Wouldn’t it be nice to pay nothing for your insurance coverage if you don’t end up using it? While some types of insurance – like car insurance – can decrease in cost as you prove you have little need for it, most forms of your personal insurance protection cost more as you age.

However, in Canada, some forms of living benefit insurance, such as critical illness insurance and disability insurance, allow you a partial or full refund on your premiums paid. This is offered through a life insurance rider called return of premium (ROP).

How does a return of premium work?

As mentioned, return of premium is available only on critical illness insurance and disability insurance policies. It is usually available as an add-on rider. A policy with a return of premium rider works just like a regular policy: you pay the monthly premiums and the policy coverage continues. If there is a critical illness or disability claim, the policy pays out.

When return of premium rider is added, an insurance provider pays back a portion or all of the premiums paid by the policyholder under certain circumstances.

There are generally three ROP variants:

Upon death or Return of Premium on Death (ROPD)

ROPD refunds all returnable premiums paid if the policyholder passes away while the policy is in force. The premiums returned are paid to the beneficiary appointed by the insured, upon the passing away of the insured individual.

Different providers have their own individual definitions of what constitutes a returnable premium but generally will remove any advanced payments made for long-term care or child policies if they were part of the original coverage.

At the end of the contract or Return of Premium on Expiry

In this case, the insurance provider refunds premiums paid if the policy term expires without any claim being made.

When the contract is cancelled or Return of Premium on Cancellation/Surrender

In the case of Return of Premium on Cancellation or Surrender, most insurance companies will allow a partial or full return of premiums at predefined ages or depending on how long the policy has been in force.

For instance, a policyholder may have 50% of the premiums returned back to them 20 years after your coverage has begun. That percentage will increase with the insured’s age, with full return of premiums at the age of 65 or 75.

Providers have different rules and guidelines on how returnable premiums are defined, including when you can claim them. Schedule a call with our experienced life insurance advisors so we can help you select the return of premium option that works best for your needs.

Can I get return of premium on term life insurance?

Unlike in other jurisdictions like the United States, Canadian insurance companies do not offer return of premium for term life insurance policies.

For those Canadian life insurance seekers also looking to get back some or all of the premiums they pay for their coverage, there are permanent insurance options available with accessible cash value to explore.

What are the benefits of return of premium riders?

The number one benefit of a return of premium rider is the refund of the premium that you or your beneficiary could receive. While insurance is something you buy and hope you never need, such a feature can be a helpful push for those on the fence about getting more specialized coverages like critical illness and disability.

For the risk-averse, ROP can also act as a guaranteed savings account that simultaneously provides you with income protection. Should you decide you don’t need or cannot afford the policy, you can cancel or surrender your policy and access those funds.

What are the drawbacks of return of premium (ROP) riders?

Cost: Nothing in life is free, adding a ROP rider to your policy can increase your monthly premium. You could decide that cash is better used elsewhere, like adding more coverage to your policy or taking out another kind of coverage that you may also require.

Opportunity cost of capital: As mentioned above, some ROP riders can only be exercised at certain ages.

And, while you do have the guarantee that you or your beneficiaries will get your premiums back, there are alternatives for saving and investing your money that would offer a better return than parking your money in a ROP rider.

Availability of providers: Lastly, insisting on ROP at expiry or cancellation option may limit who you can choose as an insurance provider, as not all companies offer the full suite of ROP variations. ROP options may also vary based on your chosen term; for instance, Return of Premium on Surrender options are typically only available on longer-term policies. The provider that offers ROP on expiry, cancellation, or surrender may not have other insurance features you seek or charge a higher premium than another provider.

Which critical illness insurance providers offer return of premium riders?

Many Canadian insurance providers offer riders for return of premium. Below is a list of some of the companies offering Return of Premium on Death (ROPD), Return of Premium on Expiry (ROPX), Return of Premium on Cancellation (ROPC), and Return of Premium on Surrender (ROPS).

How do I get return of premium coverage?

PolicyAdvisor’s team of licensed brokers have decades of experience helping Canadians navigate living-benefit insurance and ROP riders. Reach out today to speak to an advisor, get instant quotes, and find the right coverage for your budget and needs.

Many purchase life insurance for the protection it provides, but don’t put much thought into the process their beneficiaries will go through to get the life insurance payout. During this difficult time, beneficiaries may be unsure how to collect the financial security you have set up for them. Thankfully, claiming a life insurance benefit is a fairly quick and straightforward process in Canada.

Read on to find out exactly what you need to do to make a life insurance claim.

How to file a life insurance claim

If you are the beneficiary on a life insurance policy, you will need to contact the insurance agent or the insurance company where the policy is from. They can then walk you through the process involved in receiving the insurance benefit. This is commonly called filing a claim.

The steps to file a claim are fairly similar among most Canadian life insurance companies.

Step 1: Submit proof of death of the insured
Step 2: Submit the policy contract
Step 3: Fill out the death claim paperwork
Step 4: Tell them how you want to be paid
Step 5: Wait for the claim to be processed
Step 6: Get the payout

Step 1: Submit the proof of death

The claims process starts with submitting the proof of death of the person insured. All claims require the submission of at least one document. This is usually the death certificate. However, based on the dollar value of the death benefit payment, two separate documents may be required.

Documents that prove the death of the insured may include:

• the death certificate
• funeral director’s statement
•  coroner’s report
• obituary
• funeral service program
• funeral home bill
• police reports
• medical records

Depending on the circumstances, the insurance company may request an attending physician’s statement (APS) to certify the cause of death and to verify the medical information that was used to underwrite the policy.

The claims packet sent to the beneficiary will usually specify exactly what documents are required to prove the death of the insured person.

Here are some other things to keep in mind when proving death for life insurance:

• Most insurance companies do not accept a death certificate where the cause of death is yet to be ascertained or is mentioned as “pending”.
• For foreign deaths, many companies require valid death certificates from the country where the death occurred.
• The certificate should be translated into English (or the main business language of the carrier).

Step 2: Submit the policy contract, if available

Along with the claim forms, the submission of the original policy document can help speed up the process. This is the original document that contains all the information relating to the policy for the insurer to cross-check when they first enact the policy. In case you have lost or misplaced the original policy, you should contact the company for a digital retrieval of the document.

Step 3: Filling out the death claim paperwork

This is where you need to provide all relevant information pertaining to your claim. This includes

• the policy number
• the cause of death
• the relationship of the beneficiary or claimant to the life insured
• funeral home information
• any other pertinent information about the death of the insured

Step 4: Specify how you want the amount to be paid

Once you submit the required documentation, the insurance company will cross-check the information and fact-check the claim. As the beneficiary, you can opt for:

• One lump-sum payment: receive the entire death benefit at once.
• An annuity*: the death benefit amount is invested and paid out in the form of a yearly payment. You can receive these payments for life or for a predetermined number of years, depending on the policy.

*not all policies allow for annuity payments.

Step 5: Wait for the claim to be processed

It takes time for the insurance company to process the claim before one receives the death benefit payment. However, insurance companies want to pay out the death benefit as quickly. Paying in a short time frame helps them avoid interest charges that accumulate on unpaid death benefits. Depending on your policy, and if the claim is not subject to any investigation, the processing of the claim may take anywhere between a few days to as long as 30 to 60 business days.

Step 6: Get the life insurance payout

Once the processing is done, you, the beneficiary, will receive the benefit in the payment method requested (lump sum or annuity).

Life Insurance Claims Frequently Asked Questions

Can a life insurance claim be denied?

Yes. There are multiple circumstances under which life insurance companies may choose to deny a life insurance claim. These reasons could be a discovery of false or fraudulent information during or after the contestability period, exclusions on the policy, a lapse of the policy, or more.

Two-year contestability period

The contestability period of an insurance policy lasts two years from the date the policyholder was approved for coverage. This means an insurance company has two years after it issues the policy to void the coverage or adjust the premiums if it discovers an error in a material fact in the application.

A material fact is any piece of information that influences an insurance company’s decision about providing insurance coverage (such as smoking status, known health issues, age, etc) during the underwriting process. Once the two-year contestability period passes, the policy is incontestable. An insurance company can only void or cancel the policy if it can prove the policyholder committed fraud when applying for the policy or in the case of missed premiums.

For example, if, at the time of claim, an insurance company determines the deceased person had misstated their age on the application, it can void the policy and deny the claim only if it can prove that the misstatement of age was fraudulent. If it was an honest mistake (the misstatement was not fraudulent) then the insurance company will pay the death benefit. However, it will adjust the amount of the death benefit to correlate with how much coverage the applicant would have been able to purchase with the premium they paid had the correct age been known.

If the policyholder passes away during the contestability period and any instances of fraud or misrepresentation come to light, the insurer may choose to cancel the policy, refuse to pay the benefit, or subtract money from the death benefit.

False or Fraudulent Information

False or fraudulent information can also result in a denial of a claim. Hiding smoking or drinking habits, or misrepresenting details like age, height, and weight could create problems when a claim is made.

Exclusions

The provider may deny the claim if the type of death was not included in the policy. Death due to suicide in the first 2 years of coverage, homicide*, or death due to engagement in illegal activities, drug abuse, dangerous activities, or the acts of war are some common exclusions.

Note: typically if you are murdered it will still pay out, but if murdered by the beneficiary it will still pay out but to the estate.

Read more about life insurance coverage and death by suicide.

Lapse of Policy

Missing a life insurance premium payment may lead to the cancellation of the policy. If you miss paying your premium on the specified date, take care to inform your insurance provider as quickly as possible. Usually, insurance companies grant a grace period of 30 days and one should settle all your pending payments within that time to ensure there is no lapse in their coverage. Otherwise, all the premiums you paid up to that point may go to waste, and it could prove costly to get coverage again at this later date.

What happens if a life insurance claim is denied?

If an insurance provider has denied your claim, it will generally provide a written explanation detailing the reason(s) the claim has been denied. Once the reason is known and the life insurance beneficiaries can effectively prove that the carrier’s decision to deny the claim is not justified or warranted, the issue could be cleared up.

This can be accomplished by writing an appeal letter for the denial or speaking with a designated representative of the company. If the carrier still denies the claim, at this point the claimant could consider legal recourse.

Can a life insurance claim be delayed?

Yes. A claim may get delayed if they are investigating false or fraudulent information, which could lead to the denial of a claim. Providing incorrect information, death during the contestability period, a delay in filing, and not making proper disclosures about other policies are all valid reasons for a delay of a claim. Additionally, there are some other reasons which can play a role in delaying claims:

• A minor beneficiary, without any trustee designated to their name, may witness delays in getting the proceeds of an insurance policy.
• If the policyholder mentions no beneficiary, the claim goes to the insured’s estate through probate.
• If the policyholder named their ex-spouse in the policy as the beneficiary and they did not update the policy the claim may get delayed

Read more about life insurance and divorce settlements

How long does it take to process a life insurance claim?

Processing a claim may take anywhere between a few days to as long as 60 days or more. For example, if the insurance company suspects that the death happened due to suicide and the policy falls within the two-year suicide exclusion period, it may want to investigate the death more thoroughly and this could take time. However, if there are no issues or cause to suspect the claim, they usually get processed within 30 to 60 days.

Is there a timeline for filing a claim?

Sometimes. Some policies may state that you must file before 90 days to 12 months, others may not. In any case, it is always good to file a life insurance claim as early as possible. If the policy is active at the time of the life insured’s death, all premiums are paid on time, and there are no grounds for the provider to deny the claim, the beneficiary will get the death benefit they are owed in a timely fashion.

How can I use the proceeds from life insurance?

There are no rules about how the life insurance payout can be used. While many policyholders get coverage to soften the financial hardship their death may have on those they leave behind, those receiving the benefit from a life insurance payout can use the proceeds in any way they see fit. Many choose to use it to pay off mortgages, fund education, or for down payments on other properties.

Is interest paid on the proceeds of a life insurance death benefit?

An insurance provider is required to pay interest for the period it takes to process a life insurance claim. However, this may be subject to certain conditions. This period is generally the interval between the date of death of the policyholder and the date of payment.

Are life insurance proceeds taxable?

Usually, the proceeds of a life insurance death benefit are not taxable. However, any excess interest earned on the death benefit while the insurance company held the funds would be taxable. This can happen if there are any delays in a claim being settled (especially after the receipt of all required documents), or if an insurance provider was directed by the policyholder to hold the proceeds for a period before transferring it to the beneficiary.

If the policyholder has made an estate the beneficiary of their policy, the estate’s heirs might need to pay estate taxes

Read more about life insurance and taxes.

As one of the almost 2.5 million Canadians with diabetes (source: Statistics Canada), you may have hit some stumbling blocks or even brick walls on your search for insurance of any kind. Getting life insurance when you are diabetic can be a little less straightforward than for those without it. But, it is possible to obtain life insurance for diabetics, and maybe less expensive than you assumed.

Why does diabetes affect insurance rates?

Diabetes is a disease that affects how your body uses and produces insulin, a hormone produced by your pancreas.

As you no doubt know – there are multiple types of diabetes:

• Type-1 diabetes, also known as insulin-dependent diabetes, is an auto-immune disorder. For Type-1 diabetics, their pancreas no longer produces insulin, a hormone that helps your body convert sugar to the energy you need. You need to administer synthetic insulin to cover for the food you eat.
• Type-2 diabetics produce insulin but their body does not use or recognize it correctly. They can deal with the condition through oral medication or diet. Type-2 diabetes is the most common form of diabetes in Canada, with approximately 90% of diabetics living with Type-2.
• Gestational diabetes is a temporary form of diabetes associated with pregnancy. The body cannot produce an adequate amount of insulin, leading to an increase in the amount of blood sugar. In most cases, gestational diabetes goes away post-pregnancy.

So why would diabetes affect life insurance policy premiums? Well, the stress of constantly fluctuating blood sugar levels puts stress on your internal organs like your heart and kidneys. The added stress means they are prone to failure in your older years, thus approving your application takes on added risk factors and adds to the cost of life insurance.

More specifically, Type-1 insulin-dependent diabetes is usually diagnosed in childhood and puts a lifetime of stress on one’s body. This is why insurance rates for Type-1 diabetics are higher.

Type 2 diabetes is more prevalent in individuals after the age of 40, and its effects can be quickly remedied by diet; organ stress is not as great of a factor in medical underwriting.

Gestational diabetes does not usually affect insurance rates, as most expecting mothers opt to do any medical underwriting before or after their pregnancy.

Can diabetics get life insurance?

Diabetics in Canada have many options when it comes to getting a life insurance policy. Diabetics who are in good health, with consistent medication levels, and who keep their blood sugar levels in control can qualify for standard, medically underwritten life insurance coverage. In medically underwritten life insurance, the life insurance company will arrange for a blood test and likely request for a physician’s report to evaluate and screen for a pre-existing condition and grant approval for a life insurance policy. This process may provide more monetary coverage (a higher death benefit) for a lower premium, than no medical life insurance.

Much like anyone with a pre-existing health condition, no medical life insurance is another choice for diabetics. No medical life insurance is a policy that is issued without the insured having to undergo a medical exam. It usually has the added advantage of a simpler and faster issuance process that doesn’t require details for every medical condition one may have.

The two most common types of no medical life insurance are simplified issue and guaranteed issue. Read more about simplified vs guaranteed. 

Best life insurance for type 1 diabetics

There are life insurance options for people with type 1 diabetes who are insulin-dependent. The availability of a life insurance policy depends on the age of the applicant, duration of the disease, and degree of control. Traditional life Insurance companies that require lab results will also seek a doctor’s statement to establish the stability of the treatment and the condition. In most cases, a life insurance company may apply a rating (higher premium) when approving life insurance for those with type 1 diabetes.

No-medical, questionnaire-based options make for an easier and faster process in such cases, albeit they offer life insurance for diabetics at higher premiums. For no-medical questionnaires, the focus is primarily on the age of the insured, the stability of the medication, and the risk of complications. If you are older, with no change in your insulin dependence in the last 12 months and no associated complications, you can easily get life insurance with no medical exam or obligation to provide medical records.

Best life insurance for type 2 diabetics

Yes, people with type-2 diabetes can get life insurance in Canada with the possibility of standard, competitive pricing. Life insurance companies are usually more accommodating when offering life insurance to people with diabetes who do not require insulin injections. Traditional insurance companies may even consider granting standard regular-health pricing (even more affordable life insurance) to someone who is:

• Above the age of 50
• Controlling their blood glucose levels and providing lab results with A1C levels
• Undergoes regular medical check-ups with a physician or specialist
• Is treated with oral medications that have not been increased in the past 12 months
• Follows a diet
• And has no diabetes diagnosis associated complications

There are also several options with no medical exam for people with diabetes that may not be able to get standard pricing or those that may want easier and faster access to life insurance. Most no-medical life insurance questionnaires contain a few questions that seek to assess how long you have had type 2 diabetes, whether your medications have changed recently, and whether you have any complications associated with this type of diabetes. Based on simple binary questionnaires, the eligibility of life insurance for diabetics can be established fairly quickly.

How can diabetics get a lower insurance premium?

As hinted at above, those with diabetes can get a better insurance rating if they keep their blood sugar levels under tight control. Typically, that would mean a hemoglobin A1C result between 6-7. Once your blood sugar levels surpass those numbers, you may be looking at a higher rating, which will increase the cost of your premium.

Other factors like high blood pressure, diabetic retinopathy, diabetic neuropathy, kidney disease, and proteinuria can also affect your rating. While one of these issues may affect any diabetic as they age, if you have tight control and show no symptoms of them at the moment, it may be an opportune time to apply for life insurance as a diabetic.

What sort of questions do insurance companies ask diabetics?

Just like any other applicant, an insurance provider will ask you questions about your health and medical history to evaluate your risk when you apply for life insurance. When you disclose to your insurance broker that you are diabetic, they will have specific questions about the disease when calculating how to price your coverage. These questions are aimed at assessing the duration and stability of diabetes and the risks of any complications.

They will include:

• Details about your family doctor or endocrinologist
• When you were first diagnosed with diabetes
• What medications or treatment your diabetes requires (Whether you are insulin-dependent, or control your blood sugar levels through oral medication or diet)
• How often you check your blood sugar levels and the results of your most recent hemoglobin a1c blood test
• Any other health conditions you have that are or may be diabetes-related complications (like heart disease or high blood pressure, elevated cholesterol, kidney function, neurological problems, diabetic comas, or diabetic retinopathy)
• Your family doctor may be asked to provide an Attending Physician’s Report with details about the state of your health

Can diabetics get a life insurance policy if they have been turned down before?

Yes, diabetics can get life insurance if they have been turned down before or denied coverage. Read more about your life insurance options when your application has been declined.

Getting life insurance with diabetes

As experienced, licensed insurance brokers, the PolicyAdvisor team has helped many diabetics in Canada get either a no medical or medically underwritten policy. We work with the best life insurance companies in Canada to shop for the best provider for your needs. Whether it is term policy or permanent life insurance policies you seek, our advisors have experience placing every different type of life insurance and matching our clients with affordable coverage.

If you have any questions at all about life insurance for diabetics or want to chat about what you can do to make sure you apply for the right kind of coverage, schedule a free consultation with one of our experts and we’ll make sure you have all the facts about term life insurance for diabetics.

It’s a good feeling knowing that you’re protected – whether by group life insurance paid for by your employer or perhaps coverage through a group or professional association you belong to. Because of this, you might assume, as many people in your situation often do, that you don’t need to look into any other insurance options. But the reality is…it’s usually not enough coverage.

Almost 39% of life insurance policies in Canada are through group term insurance. With such a large number of Canadians covered through their work, many are under the impression that it’s enough coverage for their family too. It’s no wonder they don’t know the intricacies of their group term insurance versus individual term life insurance.

It’s important you understand your work’s life insurance policy to make sure your family is fully covered. Let’s look into it!

What is group life insurance?

Group life insurance is a master insurance contract designed to cover a particular group of people, such as those who work for the same company or who belong to the same professional organization. The plan is owned by the plan sponsor (usually the employer or the professional organization) and offers life insurance coverage to the members of the group.

The coverage provides a lump sum of money (called the “death benefit”) to the family of the employee or plan member if they pass away. The coverage amount is typically based on a multiple of the plan member’s salary. For example, the plan benefit might be two or three times your annual income.

Do I need group life insurance?

Group life insurance is generally provided by workplaces as part of an overall employee benefits package in order to attract and retain talent. So, if you are offered group life insurance through your employer or another group, we would recommend that you sign up for it, especially if you don’t have personal life insurance coverage of your own yet.

What type of life insurance do employers offer as a group benefit?

Most employee life insurance is term life insurance. Although other types of permanent life insurance are also sometimes offered.

With group term life insurance plans, the death benefit is offered as a flat dollar amount, as a multiple of an employee’s annual salary (such as one or two times your annual salary), or a mix of both.

Additional insurance coverage offered by employers

Some employers also offer additional coverage, such as dependent life insurance. This death benefit from the employer’s life insurance plan is a one-time, lump sum payment in the event an employee’s dependent (child, spouse, etc.) passes away. The coverage amount for dependent coverage is usually $1000-$5000, to cover funeral expenses.

Another type of policy that’s usually in employee benefit packages is accidental death & dismemberment insurance. This usually covers death by accidental means (rather than natural causes) and dismemberment, which includes loss of the use of certain body parts (including limbs or eyesight).

Do employers pay for group term life insurance?

Most private employers will pay for a substantial, if not the entire, portion of the premiums for group life insurance. The only thing to note: the coverage offered is typically basic. This means there are no customization or riders built in. The cost of additional supplementary coverage is usually paid for by the employee.

Public service life insurance coverage also exists through the Public Service Management Insurance Plan. Employees must choose the basic plan first in order to be eligible for other types of insurance through the plan.

Are all employers required to offer life insurance as an employee benefit?

Offering group life insurance is completely optional for employers. However many workplaces will offer insurance benefits for employees in their personal benefits package. This helps employers to attract and retain new talent while also helping existing employees benefit from the lower rates of insuring through a group.

What are the benefits of group life insurance?

There are a number of benefits of group life insurance that make it an attractive option for those who are offered it through work or a professional association.

Affordability
An employer often pays for most – if not all – of the life insurance premium so there is very little or no cost to the member of the plan. If you do need to pay a portion of the premiums, they are usually less expensive. This is because the insurance company prices it on the basis of the underlying risk profile of the entire group as a whole rather than as an individual insurance applicant.

Convenience
It’s easy and convenient to sign up with only a small amount of paperwork and no individual underwriting. The payments are usually through payroll deduction, so no worries about policy lapsing because you missed your premium payments.

Limited underwriting
Most group term life contracts do not require any medical exam to be administered to the individual plan members. Members may be automatically or voluntarily enrolled in the overall group life insurance plan. However, an eligible employee may be required to go through medical underwriting, to establish good health in special circumstances such as when seeking an amount higher than the group coverage or when trying to rejoin the plan, after initially declining coverage.

What are the disadvantages of group life insurance?

Limited coverage
The group life insurance benefits are generally limited in coverage and are likely to be inadequate for your or your household’s needs. You will likely need supplemental coverage beyond the basic group life insurance plan offered by your employer.

Lack of control
Another disadvantage is that the plan sponsors (i.e. the employer or the organization) or even the insurance company can change the plan anytime they choose or even discontinue it altogether. Because you are sharing a plan among others in a group, it cannot be tailored to meet your own unique needs. There may be exclusions for medical conditions that you may have.

Limited Portability
Group life insurance is dependent on an individual’s affiliation with the group. Just because one particular job includes insurance, there’s no guarantee that the next one will. If you find yourself in a position where you need to purchase life insurance once you make a career change, your premiums are likely to be much higher by then as you are a little older and more expensive to insure from an underwriting perspective.

Taxation
Lastly, depending on how your employer structured the benefit fees, you might need to pay taxes on the payout.

What happens to my group life insurance coverage if I leave my employer?

Employer-offered life coverage is linked to your employment. This means it covers you and your dependents until your employment period ends—whether you quit or you’re fired by the employer.

Many employer-offered plans include an option to convert the group coverage to an individual policy, upon leaving the employer. However, the cost of conversion from group to individual coverage is significantly higher and most people tend to get new individual coverage at that time. Typically, only those individuals who may have pre-existing health conditions, and may find it hard to get individual coverage based on a medical exam, will take advantage of this conversion option.

Frequently Asked Questions

Does life insurance cover job loss?

No, life insurance does not cover job loss. It pays your beneficiaries a lump sum of money in the event that you, the employee, pass away. Job loss insurance is a separate insurance product.

Disability insurance provides income replacement (usually 60-80%) in the event that you are injured or ill and can no longer work. Usually, employee insurance policy packages include some type of short or long-term disability coverage, although they can be restrictive compared to individually purchased plans. And again, if you stop working for that company, you lose your coverage.

Does group life insurance end at retirement?

Yes. Group life insurance is dependent on your continued employment; therefore, at retirement, your group life insurance also expires. However, as mentioned above, you will typically have the ability to convert the group plan into individual coverage, without providing any evidence of good health. The conversion has to be requested within a limited period of time, usually 31 days. The conversion option is much more expensive since no evidence of good health is provided.

Are my dependents covered through employer life insurance?

Sometimes. Most employer-offered life insurance plans will allow an employee to extend coverage to also include their dependents, such as married or common-law spouse and dependent children up to a certain age, such as 21 years. But that’s not always the case, so check your policy documents!

Is group life insurance a taxable benefit?

Yes, employer-paid life insurance is considered a taxable benefit. With group term life insurance paid by the employer in Canada, the premiums appear on your T4 slip and are reported on your tax return as a taxable benefit.

Do I need individual term life insurance if I am covered through work?

The general rule of thumb is that you should carry 10-15x your annual salary as life insurance coverage. Generally, employer-provided life insurance may cover a few thousand dollars or in most cases one or two years of your salary. This means your family is only covered for a couple of years…then what do they do?

You’ll want your life insurance to cover your family’s living expenses, your funeral cost, their education fees, and more—it should provide financial security. The level of coverage offered through employer plans might not have that for you.

If you’re offered group life insurance, of course, you should take the maximum that you’re entitled to—at the end of the day it’s free (or almost free coverage). It’s a great first step! However, you should strongly consider purchasing additional life insurance coverage. Buying your own individual term life insurance gives you a choice in where your monthly premiums go.

What is individual term life insurance?

An individual life insurance policy is a contract between you and the insurance company – instead of getting life insurance through a group plan, an individual can purchase life insurance for themselves.

The most important aspect is that individual life insurance is portable. This means where ever you work, your policy follows. An individual term policy isn’t tied to a particular employer, group, or organization – so it stays with you until you decide to cancel it.

With insurance you buy on your own, you know what your premium rate is before you sign a contract and the insurance company can’t change it during the term. It’s also guaranteed, so the insurance company can’t cancel the insurance should you say, contract a terminal or critical illness down the road. Only you are able to do so. Most importantly, unlike group life insurance, individual term life insurance can be tailored to your specific needs.

Read more on exactly how term life insurance works.

The bottom line

Term life insurance provides the best and most comprehensive benefits for your loved ones and estate. As the reasons above outline, life insurance through group benefits, while great when you have them, is not a guarantee. For true coverage that transcends your current job and matches the flexibility you might need as your career evolves, buying additional life insurance is your best bet.

Read the honest guide to life insurance for more information about how individual life insurance works and try out our Life Insurance Calculator to see how much term life insurance you need.

Enhanced life insurance lets you put whole life policy dividends towards additional guaranteed life insurance coverage. This is possible through a combination of paid-up additions and one-year term life insurance policies. This option is ideal for anyone purchasing a whole life insurance policy and seeking the best premium-to-payout ratio and offers great bang for your buck.

However, enhanced life insurance consumes your whole life policy’s dividends, which you could otherwise withdraw as cash, use to reduce your premiums, or leverage for other purposes. 

As with all policies, how to best use it depends on your own financial goals. PolicyAdvisor is here to explain how an enhanced life policy may benefit your circumstances. This article discusses enhanced life insurance and how you can leverage it.

How to use your life insurance policy dividends 

A whole life policy may provide dividends based on the performance of your insurer or their investment portfolio. You can receive these dividends in a variety of ways to capitalize on the policy’s living benefits. 

• Cash: The insurance company cuts you a cheque for the dividends earned. 
• Premium reductions: The insurance company applies the dividends gained to your premium costs, meaning you pay less. 
• Dividends on deposit: Dividends are put into a savings account managed by your insurer — the account generates interest, and withdrawals are allowed anytime. 
• Paid-up additions: An additional coverage paid for by your policy dividends.
• Enhanced insurance: Increases your current coverage through a combination of paid-up additions and an additional term insurance policy.

Learn more about life insurance policy dividends.

What is enhanced life insurance?

Enhanced life insurance uses your policy dividends to “enhance” your life insurance coverage without additional costs. 

Enhanced life insurance puts your whole life policy’s dividends towards a combination of one-year term insurance policies and paid-up additions. The two combined guarantee a minimum death benefit while allowing cash value to build in the enhanced portion of the whole life policy. 

In contrast, only putting dividends towards paid-up additions cannot guarantee a minimum death benefit because the payout depends on the cash value built up by paid-up additions. The one-year term insurance policies effectively maintain a minimum payout until the paid-up additions’ cash value is large enough to meet the desired payout on its own.

How does enhanced life insurance work?

Your whole life insurance policy has a base coverage amount. When you choose to use your policy dividends from this policy for enhanced insurance, a one-year term and paid-up additions are added to that baseline to increase your overall coverage to the new desired amount. As the cash value of your enhanced policy increases through the paid-up additions, the death benefit from the separate term life insurance coverage is no longer needed; the cash value of the paid-up additions have grown enough to reach your desired coverage amount. 

Any dividends from the enhanced life coverage are reinvested into more paid-up additions, which accelerate the cash value growth of your policy. 

The first year of your enhanced life insurance is likely composed entirely of the one-year term policy. The paid-up additions haven’t had time to build up a cash value. 

In year two, another term policy comes into force with a slightly smaller death benefit. The death benefit should equal the difference between the cash value of your paid-up additions and your desired enhanced life insurance payout. 

The term policy payout gets smaller as time progresses, and the paid-up additions’ cash value gets larger. 

At a certain point, the paid-up additions build enough cash value to cover the entire payout of the enhanced life insurance. The coverage then no longer requires one-year term policies; this is called the “enhanced crossover point.” 

Insurers can’t guarantee an enhanced crossover point because the point depends on your policy dividends. Your dividend may be higher in one year if your insurer or their investments do well or vice versa. 

After the enhanced crossover point, policy dividends no longer go towards one-year term life policies. Additionally, the paid-up additions continue to build cash value through dividends from its own cash value and the original whole life policy. As a result, your payout may exceed your initial desired death benefit, at no cost to you.

Aside from the cost of life insurance in your 30s, you might be wondering if you need it at all. It’s a fair question—at 30 you have so much life ahead of you!

The truth is, even if you have little liabilities and you’re just starting out, you should buy life insurance in your 30s. Depending on the type of policy you choose, you can use life insurance to meet your financial goals now and set up financial security for your family’s future.

Read on to find out the benefits of buying life insurance at a young age and how to get the best deal on life insurance in your 30s.

How much is life insurance in your 30s in Canada?

Term life insurance costs about $25-$30 per month for $500,000 in coverage when you’re in your 30s and a non-smoker.

Your insurance premium depends on various factors including your age, gender, smoking status, lifestyle, and overall health. Smoking almost doubles your life insurance rates in your early years, and then almost triples it by the end of your 30s.

You can read more about what affects the price of life insurance here.

Monthly cost of life insurance by age

To give you a ballpark idea of how much life insurance might cost in your 30s, we’ve crunched the numbers from 30 different Canadian insurance companies to give you a chart with the average cost of life insurance on a 20-year term, divided by gender and smoking status.

Term Life Insurance Cost in 30s – Male, 20-Year Term

*Representative values, based on regular health

The story is similar for women, though initial life insurance rates are lower at this age, with smoking continuing to have a meaningful impact on your costs. Here are some average life insurance rates for females looking for a 20-year term policy.

Term Life Insurance Cost in 30s – Female, 20-Year Term

*Representative values, based on regular health

Those are the average prices for term life insurance in your 30s, but you may be looking quotes for other types of policies. The cost of whole life insurance at age 30 is still affordable, but will be more expensive than term life.

Looking for a more exact monthly rate? Get a quote in seconds from some of the best life insurance companies in Canada. Get the lowest rates on the market by shopping over 30 insurance providers in seconds! Fill out the quote form below! 

Should I get life insurance in my 30s?

Yes! The price of life insurance is way cheaper in your early years. Because of your youth and health, you can lock into lower rates. In your 30s, you have a much longer life expectancy, so the company is less likely to have to pay out a death benefit within the term you apply for. 

Life insurance provides you peace of mind that your future loved ones will have financial security. Even if you don’t have a partner or children yet, you may within your 10, 20, or 30-year term.

Life insurance can be used in your future for…

• Your (future) child’s college education cost
• Outstanding debts
• Mortgage debts 
• Income replacement if you are a primary breadwinner
• End-of-life costs (funeral expenses)
• To borrow against while you’re still living 

You can get all of that for around $25-30/month now. The best part is, if you lock in your rates now, you keep them for your entire term. Or if you get permanent coverage, you lock in rates for life. There’s no better time to buy life insurance than right now! 

How much life insurance does a 30-year-old need?

A young Canadian in their thirties, with a new mortgage, young children, and a partner who also earns an income would need at least $500,000 in coverage to cover their remaining house payments and child-rearing expenses and cost of living for the next 20 years. You may very well need even more than that.

But how much life insurance you need at 30 years old depends entirely on your own personal situation – it’s even possible that you need no term life policy at this point in your life. If you are backpacking through Europe and paying for pints by washing dishes at your hostel, we agree, that now might not be the time.

To find out exactly how much coverage you’ll need, use our life insurance needs calculator. By filling out some simple information, we can tell you how much coverage you’ll need to meet your financial goals in your 30s and beyond. 

What life insurance is best in your 30s? 

There are many options for life insurance when you’re in your 30s!

To know which policy is best for you, see our full description of the different types of life insurance. 

How do I buy life insurance in my 30s?

Your 30s are an exciting time! You may be hitting many major life events like getting married, buying a house, or starting a family. All of those milestones come with financial responsibilities that you need to protect. To get a better idea of which policy is best for your goals in your 30s, get customized term life insurance quotes in minutes.

Still not sure how much life insurance you need? We’re always happy to chat.

For many young people in their 20s, fitting life insurance costs into their monthly budget is hardly a priority. And that’s understandable. In your 20s, you’re still figuring out what your life will look like—and how to pay rent in an ever-inflating economy. Plus, you probably don’t have dependents or many significant financial responsibilities yet.

But that doesn’t mean that you shouldn’t consider signing up for a life insurance policy. In fact, your 20s may be the best time to buy. Let’s take a closer look.

What is the average life insurance cost for a 20 year old?

The average cost for life insurance for a 20 year old is about $10-20 per month for $500,000 in coverage. In your twenties (especially your early twenties), age won’t be a factor in driving up premium costs. In fact, the cost difference between 20 and 29 is usually less than a dollar.

The exact cost will depend on factors like your specific health, gender, and lifestyle. Other factors, like your smoking status, having pre-existing health conditions, or participating in any extreme sports, can have an influence on your monthly cost of life insurance.

Take a look at the chart below to understand what the average premiums are for a term life insurance policy in your twenties.

Life Insurance Premiums – Male, 20-Year Term Life Insurance

*Representative values, based on regular health

The cost for a 20-year term life insurance policy is the cheapest for women in their 20s. See the rates for life insurance for women in the chart below.

Life Insurance Premiums – Female, 20-Year Term Life Insurance

*Representative values, based on regular health

Life insurance premiums are typically paid every month – like phone bills or mortgage payments – so you should ensure the payment fits into your monthly budget without too much trouble. That said, many insurance companies offer a policy discount if you opt to pay for your coverage annually.

To find out exactly how much life insurance will cost you in your 20s, check out our quoting tool below!

What life insurance is best in your 20s? 

There are many options for life insurance when you’re in your 20s! When you’re young and (presumably) have a good medical history, most insurance options will be the cheapest you’ll ever get. Term life insurance may be best for most people in their 20s, but permanent coverage may be beneficial for you as well!

To know which policy is best for you, see our full description of the different types of life insurance. 

How do I buy life insurance in my twenties?

If you’re looking to secure a term or permanent life insurance policy in your twenties, look no further. The insurance experts at PolicyAdvisor are available to help you find the right policy for your needs and budget. We bring you instant, customized life insurance quotes from Canada’s top insurance providers, as well as any additional support you need. 

When completing a permanent life insurance policy application, there are several payment structures available. While many opt for monthly or yearly premium payments for the duration of their policy, it is also possible to choose quarterly, annual, or limited payment options. So, which one is the best deal and will give you the most bang for your buck? We’ll explore these options in further detail, with a special focus on limited pay life insurance options.

How much does life insurance cost?

The cost of life insurance varies from person to person. Policy type and benefit amount play a big role in determining the cost of life insurance premiums, as do the age, health, smoking status, and occupation of the insured. For instance, a term life insurance policy has lower premiums than a whole life insurance policy; a 30-year-old non-smoker will have significantly lower premiums than a 30-year smoker, and a person with a history of medical conditions may have higher premiums than someone deemed healthy.

All that to say, the cost of life insurance is highly subjective to your individual circumstance and how the insurance company underwrites those circumstances. To navigate this topic in more depth head to our posts on the cost of life insurance and the cost of whole life insurance. You can also use our life insurance calculator to see how much you can expect to pay for the policy of your choice.

What are my payment options for term life insurance?

When purchasing a life insurance policy, there are a few payment structures to choose from. Term life insurance is straightforward: you either pay premiums every month or some insurance companies provide the option to pay premiums annually and offer a discount if you choose to do so.

What are my payment options for whole life insurance?

Permanent life insurance, including whole life insurance policies and universal life insurance policies, have several more options for payment because of their lifelong coverage period.

Read more about the difference between whole life insurance vs. universal life insurance. 

Standard

With a standard permanent life insurance policy, the policy owner is expected to make regular premium payments over the course of their lifetime. These payments keep the policy active and ensure continued coverage as well as a death benefit paid to the beneficiary. The standard payment structure for permanent life insurance has lower individual premiums payments than other options. Most policyholders choose to pay their premiums on a monthly or annual basis using this standard payment structure, but there is another option called limited pay.

There is a large difference between using an insurance agent and a brokerage. Sometimes you will hear people referring to them as an insurance intermediary, which is somebody who plays a major role in the process of insurance placement (in simpler terms, somebody who helps you find a great insurance policy).

If you’re an individual or small business owner, you will likely purchase an insurance policy using an insurance agent or broker. Your average insurance broker is meant to represent the client (or customer) themselves, as they are not appointed by an insurance provider. You’ll likely come across either a broker, agent or company in your search for coverage as you interact more with the insurance industry.

Using an insurance broker

Insurance brokers are professionals who represent the customer and search for the best possible policy according to their needs. They’ll work closely with clients to research optimal coverage options, as well as go through the quoting process. Insurance agents often serve an insurer’s best interests, while brokers are more focused on keeping the customer happy by identifying specific needs for their policies or helping find a policy with the lowest insurance premiums.

Seeing as brokers don’t work for the insurer themselves, they don’t have the power to manage your insurance claims. While they cannot manage claims, when you purchase your insurance through a broker they can give you professional advice while you search for your insurance quotes. They’ll help you figure out an optimal price point, as well as consider what sort of options (like riders or deductibles) apply to your policy.

Using an insurance agent

Insurance agents sell insurance products to customers directly through an insurer. They help people select the right insurance to buy, but they are generally representatives of the insurance company they work for. Captive agents tend to represent one insurance company, while independent insurance agents often represent multiple.

Selling policies on behalf of the carrier means they have some skin in the game when it comes to you choosing their particular policy. While rare, there may be times when an insurance agent is focused on making a sale (as opposed to making sure you get the perfect insurance policy). Insurance agents don’t tend to offer as many options as brokers since they are limited to the specific companies they work for (and policies those companies offer).

The importance of insurance brokers

Most insurance brokers aren’t just in it for the money. When you decide to work with an insurance brokerage, you don’t have to worry about feeling limited – you can purchase insurance products and get insurance quotes from multiple companies, as opposed to just one. They’re going to point you in the right direction and help you find the best policy possible.

Having access to insurance brokers is advantageous for most people. Without them, not only would you be limited in regards to your policy options, but also which companies you’re able to receive insurance quotes from.

Versatility is an obvious selling point for brokers, so if you’re looking for a more “personal approach” to your insurance, using a broker’s services is the best solution. An insurance broker will provide you with an unbiased opinion on the policy provided by any insurer, as they aren’t “tied” to one carrier (like an insurance agent).

Insurance brokers are also more likely to support you when compared to an agent. If you’re not satisfied with the product and want to switch your insurance company, an insurance agent will go to great lengths to persuade you from leaving their company. Whereas, in the same circumstances, an insurance broker will be able to assist you in finding a better solution with a different company’s insurance offerings.

For true flexibility and the ability to see all of your options before committing to a policy, purchasing insurance products through a broker is ideal.

Are all insurance brokers the same?

While some insurance brokers are going to seem more beneficial than others, many Canadians are choosing to work with digital insurance brokers these days. This is especially true given restrictions on in-person meetings and places of business due to COVD-19 to mitigate transmission risk.

For example, a digital life insurance broker like PolicyAdvisor gives you a chance to get life insurance quotes from multiple companies without leaving the comfort of your home (not to mention critical illness insurance, disability insurance, mortgage protection, and more). Digital brokers can generate and provide insurance rates much faster and the ability to apply online is something most people would favour over the traditional insurance buying experience of years past.

Other reasons to consider a digital broker:

• More choice; digital brokerages like PolicyAdvisor matches you with coverage options from more than 30 Canadian insurance companies
• Speed; you can compare quotes instantaneously instead of waiting for multiple brokers or agents to get back to you
• Unbiased advice; the advisors at PolicyAdvisor don’t work on commission and are dedicated to finding you the best insurance policy you can afford and guiding you through policy applications.

How do insurance brokers make money?

Insurance brokers are often paid by commission for their services, so they’re going to benefit from getting you the best policy possible. The insurer pays brokers a certain percentage that is determined differently by each carrier.

If you decide to cancel your policy or stop making payments, the broker you’re with may have to repay the commission they’ve received back to the insurance company. As a result, it means most brokers are focused on getting you the best policy for your needs so that you retain the coverage throughout your term.

They could also decide to charge you a broker fee, which always has to be disclosed to the buyer beforehand. Your province may have a restriction when it comes to broker fees, but just remember that they’re typically nonrefundable. Broker fees are not always applicable and are not permitted in certain provinces or on certain kinds of coverage, so be sure to check your provincial insurance regulations before making such a payment.

What kinds of coverage can you get through an insurance broker?

Insurance brokers work within several fields including:

• Life insurance
• Critical illness insurance
• Disability insurance
• Health insurance
• Auto insurance
• Home insurance
• Travel insurance

How does insurance regulation work in Canada?

Insurance regulations in Canada are handed down from both Federal and Provincial levels. Canada’s 13 provinces and territories in total have the right to regulate markets when it comes to insurance sales. This means they are effectively the insurance regulator and that they get to decide who gets to sell insurance, as well as what type of insurance they’re able to sell.

Times are always changing, and that means the types of insurance available to you are likely going to follow suit. With digital brokers like PolicyAdvisor, you can rest assured that the ways you compare and apply for insurance coverage will evolve to match your needs. When you want to feel confident that you’re covered for the future, working with an insurance broker is one of the better choices you can make.

The information provided herein is for general informational purposes only. It is not intended and should not be construed to constitute legal or financial advice.

One’s insurance needs vary throughout their lives. Generally, less coverage is needed in one’s young and single years. But, needs do increase after major life events such as getting married, buying a house, and having children. Then, as more time passes, debts and obligations decrease, and coverage needs decline simultaneously.

So how does one ensure they have the right amount of insurance coverage throughout their lives? More importantly, how does one ensure that we are not overpaying for coverage that we may not need in future years?

One solution is laddering, also known as a life insurance ladder strategy, a comprehensive plan that ensures you have multiple coverages in place to address specific needs and periods of your life and are paying only for the amount of coverage you need during these periods.

How does a life insurance ladder work?

At its most basic level, life insurance laddering entails purchasing multiple life insurance policies with different coverage amounts and durations. Each of these individual policies expire at different times. They are chosen to address specific protection needs for specific periods of time in your life. For example:

• a 10-year policy to cover your outstanding student debt
• a 20-year policy to help protect your children from their youngest years until they can complete their education and gain financial independence, and:
• a 30-year policy to cover the amortization period of your mortgage

This can be executed two ways: through a base life insurance policy with term life riders added to it. Or by purchasing a set of individual life insurance policies, purchased simultaneously.

You can save substantially on your combined life insurance premiums by enacting an insurance laddering strategy, especially through a base-policy plus rider strategy.

How to save money on life insurance with a ladder

Foremostly, you purchase the bulk of your coverage when you need it most, using favourable rates due to your age.

As time passes, and you catch up to expiring debts like large loans or mortgages, your coverage will be timed to also decrease as shorter duration policies terminate. Once those policies terminate, you no longer pay their premiums.

Some insurance companies also offer discounts on premiums when an applicant takes out multiple policies and/or riders.

Lastly, laddering offers a great way to combine and mix term life and permanent insurance coverage. A policyholder can have permanent life insurance as their base policy, and add one or more term riders layered on top to achieve the coverage they need.

A life insurance ladder can seem confusing, but a real-life example tends to help those curious insurance seekers understand the concept better.

For example, say you’ve just finished a specialized graduate program like medicine or law. You’re now starting your career, getting married, perhaps starting a family, and purchasing your first home. Wow, that’s a lot to cover, but not an uncommon situation for many first entering their professional careers.

And while it is a lot to cover, those obligations all occur over different time periods. Your student debt can be taken care of in 10 years, your children most likely leave your care in their 20s, and your home will be paid off in 30 years. You need the most coverage in those early years, but once your obligations have diminished in the last years of your mortgage, you simply don’t require the same amount of coverage.

Here’s what a life insurance laddering strategy versus just term life insurance might look like in that situation.

*Premium figures for a 32-year-old non-smoker male.

Do I need a life insurance ladder?

Using a  life insurance ladder is largely dependent on your future plans. For many people, expenses decrease over time and, correspondingly, so do their coverage needs. For example, once you’ve paid off your mortgage and children are financially independent, the amount of insurance you actually need would be much less than before.

Laddering is for you if:

• You have large – but temporary – obligations: A mortgage or other debts, cost of living for children, funding children’s education, and other needs that taper off slowly as you age. Although you need a large amount of immediate coverage, this will greatly decrease as time passes.
• You have pre-existing health conditions or hazardous hobbies/travel plans that will result in higher future insurance rating, and thus increase your cost of insurance down the road.

But, if you don’t have solid plans for your future, a life insurance ladder may not be your best option at the moment. If you are very young without any liabilities or dependents, simple term life insurance may make more sense for your immediate needs.

This is also true if you want to leave a large financial legacy for your loved ones, irrespective of your needs.

How a  life insurance ladder differs from a single term life insurance policy

Can I use a ladder strategy to increase my coverage over time?

Speaking strictly on a technical level, a ladder strategy refers to coverages purchased at a single point in time. And if you purchase multiple coverages with varying lengths at one time, your initial coverage will always be of the highest value and reduce with time as shorter duration coverages lapse.

You cannot establish coverage that only starts a few years later since it will require new medical underwriting at that point in time.

So, while not laddering as we described it above, you can always purchase multiple life insurance policies over time that allow you to increase coverage. Additionally, some life insurance providers and policies have the option to increase your coverage amount once the policy goes into force. This is typically accomplished through optional policy riders such as guaranteed insurability – though, additional premiums are required for this rider.

How do I start a life insurance ladder strategy?

Most major Canadian insurers allow a form of life insurance laddering through their coverage options.

Some insurers such as RBC allow you to layer multiple term riders on top of your base coverage, within one policy. Others, such as BMO, let you apply for multiple separate term life policies simultaneously, to implement a ladder strategy, while availing a multi-policy discount on the premiums.

PolicyAdvisor can suggest the best ladder strategy for you, as well as the right insurer to match your needs. Schedule a call today and start building your own insurance ladder with one of our licensed insurance advisors.