increase premiums. However, most guaranteed renewable term policies do not require a medical exam at renewal, so changes in health do not prevent renewal, though premiums may still rise due to age

• Smoking status: Smokers are classified as higher-risk, resulting in higher premiums. If you quit smoking, your existing renewable policy usually still charges smoker rates unless you apply for a new policy.

• Coverage amount: Higher coverage amounts lead to higher premiums. Reducing the coverage is one way to lower renewal costs while still maintaining essential protection

• Policy length and type: Longer-term policies and policies with additional riders or benefits cost more than basic term coverage. Choosing the right policy term and optional add-ons can help control premiums

When considering renewal, it is essential to weigh these factors against your current financial needs and health status. Comparing the renewal premium with quotes for a new policy at your current age can sometimes result in significant cost savings, particularly for healthy individuals or those who have quit smoking.

Renewal premium differences: smoker vs. non-smoker

The premium for a smoker is significantly higher because insurers classify them as higher-risk applicants. Smoking increases the likelihood of developing serious health conditions, which raises the insurer’s expected claims cost. Premium calculations also consider other factors such as age, overall health, coverage amount, and policy type, but smoking status remains one of the most influential rating factors.

Top Canadian life insurance providers for renewals in 2025

Selecting the right insurer for your term life insurance renewal in Canada can make a significant difference in both cost and flexibility. Renewal premiums vary widely between providers, so choosing a financially strong insurer with competitive rates and reliable customer service is essential.

Canada’s leading life insurance companies, such as Canada Life, Desjardins, Empire Life, Manulife, RBC Insurance, and Sun Life, offer guaranteed renewable term life insurance policies with different renewal schedules and premium structures. Each insurer has its own approach to pricing, conversion options, and maximum renewal age, which can directly affect your long-term costs.

The table below highlights major Canadian insurers that provide term life insurance renewal options. Reviewing these differences helps you compare coverage features, understand premium increases, and make an informed decision about whether to renew your existing policy or apply for a new one.

Step-by-step guide to renewing term life insurance in Canada

Before your 10-year term life insurance policy expires, you have two main options: renew the existing policy or let it lapse. Renewing your term policy ensures continuous coverage without the need for medical underwriting, though renewal premiums are typically higher than your original rates.

Many reputable Canadian insurers offer guaranteed renewable term life insurance. Understanding the renewal process helps you make an informed decision, maintain coverage, and avoid unnecessary out-of-pocket expenses.

Here is a step-by-step guide to renewing your term life insurance:

1. Watch for your renewal notice: Insurers generally send a reminder 30 to 60 days before the policy expires. This notice provides the renewal premium and outlines your available options

2. Review your existing policy: Evaluate whether your current coverage meets your financial needs. Consider factors such as age, income, outstanding debts, number of dependents, and health status when deciding whether to continue with the policy

3. Compare renewal costs with new policy quotes: If you are in good health, it may be worth comparing the cost of renewing your current policy with obtaining a new term life insurance policy. While renewable term policies do not require new medical underwriting, premiums at renewal can be significantly higher than the original rates

4. Decide whether to renew or purchase a new policy: After reviewing costs and coverage, inform your insurer of your decision to renew or let the policy lapse

5. Consider converting to permanent life insurance: Some term policies include a conversion option, allowing you to switch to a permanent plan without additional medical underwriting. Check with your insurer for eligibility criteria and assess whether conversion better meets your long-term financial goals

6. Update beneficiaries and contact information: Ensure your beneficiary designations and their contact details are current to prevent any issues in the event of a claim

PolicyAdvisor’s experienced advisors can guide you through the renewal process, help you compare options, and answer any policy-related questions. Our team supports you not only during the renewal but also after you have renewed or purchased a new policy, ensuring you make informed decisions every step of the way.

Best alternatives to renewing your term life insurance after 10 years

As your 10-year term life insurance policy approaches expiry, you have the option to renew it or let it lapse. While automatic renewal is convenient, it is often expensive and can put a strain on your budget. Fortunately, there are several alternatives that can maintain coverage while offering more flexibility and affordability.

Convert your existing term policy to permanent coverage

Converting a term life plan to permanent insurance can provide lifetime protection and additional financial benefits. Whole life insurance offers fixed premiums for life and builds cash value, while universal life provides flexible premiums and potential investment growth. Converting your term policy allows you to secure permanent coverage without a new medical exam, though premiums will generally be higher than term rates.

Buy a new term life insurance plan

Purchasing a new term policy at your current age may be more cost-effective than renewing an existing one. You can choose a term length of 10, 20, or 30 years based on your coverage needs. A new term policy can provide more affordable premiums and ensures that your loved ones remain financially protected.

Reduce your coverage amount

Term life insurance premiums are directly tied to coverage amounts. Lowering your coverage can reduce costs while still maintaining essential protection. Consider your outstanding debts, future financial obligations, and family needs when evaluating whether a lower coverage amount is sufficient.

Ladder multiple-term life policies

Laddering involves holding multiple term policies with staggered expiry dates to match your changing financial obligations, such as a mortgage, children’s education, or other life events. This strategy allows you to maintain higher coverage when it is most needed while letting shorter-term or higher-value policies expire as your financial needs decrease

How to decide whether to renew term life insurance?

Deciding whether to renew a term life insurance policy is an important financial decision. While renewal premiums can double or triple compared to your original term, cost is only one factor. Your long-term financial goals, family situation, and health status all play a crucial role in determining the best option.

Assessing your current financial situation and future obligations can help you decide whether to renew your existing term plan or purchase a new policy that better meets your needs. We recommend considering the following factors:

• Review your policy documents: Insurers typically send a renewal notice 30 to 60 days before the policy expires. Reviewing your policy helps you understand coverage, riders, and renewal terms, which is essential before deciding whether to renew or purchase new coverage.

• Evaluate changes in coverage needs: Consider any changes in income, outstanding debts, number of dependents, or long-term financial goals. These factors can determine whether your current coverage amount remains sufficient.

• Compare life insurance quotes: Compare renewal premiums with quotes for a new term life insurance policy. Healthy individuals may find that buying a new policy is more cost-effective than renewing an existing plan at higher rates.

• Consider health status: Health plays a key role in choosing between renewal and a new policy. If you have a pre-existing condition, a no-medical-exam policy may be the better option. Conversely, if you are healthy, a new term plan can offer more affordable premiums.

• Consult an insurance advisor: Licensed advisors at PolicyAdvisor can guide you through the renewal process, evaluate options, and help determine whether renewing your existing term plan or purchasing a new policy aligns with your financial goals and protection needs.

Can I renew my 10-year term life insurance without a medical exam?

Yes, most Canadian insurers offer the automatic renewal option for 10-year term life insurance without a medical exam. Insurance companies recalculate premiums based on your age. Unless you apply for new coverage, you do not have to disclose your health status during the renewal process.

Can I switch insurance companies instead of renewing my current policy?

Yes, you can switch to a new insurer instead of renewing the existing term plan. However, while applying for a new policy from another insurer, you will have to submit a fresh application and undergo a medical examination.

What documentation do I need for term life insurance renewal?

For renewal, you need to evaluate the renewal notice and pay the new premium. If you are reducing coverage or switching to a new plan, fill in a conversion form. Renewing your existing policy doesn’t require a medical examination, unless you buy new coverage. 

Can I partially renew my term life insurance coverage to reduce costs?

Yes, certain plans enable lowering of coverage, and renew the lower amount. You can also partially convert your term plan to a permanent one while keeping the remaining as term plan coverage. This is an effective way of saving and still enjoying protection.

What happens to my term life insurance if I move provinces in Canada?

If you move to another Canadian province, the existing term life policy remains active. Update your banking and address information to ensure the policy service is smooth and convenient. If you buy a new policy after moving to a new province, the replacement options and provincial taxes may differ.