Whole life insurance explained

Whole life insurance is a type of permanent life insurance that provides coverage for your entire life rather than a limited term. In exchange for regular premium payments, the insurer guarantees a generally tax-free death benefit (unless it exceeds the policy’s adjusted cost basis) to your beneficiaries when you pass away.

Unlike term life policies, whole life insurance also includes a guaranteed cash value component that accumulates over time. Depending on the policy you select, the plan may also earn annual dividends that can further supplement your death benefit and cash value. As a result, premiums are typically 7 to 10 times higher than those of comparable term life policies. 

For example, a healthy non-smoker 30-year-old parent may be able to purchase $100,000 in term life coverage for somewhere between $10 per month. The same amount of coverage could cost around $70 per month for whole life insurance. While whole life policy costs significantly more, the higher premiums reflect its lifelong coverage, guaranteed cash value, and potential dividend growth.

Key features of whole life insurance:

How does whole life insurance work in Canada?

Whole life insurance combines lifelong financial protection with a built-in savings component. As long as you continue paying your premiums, you remain covered for the entirety of your life. Additionally, a portion of your premiums contributes to your policy’s guaranteed cash value, which grows over time. 

Here’s how a whole life insurance policy usually works:

Step 1: Choosing the right coverage amount: Choose a coverage amount that would secure the financial future of your family and protect your loved ones from outstanding debts or other costs. Many applicants choose anywhere between 7 and 15 times their annual income

Step 2: Choose your policy type: Next, you will select the type of whole life insurance that best aligns with your financial goals.

Step 3: Complete your application and pay your premiums: Once you have chosen your coverage amount and payment period, you will need to complete your application and name the beneficiary. Most applicants choose their close relatives, such as their spouse, children, or parents, as the beneficiary. Additionally, they can choose one or more beneficiaries

Step 4: Your policy builds cash value: One of the defining features of whole life insurance is the cash value. Each premium payment contributes toward a guaranteed cash value that grows over time on a tax-advantaged basis. Additionally, if you choose a participating whole life policy, you may earn dividends based on how the insurer performs financially

Step 5: Your beneficiaries receive the death benefit: If you pass away while your policy is active, your beneficiaries submit a claim to the insurance company. Once the claim is approved, the insurer pays the death benefit as a tax-free lump sum

Types of whole life insurance in Canada

While whole life insurance provides permanent coverage to policyholders as long as premiums are paid, many insurers offer the policy in different structures to suit different financial goals. The most common options are participating and non-participating, and limited-pay whole life insurance.

Participating whole life insurance

Participating whole life insurance is one of the most popular permanent life insurance policies in Canada. Alongside guaranteed lifetime coverage and cash value growth, eligible policies may also receive annual dividends based on the insurer’s financial performance.

These dividends can be used to purchase additional paid-up insurance, increase the policy’s cash value, reduce future premiums, or even repay policy loans. While the dividends are not guaranteed, most major Canadian insurers have historically paid them. 

Best for: Participating whole life insurance is a good choice for those who are looking for long-term wealth accumulation and estate planning.

Non-participating whole life insurance

Non-participating whole life insurance provides guaranteed lifetime protection with fixed premiums and guaranteed cash value growth. However, unlike participating whole life policies, it does not pay dividends.

Since there is no dividend component, these policies are simpler and more predictable. The returns and death benefit are guaranteed when the policy is issued, providing greater certainty over the life of the policy. 

Best for: This policy is well-suited for those looking for seeking predictable lifelong coverage. 

Limited-pay whole life insurance 

Limited-pay whole life insurance policies allow you to complete all premium payments within a predetermined period while keeping coverage for life. Common payment schedules include:

• 10 Pay
• 20 Pay
• Pay to Age 65

Although the premiums are higher since they are paid in a shorter period, policyholders no longer need to make payments once the policy becomes fully paid up. As the premiums are paid, the cash value increases on a tax-deferred basis if the policy is “exempt” under the Income Tax Act.

Once enough cash value has accumulated, you can borrow or withdraw from it (subject to policy rules) for retirement income, emergencies, or other financial needs. However, this may reduce the death benefit and cash value.

Best for: Those who want lifelong coverage but prefer to finish paying premiums within a set period.

What is a children’s whole life insurance policy?

Whole life insurance for children provides lifelong protection with added financial benefits such as growing cash value over time. Here’s why whole life insurance for children can be a smart choice:

• Cost-effective payments: Premiums for children’s whole life policies are generally lower, making it an affordable way to secure coverage for life. Since rates are locked in early, you avoid higher costs later
• Guaranteed lifetime coverage: Once a policy is in place, the child is covered for life, regardless of future health changes. As long as premiums are paid, the policy cannot be cancelled by the insurer.
• Securing insurability: Buying insurance early ensures that the child has coverage even if they develop health issues later. This helps avoid challenges in obtaining insurance as an adult
• Cash value that builds over time: Children’s whole life policies build cash value over time, offering a financial asset they can access later for education, a home, or other needs. The cash value grows tax-deferred, adding long-term benefits

Learn more about life insurance for children 

How much whole life insurance coverage do you need?

You generally need whole life insurance coverage that is 10 times your salary. Choosing the right amount of whole life insurance depends on your financial goals and the needs of your loved ones. While it offers lifelong coverage and cash value growth, it’s essential to determine how much coverage will adequately protect your family.

Two common strategies to help you decide are the ‘Ten times salary’ and the ‘Years to retirement’ rules.

The ‘Ten Times Salary’ Rule: This rule suggests buying a policy with a death benefit equal to ten times your annual salary. For example, if you earn $80,000 per year, you would aim for a policy with an $800,000 death benefit. This method ensures that your family can maintain their current lifestyle, cover debts, and manage expenses in the event of your passing. It’s a straightforward approach that offers a solid financial cushion.

The ‘Years to Retirement’ Rule: This strategy focuses on covering your income until retirement. Multiply your annual income by the number of years left until you retire. If you earn $80,000 annually and plan to retire in 20 years, you would need $1.6 million in coverage. This method ensures that your family can replace your income until you’re no longer working.

Using the DIME method to estimate whole life insurance

Another method of calculating how much coverage you need is to use the debt, income, mortgage, and education (DIME) method. It is a simple way to estimate how much term life insurance you may need by considering four key financial obligations your family could face.

Let’s assume Michael, a 45-year-old business owner, wants to ensure his family is financially secure while also leaving an inheritance.

Here’s a projection of whole life insurance coverage using the DIME method:

Based on the DIME method, Michael may consider approximately $2.6 million in life insurance coverage. However, because he also wants to leave an inheritance and reduce the tax burden on his estate, he may choose a higher coverage amount through a whole life insurance policy. 

While it is a handy index, your ideal coverage amount may differ based on factors such as savings, investments, and long-term financial goals.

Pros and cons of whole life insurance

How much does whole life insurance cost in Canada?

The cost of a whole life insurance policy ranges between $57 and $382. The premium depends on the policy type, coverage amount, and personal factors, such as gender, age, smoking status, and health. 

Cost of $100,000 whole life insurance policy:

*Illustrative monthly premiums for non-smoking males and females of various age ranges seeking a whole life insurance policy with $100,000 in coverage for a 20-pay premium option

How are whole life insurance premiums calculated?

Life insurance companies calculate your premium by assessing how likely you are to make a claim over the life of the policy. It is primarily based on your age, smoking status, health conditions, coverage amount, and other related factors.

Personal factors:

• Age: Younger applicants generally qualify for lower premiums. A 30-year-old male non-smoker pays $100.35/month for a non-participating policy with $100,000 in coverage, while a 40-year-old male non-smoker can pay $141.66/month
• Health: Good overall health can help you secure more favourable rates
• Smoking status: Smokers and tobacco users typically pay significantly more than non-smokers
• Gender: Women often pay slightly lower premiums because they generally have longer life expectancies
• Occupation: High-risk occupations may increase premiums depending on the insurer
• Lifestyle and hobbies: Activities such as skydiving, scuba diving, or motor racing may result in higher rates

Policy and coverage factors:

• Coverage amount: Higher death benefits result in higher premiums. A $500k policy will cost more than a $250k whole life insurance policy
• Policy type: Participating whole life policies usually cost more than non-participating policies because of their dividend potential
• Payment period: Limited-pay policies often have higher annual premiums than lifetime-pay policies since payments are compressed into fewer years
• Policy riders: Optional add-ons, such as critical illness, child, or disability riders, increase the overall cost of your policy
• Payment frequency: Some insurers offer modest savings if you pay annually instead of monthly

How do whole life insurance premiums work?

A whole life insurance policy will offer coverage as long as you pay the premiums. Here’s how it works:

• The premiums will remain fixed, and the coverage remains active as long as you pay the premiums
• A part of the whole life insurance cost goes towards life insurance coverage, and the other part builds the cash value
• The greater the cash value, the more interest will be accrued, and the greater the cash value

Why is whole life insurance expensive?

Whole life insurance costs more than term life insurance because it provides lifetime coverage and builds cash value. Unlike term insurance, which covers you for a set period, whole life insurance is designed to pay a guaranteed death benefit whenever you die, provided the policy remains in force. Premiums also help fund the policy’s cash value and other guarantees, which contribute to the higher cost.

What is the cash value of whole life insurance? 

Cash value in life insurance is essentially an accumulated savings component funded by a portion of the premiums you pay. This cash value amount grows over time at a guaranteed rate and can be accessed tax-deferred during your lifetime through policy loans, withdrawals, or even to cover premium payments. 

It is also worth noting that this amount is separate from the death benefit. At death, beneficiaries receive the policy’s death benefit (base amount plus any paid‑up additions and dividends on deposit, minus loans/interest). The accumulated cash value generally remains with the insurer and is not paid out in addition to the death benefit.

How does cash value grow?

During the early years of the policy, a larger portion of your premium goes toward insurance costs and administrative expenses. As a result, the cash value grows gradually. However, as the policy matures, the cash value typically increases at a faster pace. 

Additionally, if you own a participating whole life policy, annual dividends may further increase your cash value and death benefit. Unlike market-based investments, guaranteed cash value is not affected by volatility. This makes it a relatively stable long-term commitment.

How to use cash value in whole life insurance?

You can access the cash value of a whole life insurance policy by taking out a policy loan, making a partial withdrawal, using the cash to pay premiums, or fully surrendering the policy.

Each option has different tax implications and may affect your policy’s cash value or death benefit, so it’s important to understand how they work before accessing your policy.

Here’s an overview of how you can use the cash value of your whole life insurance policy:

What happens to cash value when the insured dies?

When the insured dies, the cash value is not paid out to the beneficiaries and is returned to the insurance company. In most whole life policies, the insurer pays the beneficiaries only the death benefit, while the accumulated cash value is generally not paid separately. The cash value, however, helps the insurer fund the guaranteed death benefit.

What are whole life insurance dividends?

If you purchase a participating whole life insurance policy, you may receive annual dividends from your insurer. These dividends are based on the performance of the insurer’s participating account and may be paid to eligible policyholders.

The dividends are issued when the participating account performs better than expected in terms of investment returns, claims experience, and operating expenses. Additionally, dividend scale interest rates and payouts vary by insurer and can change over time. While these amounts are not guaranteed, they add flexibility and long-term value to your policy

How to use your whole life insurance dividends?

Similar to the cash value component, you can use your dividends to purchase additional paid-up life insurance, receive cash payments, or even repay your outstanding policy loans.

• Paid-up additions: Purchase additional fully paid-up life insurance, increasing both cash value and the death benefit
• Cash payment: Receive the dividend directly as cash
• Premium reduction: Use dividends to pay some or all of your premium payments
• Deposit with the insurer: Leave dividends on deposit to earn interest, subject to the insurer’s rates
• Loan repayment: Apply dividends toward outstanding policy loans

Can you cancel your whole life insurance policy? 

Yes, most whole life policies can be cancelled at any time. However, since these policies build cash value, cancelling them differs from cancelling a term life policy. If you surrender your whole life insurance policy, the insurer generally pays you the available cash surrender value after deducting any applicable surrender charges, outstanding policy loans, or unpaid interest. Once cancelled, your coverage ends, and your beneficiaries will no longer receive a death benefit. 

Like most life insurance policies in Canada, whole life insurance also includes a free-look (cooling-off) period, typically lasting 10 to 30 days after you receive your policy. During this period, policyholders can review and cancel the policy, receiving a full refund of any premium paid.

What does whole life insurance not cover?

While whole life insurance covers natural and accidental death, there are certain exclusions and situations where a claim may be denied or the policy may become void.

Common exclusions and limitations include:

• Suicide: Most policies have a two-year suicide exclusion. If death occurs during this period, the death benefit is generally not paid, although premiums may be refunded
• Risky activities: Activities such as skydiving or scuba diving may result in higher premiums, standard coverage, or an exclusion, depending on the insurer’s underwriting assessment
• Fraud or misrepresentation: False or incomplete information on an application can result in claim denial or policy cancellation
• War and terrorism: Some policies may restrict or exclude coverage for deaths related to war, armed conflict, or terrorism
• Undisclosed medical conditions: Failing to disclose requested health information can lead to claim denial, policy cancellation, or the policy being declared void

Exclusions vary by insurer and policy. Review policy wordings for specific limitations and definitions that apply to your coverage.

What other types of life insurance can I get in Canada?

If you are looking for alternatives to whole life insurance, these are the other types of life insurance that you can get in Canada, such as term life insurance, term-to-100 insurance, universal life insurance, funeral insurance, and no-medical life insurance.

• Term life insurance: A type of life insurance that lasts for a certain number of years, called a term. Usually inexpensive and great for short-term needs
• Term-to-100 life insurance: A type of life insurance policy that covers you for your entire life, but does not have a cash value or investment component as whole life does
• Universal life insurance: A type of permanent life insurance that gives the policyholder more control over the investment part of the policy
• No-medical life insurance: A type of insurance coverage that does not require a medical exam, and can ask just a few or no health questions at all. Usually gives lifelong coverage but comes with a lot of downsides

How does whole life compare to other life insurance policies available?

Whole life insurance is one of the many types of life insurance available in Canada. Depending on your financial goals, you may also consider term life insurance, universal life insurance, or no-medical life insurance.

Here’s a quick overview of how whole life compares to other popular life insurance options:

For a detailed comparison of the plans, check out the different types of life insurance in Canada.

Best whole life insurance providers in Canada

In Canada, you can buy whole life insurance from some of the best companies, including Sun Life, Canada Life, Equitable Life, Manulife, and a few others. The right insurer depends on your coverage amount, participating-account objectives, payment period, financial strength, underwriting, policy guarantees, and dividend history.

You can also read our blog on the best whole life insurance companies in Canada to compare the top options available. Here is a quick overview of some of the best companies you can consider:

• Equitable Life: A strong option for those who value a mutual-company structure and participating whole life coverage.
• Manulife: Offers multiple premium payment options, including 10-pay, 20-pay, pay-to-90, and pay-to-100, along with its Vitality Plus option
• Empire Life: Known for balanced whole life offerings through EstateMax and Optimax Wealth, with options for different long-term financial goals
• Sun Life: Offers high coverage amounts and flexible policy features that can suit high-net-worth estate planning needs.
• Foresters Financial: Offers competitive whole life options for smokers, including a Quit Smoking Incentive

Is whole life insurance worth it?

Yes, whole life insurance can be worth it if you are seeking lifelong financial protection, guaranteed cash value growth, and estate planning benefits. Unlike term life insurance, whole life insurance is not designed solely to replace your income for a limited period. It provides permanent financial protection while building cash value, in exchange for comparatively higher premiums.

Who is whole life insurance best suited for?

Whole life insurance is a good choice for those who:

• Want guaranteed lifetime coverage
• Want to leave a tax-free inheritance for your family
• Need funds to cover estate taxes or final expenses
• Have dependents who will rely on your financial support
• Want to build guaranteed cash value over time

Who may not need whole life insurance?

Whole life insurance may not be an ideal choice if:

• Your priority is affordable coverage at lower premiums
• You want temporary coverage
• You have limited financial obligations

Can whole life insurance be used for corporate business planning?

Yes, whole life insurance can be used for corporate and business planning in Canada, particularly by incorporated business owners. With a corporate-owned life insurance (COLI) policy, the corporation owns and pays the premiums and is generally named as the beneficiary.

The policy can help with business succession, shareholder agreements, estate planning, and providing liquidity to cover financial obligations when an insured business owner dies. Depending on the policy structure, the corporation may also build cash value that can support longer-term financial planning.

Is whole life insurance tax deductible?

While premiums paid for personal whole life insurance aren’t tax deductible, the policy offers several tax advantages, such as:

• Tax-deferred cash value growth: Whole life policies entail a cash value component that grows on a tax-deferred basis. That means you won’t incur taxes on the cash value growth until you withdraw it
• Tax-free death benefit: The death benefit paid to beneficiaries isn’t taxable
• Tax-free loans against cash value: If you borrow against your whole life policy’s cash value, the loan amount isn’t subject to taxes
• Tax-free interest-earning deposits: If you choose to receive your annual dividends in an interest-earning deposit, they remain tax-free unless withdrawn

How many years do you pay on a whole life policy?

The number of years you pay for a whole life insurance policy depends on the payment structure chosen at the time of purchase. Typically, whole life policies offer lifetime payments, limited payments, or single-premium policies.

1. Lifetime payments: You pay premiums throughout your entire life to keep the policy active. This option spreads the cost over time, resulting in lower annual premiums
2. Limited payment policies: You pay premiums for a set number of years, such as 10, 20, or 30 years, or until a specific age (like 65). After this period, the policy is fully paid, but coverage continues for life
3. Single premium: You make a one-time lump sum payment upfront, and the policy remains active for your lifetime without any further premiums

Do you get your money back at the end of a whole life insurance?

No, you don’t get your premiums back at the end of a whole life policy. Instead, you get a cash surrender value that depends on the total cash value minus any applicable charges that the insurer may levy.

If your policy has a cash value of $50,000 and has accumulated $5,000 in dividends, but has $2,000 in surrender charges, your cash surrender value would be $53,000. This is calculated in the following way:

$50,000 + $5,000 – $2,000 = $53,000.

The cash value can be withdrawn or used as collateral for a loan. The death benefit is paid to beneficiaries upon your passing, provided the policy remains active.

Does your money grow in Canadian whole life insurance?

Yes, your money grows in a whole life insurance policy through its cash value component. It not only provides lifelong protection but also builds cash value over time.

A portion of your premiums is allocated to this cash value, which grows at a guaranteed rate, often supplemented by dividends if you have a participating policy.

The cash value can serve as a valuable financial resource; you can borrow against it, use it for future premiums, or even access it for retirement or other expenses.

This growth is tax-advantaged, meaning you won’t pay taxes on the cash value growth as long as it remains within the policy. Whole life insurance offers both security and a way to build wealth over time, making it a popular choice for Canadians seeking long-term financial planning.

Do you need a medical exam for whole life insurance?

In many cases, yes. Most traditional whole life insurance policies in Canada require medical underwriting, particularly if you are applying for a higher coverage amount. Depending on your age, health, and smoking status, insurers may require you to take tests to assess your health conditions.

However, many insurers also offer simplified issue and guaranteed acceptance whole life insurance with little or no medical underwriting. It is worth noting that simplified issue and guaranteed issue whole life insurance policies will typically have lower coverage limits and higher premiums, compared to traditional policies with medical underwriting.

What age to get whole life insurance?

Although there is no ideal age to get a whole life policy, the sooner you buy one, the better it will be for you. The youngest age limit to get life insurance in Canada is 18 years. Starting early on it can have certain benefits such as:

• Lower premiums: Premiums are significantly cheaper when you’re young and healthy
• Guaranteed coverage: Secures lifelong coverage, even if health conditions develop later
• Builds cash value early: More time for your policy to accumulate cash value, creating a financial safety net
• Long-term savings: Spread costs over a longer period, making it more affordable
• Future financial security: Provides stability for dependents and can be used for estate planning or retirement

Case study: A whole life insurance example

Let’s look at how whole life insurance works in a real-world example. John is a 30-year-old Canadian who’s thinking about estate planning. He wants lifetime insurance coverage so he can leave a financial benefit for his family after he dies.

The chart below shows the cash value of his policy over time.

• Age: 30
• Gender: Male
• Policy type: Whole life (non-participating)
• Death benefit: $250,000
• Annual premium: $1,565
• Payment type: Life pay (premiums paid annually for life)

Figures are based on an insurance illustration for a Desjardins non-participating whole life policy purchased through PolicyAdvisor.com for a 30-year-old male in normal health.

John can access the cash value of his policy during his lifetime, subject to the policy’s terms. However, accessing the cash value can reduce the policy’s value or death benefit and may have tax implications.

How to find the right whole life insurance policy?

Choosing the right whole life policy requires careful consideration of several factors to ensure it aligns with your financial goals. Here’s a step-by-step guide to help you make an informed decision:

• Choose the amount of coverage you need: Determine how much coverage will adequately protect your family. Consider factors like income replacement, debt, future expenses, and long-term financial goals
• Examine riders: Riders are optional add-ons that enhance your policy. Popular options include critical illness coverage, waiver of premium, and accelerated death benefits. Assess which riders suit your needs
• Look at the rate of return on cash value: Whole life policies build cash value over time. Evaluate the guaranteed rate of return and any potential dividends if you’re considering a participating policy
• Be aware of surrender charges: If you cancel your policy early, surrender charges may apply. Understand these fees and how long they last to avoid surprises
• Understand the different approval processes: Some policies require a medical exam, while others offer simplified or guaranteed issue options. Choose the process that best suits your health status and preferences
• Check the insurer’s financial strength: A financially strong insurer is more likely to meet its long-term obligations. Review ratings from agencies like AM Best or Moody’s to gauge stability
• Speak with our advisors: Our experienced advisors help you compare life insurance quotes from 30+ top insurers across Canada so you can choose a plan that best meets your needs

Frequently asked questions

How long does it take to build cash value?

Cash value begins accumulating once your policy is in force, although growth is generally slower during the first few policy years. It typically accelerates over the long term. The timing and amount of cash value growth depend on the specific policy, premium structure, and whether the policy is participating or non-participating.

Are whole life insurance dividends guaranteed?

No, dividends are only available on participating whole life policies and are not guaranteed. They depend on the insurer’s financial performance. Insurers determine dividends based on factors such as the performance of the participating account, investment results, mortality experience, and expenses. An insurer’s historical dividend payments do not guarantee future payments.

Can I have more than one whole life policy?

Yes, many Canadians own multiple life insurance policies to meet different financial needs. Having multiple policies can help address different financial needs, such as estate planning, business protection, or leaving an inheritance. You may also combine permanent coverage with a term life policy when you need additional coverage for a specific period, such as while raising children or paying a mortgage.

Can I get life insurance riders with whole life insurance?

Yes, you can enhance a whole life insurance policy by adding riders, depending on the options your insurance provider offers. Commonly available riders include a term rider, child rider, accidental death and dismemberment benefit rider, guaranteed insurability rider, return of premiums rider, critical illness rider, and disability waiver of premiums rider, among others.

What happens if I miss a premium payment on my whole life insurance policy?

Missing a premium payment on your whole life policy can have varying consequences depending on the policy’s terms. Many policies include a grace period, typically 30 days, during which coverage remains active. If you fail to pay within this window, the insurer may use the policy’s cash value to cover premiums. If no cash value is available, the policy may lapse, leading to a loss of coverage. Some policies offer options like automatic premium loans to prevent lapses.

Can I use my whole life insurance policy as collateral for a loan in Canada?

Yes, you can use your whole life insurance policy as collateral for a loan, thanks to its cash value component. Many Canadian lenders accept this arrangement, allowing you to borrow against your policy. Alternatively, you can take a policy loan directly from the insurer. In both cases, it’s important to maintain the policy and repay the loan to avoid reducing the death benefit or risking a policy lapse.

How soon can I cash out my whole life insurance policy?

It depends on your provider. Most Canadian companies will let you access your policy’s cash value on the anniversary after 5 or more years. This depends on whether you want to withdraw it, borrow against it, or access it any other way. But you may want to wait. The longer you let whole life insurance cash value accumulate, the bigger the amount you can use and the more benefit you can have.

How much can I borrow from a whole life policy?

You can normally borrow up to 90% of your policy’s cash value if you want to take out a policy loan directly from your insurance provider. If you want to borrow from a bank or lender and just use your policy as loan collateral, you can borrow up to 100% of the premiums you paid.

How long does whole life insurance last?

Whole life insurance is designed to provide coverage for the insured’s entire lifetime, rather than for a fixed term. The policy remains in force as long as its requirements are met, such as paying premiums when due or maintaining sufficient policy value where applicable.

Should you buy whole life insurance for your child?

Yes, many Canadian parents and grandparents purchase whole life insurance for children to give them lifelong coverage at a young age. Buying coverage while a child is young can lock in lower premiums for life, guarantee their future insurability regardless of changes in health, and begin building cash value that they can access later in life, subject to the policy terms.

Top 5 best life insurance companies for couples in Canada

Choosing the right life insurance company for couples in Canada is just as important as choosing the right type of policy. While many insurers offer great benefits, the following companies offer greater flexibility, built-in benefits, and features that make them particularly suitable for partners with shared financial goals.

Here’s an overview of the five best life insurance companies for couples in Canada:

BMO Insurance

BMO Insurance is an excellent choice for couples who want their coverage to remain stable even after a life-changing event. Even if one insured person in a joint policy passes away, the surviving insured member can continue coverage at the same premium, provided the coverage amount remains unchanged.

This feature is great for couples seeking hassle-free coverage, especially at older ages when premiums are higher. In addition, BMO also offers the Empathy service, which provides emotional and logistical support to the policyholder’s beneficiaries.

Beneva

Beneva is well suited for couples who want more than just a death benefit. The policies include valuable built-in features such as the Extreme Disability Benefit and Guaranteed Insurability Option, ensuring policyholders can increase coverage later on without additional medical underwriting (under qualifying circumstances).

Additionally, eligible policies also have the option to add valuable riders such as child coverage and accidental death benefits, allowing couples to customize their protection and help ensure the financial safety of their beneficiaries.

Empire Life

Empire Life has one of the most seamless application processes, combining a streamlined online application process with competitive policy features. Couples can benefit from policy fee savings, strong term conversion options, and the ability to choose from a wide selection of term and permanent life insurance plans.

Policyholders can also add critical illness insurance under the same policy, making it easier for them to build a comprehensive financial protection plan. Additionally, the joint first-death plan offers temporary insurance to the surviving partner for an additional 90 days. This gives the spouse time to figure out their next steps without suddenly being unprotected.

RBC Insurance

RBC Insurance stands out for its Pick-a-Term feature, which lets partners choose a customized term length rather than selecting only standard options such as 10 or 20 years. This flexibility allows them to match coverage with major financial obligations like mortgages, education, or even retirement planning.

Many eligible policies also feature a seamless conversion option, allowing couples to transition from term to whole life without additional medical underwriting. Couples can also benefit from policy fee savings when purchasing joint coverage.

Manulife

Manulife is an excellent option for couples who want to combine life insurance with wellness incentives. Through the Manulife Vitality program, policyholders can earn points and receive rewards for maintaining healthy lifestyle habits, such as exercising, participating in activities, and completing health assessments.

Additionally, Manulife life insurance offers a Waiver of Premium option for couples. If either partner becomes totally disabled due to injury or illness, the premiums for the entire joint policy are waived, ensuring coverage remains active while household income is impacted.

Quick overview of the five best insurance companies for couples in Canada:

What is the best life insurance for couples in Canada?

The best life insurance for couples in Canada depends on a couple’s financial goals, family situation, and long-term plans. Leading insurers such as BMO, Empire Life, RBC Insurance, and Manulife offer unique features that suit couples seeking financial protection.

While many assume a joint policy is best, separate life insurance policies can offer greater flexibility, personalized coverage, and better long-term value. Joint first-to-die insurance covers two people but generally pays one benefit when the first insured dies. Meanwhile, joint last-to-die insurance generally pays the benefit after the second insured dies. This can make it useful for estate expenses and wealth transfer.

Here’s a quick overview of life insurance for couples in Canada:

Types of life insurance available for couples in Canada

In Canada, couples can choose between joint life insurance policies that cover both partners under a single plan or individual policies that provide separate coverage for each person. Based on the type you choose, the following options are available:

• Joint first-to-die life insurance
• Joint last-to-die (survivorship) life insurance
• Two separate life insurance policies
• Combined or multi-life insurance policy

Here’s a quick overview of the different policy types:

Joint first-to-die life insurance

A joint first-to-die life insurance policy covers two people under a single contract and pays the death benefit after the first insured person passes away. Once the benefit is paid, the policy ends, and the surviving partner no longer has coverage.

Couples commonly choose this option to ensure the surviving spouse has financial protection for living expenses, debts, child care, or mortgage payments. While it is comparatively less expensive than two separate policies, note that joint first-to-die life insurance only provides one death benefit.

Joint last-to-die (survivorship) life insurance

A joint last-to-die policy insures two people under one contract but pays the death benefit only after both insured individuals have passed away. Since the insurer does not pay until the death of both partners, premiums are often lower than buying two separate policies.

This option is great for parents or partners who wish to protect their children and other beneficiaries from debts and to support estate planning and wealth transfer.

Two separate or single life policies for couples

In this case, each spouse owns an individual policy with their own coverage amount, beneficiaries, and policy features. Each policy pays its own death benefit when the insured passes away, offering beneficiaries two separate payouts over time.

This is the most flexible option, working well for couples with different incomes, debts, health conditions, or long-term financial goals. Additionally, separate policies are easier to maintain in the event of a divorce or separation. Since they are not under a joint policy, the individuals continue to be insured without any complications or reassessment. 

Combined or multi-life insurance policy

A combined or multi-life insurance policy allows two people to have two coverages within a single insurance contract. It combines features of joint policies while offering personalized and individual solutions under one policy. 

Each insured person has their own benefit, but the policy is offered under one application and one premium payment schedule. Beneficiaries receive two death benefits, one for each policyholder. Despite being combined, the death benefits are separate for each individual. Since there are two policies under one contract, couples can save on policy or administration fees, reducing the overall costs.

The average cost of life insurance in Canada starts at around $7 per month for a healthy young adult purchasing a basic term life insurance policy. Depending on the type of policy, coverage amount, age, health, and insurer, premiums can range from $7 to over $3,276 per month. Individuals who smoke, have pre-existing medical conditions, work in high-risk occupations, or require larger coverage amounts generally pay higher costs. On the other hand, young and healthy applicants typically qualify for lower rates.

Quick summary: Average life insurance costs in Canada

Disclaimer: The premiums shown above are illustrative estimates based on specific applicant profiles and policy assumptions, and your actual life insurance cost may vary depending on several factors such as your age, gender, health, smoking status, medical history, coverage amount, policy type, term length, and the insurer’s underwriting guidelines.

Factors affecting life insurance cost in Canada

The cost of life insurance in Canada is mainly driven by factors like age, gender, health, coverage amount, and more. Some of these factors include: 

• Age: The age of the individual directly affects the life insurance cost. The older the individual, the higher the premium
• Gender: Life insurance costs may vary by gender, with women generally paying lower premiums than men
• Coverage amount: The higher the coverage amount you choose, the higher the life insurance rates will be
• Health: An individual’s health also affects life insurance rates. A healthy individual, compared to someone with a history of medical conditions, qualifies for lower rates
• Smoking status: Any insurance company in Canada will charge a higher premium if you are a smoker. This is because the health risks associated with smoking are higher than those for a non-smoker
• Lifestyle: If you are involved in high-risk activities as a result of your hobby or occupation, then the insurer views you as higher risk. This increased liability will also result in you paying higher premiums
• Insurer: Life insurance rates can vary between insurers because each company has its own underwriting guidelines, pricing, and risk assessment

Why do men pay more for life insurance than women?

Men pay higher premiums than women because insurers consider life expectancy and mortality risks when setting life insurance premiums. Generally, men have lower life expectancy than women, which can increase the insurer’s expected cost of providing coverage over the policy term. Moreover, the exact difference in premiums will also vary depending on the insurer and their underwriting rules, along with the other factors listed above.

Life insurance costs by policy type

The type of policy you choose is one of the biggest factors affecting your life insurance rates. In general, term life insurance is the most affordable option, while permanent policies, such as whole life insurance, cost more because they provide lifelong coverage and can build cash value. No-medical life insurance also tends to have higher premiums since insurers assume more risk by offering coverage without requiring a medical exam.

What is the cost of term life insurance in Canada?

The cost of term life insurance in Canada with $500,000 in coverage can range from $14 to $200 per month, depending on the applicant’s age, gender, and health. Because term life insurance provides coverage for a fixed period and does not build cash value, it is the most affordable type of life insurance. It is well-suited for individuals and families looking to protect their income, cover a mortgage, or provide financial security during their highest-earning years.

Term life insurance cost in Canada

*Illustrative monthly cost of term life insurance for a 10-year period for individuals of various ages with $500,000 in coverage

What is the cost of whole life insurance in Canada?

In Canada, participating whole life insurance with $100,000 in coverage costs between $139 and $382 per month, whereas a non-participating policy may cost between $71 and $320 per month, depending on the applicant’s age and insurer. The cost of whole life insurance is generally several times more expensive than an equivalent term life policy because it provides lifelong coverage and builds cash value. 

Participating whole life insurance may also pay policy dividends, depending on the insurer’s dividend performance. It is commonly chosen for estate planning, wealth transfer, tax-advantaged savings, and leaving a guaranteed financial legacy.

Cost of whole life insurance in Canada

*Illustrative monthly costs for a male individual of various age ranges seeking a whole life insurance policy with $100,000 in coverage for a 20-pay premium option

What is the cost of a no-medical life insurance policy in Canada?

The cost of a 20-year no-medical life insurance policy with $500,000 in coverage ranges from $39 to $380 per month. While no-medical policies offer faster approval and do not require a medical exam, they generally cost more than fully underwritten life insurance because insurers take on greater underwriting risk. These policies are often suitable for individuals with pre-existing health conditions, those who may not qualify for traditional life insurance, or applicants who need coverage quickly.

Cost of a no-medical life insurance policy

*Illustrative monthly cost of a 20-year no-medical plan with $500,000 in coverage

Life insurance rates chart by coverage amount

The amount of term life insurance coverage you choose has a direct impact on your monthly premium. Higher coverage amounts generally cost more, although the premium increase is not always proportional. The cost of a $100,000 term life insurance policy will be much lower than that of a $250,000 term life policy. The coverage amount in the section below details the cost of different coverage amounts in Canada.

How much does a $100,000 life insurance policy cost?

A $100,000 term life insurance policy in Canada costs approximately $7 to $44 per month. While premiums remain relatively affordable for younger applicants, they increase significantly with age due to the higher insurance risk. A $100,000 policy may be suitable for people looking to cover final expenses, smaller debts, or supplement existing life insurance. However, it may not provide enough coverage for someone with a mortgage, dependents, or significant income replacement needs.

Cost of a $100,000 life insurance policy

*Illustrative monthly cost of term life insurance for a 10-year plan with $100,000 in coverage for a male/female non-smoker

How much does a $250,000 life insurance policy cost?

The cost of a $250,000 term life insurance policy ranges from approximately $10 to $98 per month. A $250,000 coverage is a popular choice for individuals and families looking to cover obligations such as a portion of their mortgage, income replacement, children’s education costs, outstanding debts, or other long-term expenses.

Cost of a $250,000 life insurance policy

*Illustrative monthly cost of term life insurance for a 10-year plan with $250,000 in coverage for male/female non-smoker

How much does a $500,000 life insurance policy cost?

A $500,000 term life insurance policy costs between $13 and $177 per month for healthy non-smokers. The exact premium will vary, with younger applicants typically qualifying for significantly lower rates. A $500,000 coverage can help cover major financial obligations.

Cost of a $500,000 life insurance policy

*Illustrative monthly cost of term life insurance for a 10-year plan with $500,000 in coverage for male/female non-smoker

How much does a $1,000,000 life insurance policy cost?

The cost of a life insurance policy with $1,000,000 in coverage is between $21 and $330 per month. This coverage amount is commonly chosen by high-income earners, homeowners, parents with young children, business owners who need substantial coverage to replace income, pay off significant debts, fund future education costs, or leave a substantial financial legacy.

Cost of a $1,000,000 life insurance policy

*Illustrative monthly cost of term life insurance for a 10-year plan with $1,000,000 in coverage for male/female non-smoker

How much does a $10,000,000 life insurance policy cost?

The rates for life insurance with $10,000,000 in coverage range from $166 to $3,276 per month. Premiums are substantially higher than those for lower-value policies because the insurer assumes a much larger financial risk. A $10,000,000 life insurance policy is suitable for high-net-worth families, business owners, executives, and professionals with significant financial obligations, business succession needs, or those with complex estate planning goals.

Cost of a $10,000,000 life insurance policy

*Illustrative monthly cost of term life insurance for a 10-year plan with $10,000,000 in coverage for male/female non-smoker

Life insurance costs by applicant category

Life insurance premiums can vary significantly depending on your personal circumstances and risk profile. In general, smokers, seniors, and individuals with health conditions tend to pay higher life insurance rates because they present a greater insurance risk. Couples may have the option to reduce costs through certain joint life insurance policies, although individual policies may be more cost-effective in some cases.

How much is life insurance per month for smokers and non-smokers?

The cost of $500,000 in term life insurance for smokers ranges from $42 to $504 per month, while comparable coverage for non-smokers ranges from $21 to $177 per month. Smokers pay premiums that are often 2 to 4 times higher than non-smokers because tobacco and nicotine use are associated with a higher risk of serious health conditions, including heart disease, stroke, and cancer. 

The difference in premiums becomes more noticeable with age, as the combined impact of smoking and age increases an insurer’s expected risk. Quitting smoking can significantly reduce your premiums, but most insurers require you to remain tobacco-free for at least 12 months before you may qualify for non-smoker rates. The required tobacco-free period may vary by insurer. 

Cost of life insurance for smokers and non-smokers (male) for varying age groups

*Illustrative monthly costs for a male individual seeking $500,000 in life insurance coverage for a 10-year policy

How much is life insurance per month for seniors?

The cost of $100,000 in term life insurance for male seniors ranges between $18 and $267 per month, while comparable coverage for female seniors is between $15 and $179 per month. Female applicants generally pay lower premiums than male applicants because they tend to have a longer life expectancy. As you get older, the costs for life insurance for seniors increase due to the higher likelihood of health issues and claims during the policy term.

Cost of life insurance for seniors

*Illustrative monthly costs for non-smoker seniors in various age ranges seeking a term life insurance policy with $100,000 in coverage

How much is life insurance per month for children?

Children’s whole life insurance typically starts at around $100 per month. Whole life insurance policies for children provide lifelong coverage and can build cash value over time, making them a long-term financial planning tool as well as a source of insurance protection.

Cost of whole life insurance for a female child

*Illustrative accumulated cash value and death benefit for a $100/month, 20-pay participating whole life insurance policy issued to a healthy 5-year-old girl. Projected cash values and death benefits assume current dividend scales and are not guaranteed; the actual policy values may vary

Cost of whole life insurance for a male child

*Illustrative accumulated cash value and death benefit for a $100/month, 20-pay participating whole life insurance policy issued to a healthy 5-year-old boy. Projected cash values and death benefits assume current dividend scales and are not guaranteed; the actual policy values may vary

How much is life insurance per month for couples?

The cost of $500,000 in term life insurance for couples typically ranges from $33 to $550 per month for non-smoking couples and from $76 to $1,283 per month for smoking couples. Couples can choose between two individual life insurance policies or a joint life insurance policy, with the latter potentially offering lower premiums in certain situations. Joint policies also simplify policy management by covering both partners under a single contract. However, individual policies may provide greater flexibility and, in some cases, better value depending on the couple’s coverage needs.

Cost of life insurance in Canada for smoking and non-smoking couples

*Quotes based on a $500,000 joint term policy in coverage for smoker and non-smoker couples in regular health seeking coverage for a 10-year term

Life insurance costs by insurance company

The cost of term life insurance from Canada’s leading insurers typically ranges from $14 to over $230 per month for the sample policy shown below. Premium differences occur because each insurer uses its own underwriting guidelines, pricing models, and risk assessment criteria. As a result, two insurers may offer different premiums for the same applicant and coverage amount.

The table below compares illustrative monthly premiums from some of Canada’s leading insurance companies for the same applicant profile.

Life insurance monthly costs by insurer

*Illustrative monthly cost of a 10-year term with $500,000 in coverage for a male/female non-smoker

How does term length affect life insurance premiums?

The cost of term life insurance ranges from about $22 to $144 per month in the example below, depending on your age and the length of the policy. For the same applicant and coverage amount, 10-year term policies are the most affordable, while 20-year and 30-year terms cost more because they provide coverage for a longer period and increase the likelihood of a claim during the term.

Cost of life insurance as per term length

*Illustrative monthly cost of a 10-year, 20-year, and 30-year term life insurance with $500,000 in coverage for a male non-smoker

Do life insurance premiums increase over time?

It depends on the type of life insurance policy. Term life insurance premiums are usually fixed for the length of the term, so your premium generally does not increase during that period. With annually renewable term insurance, premiums can increase each year. On the other hand, whole life insurance premiums are fixed for the life of the policy.

How much life insurance do I need to buy?

The right life insurance coverage depends on your financial responsibilities, income, debts, and family’s needs. Here’s how to estimate the amount:

• Income replacement: Aim for 7-10 times your annual income. For instance, if you have an annual salary of $70,000, your life insurance coverage should range between $500,000 and $700,000
• Debt & expenses: The payout should cover the mortgage, loans, funeral costs, and daily living expenses for dependents
• Future needs: Consider childcare, education, and long-term financial security for your family
• DIME formula (Debt, Income, Mortgage, Education): Use the DIME formula and add up these expenses for a tailored estimate
• Affordability: Balance coverage with budget to make sure you purchase a plan that you can afford to pay for

Do individuals with pre-existing health issues pay higher life insurance premiums?

Yes, individuals with pre-existing health conditions generally pay higher life insurance premiums because they pose a greater risk to insurers. The exact increase depends on the type and severity of the condition, how well it is managed, your age, and the insurer’s underwriting guidelines. In some cases, applicants may still qualify for standard premium rates if their condition is stable and well-managed.

Depending on your medical history, insurers typically make one of the following underwriting decisions:

• Standard premiums: If your condition is minor, stable, and well-managed, you may qualify for standard rates
• Higher (rated) premiums: If your condition increases the insurer’s risk, you may be approved with a higher premium or an additional rating applied to your policy
• Guaranteed issue or no-medical life insurance: If you are declined for traditional life insurance due to a serious medical condition, you may still qualify for guaranteed issue or no-medical life insurance. These policies don’t require a medical exam but generally come with higher premiums and lower coverage limits

Which is cheaper: term life or whole life insurance?

Term life insurance is cheaper than whole life insurance because it provides coverage for a set period, such as 10, 20, or 30 years, without building cash value. Whole life insurance provides lifelong coverage and may build cash value, so its premiums are higher. Both serve different financial needs; hence, you should consider other features when choosing the policy type. 

Is life insurance worth the cost in Canada? 

Yes, life insurance is worth the cost in Canada if you have financial dependants or have ongoing loans or any other financial obligations. The value depends on your financial situation and coverage needs. Term life insurance may provide affordable protection for temporary needs, while whole life insurance can offer lifelong coverage and additional features.

10 ways to lower your life insurance premiums

There are several ways to reduce the cost of your life insurance premiums, such as maintaining a healthy lifestyle, choosing the right policy, comparing quotes from multiple insurers, and more. Listed below are the factors that will help you lower life insurance premiums:

• Buy life insurance early: Purchasing a policy when you are younger and in good health can help you lock in lower premiums for the duration of your coverage.
• Quit smoking: Most insurers offer significantly lower premiums to applicants who have remained tobacco-free for at least 12 months
• Maintain good health: Managing your weight, blood pressure, and other health conditions can improve your eligibility for preferred rates
• Choose the right coverage amount: Buy enough coverage to meet your financial needs without paying for more insurance than necessary
• Opt for term life insurance: If you only need coverage for a specific period, term life insurance is generally much more affordable than permanent life insurance
• Consider laddering life insurance policies: Instead of purchasing one large policy, you can combine multiple term life policies with different coverage amounts and durations. This allows your coverage to decrease as your financial obligations reduce, helping lower overall premium costs.
• Choose riders carefully: Only add optional riders, such as critical illness, child, or disability riders, if they meet a specific need. Unnecessary riders can increase your premium
• Select a shorter policy term: Shorter term lengths usually cost less than longer-term policies with the same coverage amount
• Pay your premiums annually: You may reduce your overall cost when you pay annually instead of making monthly payments
• Compare quotes from multiple insurers: Compare and find the best life insurance policy for your needs

To get the most affordable life insurance quotes, reach out to our expert advisors at PolicyAdvisor. Our advisors will help you get quotes from the top life insurance providers in Canada and choose the one that best fits your needs and budget.

What are life insurance premiums?

Life insurance premiums are the payments policyholders make to maintain their coverage. They can be paid monthly, quarterly, or annually, depending on the policy. The cost of your premium will be based on factors like age, health, smoking status, coverage amount, policy type, and the insurer.

What is the average cost of life insurance in Canada?

The cost of life insurance in Canada starts at around $7 per month for a healthy young adult purchasing a basic term insurance policy. The premiums can range from $7 to over $3,276 per month, depending on your age, health, coverage amount, policy type, and insurer.

What is the cheapest life insurance in Canada?

Term life insurance is generally the cheapest life insurance in Canada. Because it provides coverage for a fixed period and does not build cash value, premiums are significantly lower than those for whole life or universal life insurance.

Why are life insurance premiums different for men and women?

Life insurance premiums are generally higher for men because, on average, men have a shorter life expectancy than women. Insurers use actuarial data to estimate risk, which results in lower premiums for female applicants with similar health and lifestyle profiles.

Is it cheaper to buy life insurance when you are younger?

Yes, buying life insurance at a younger age usually results in lower premiums because younger applicants generally have fewer health risks and a longer life expectancy. Purchasing coverage early can help lock in lower rates for the duration of your policy.

Can I get life insurance without a medical exam?

Yes, many insurers offer no-medical or simplified issue life insurance that does not require a medical exam. These policies are easier and faster to obtain but usually have higher premiums and lower coverage limits than fully underwritten life insurance.

How much life insurance do I need?

The amount of life insurance you need depends on your income, financial obligations, and future goals. While it is recommended to get coverage equal to 10-15 times your annual income, the ideal amount varies based on factors such as your mortgage, outstanding debts, living expenses, your children’s future education costs, and any existing savings or life insurance coverage. The easiest way to determine the right amount is to use our life insurance calculator, which estimates your coverage needs based on your unique financial situation and helps you choose a policy that provides adequate protection for your loved ones.

What is the cost of $100,000 term life insurance?

The cost of $100,000 term life insurance for a male non-smoker ranges from  $9 to $44 per month. For females, it can range from $7 to $33 per month. You can compare quotes from multiple insurers to find a policy that fits your coverage needs and budget.

Why does life insurance cost vary by insurer?

Life insurance premiums can vary between insurers because each company uses its own underwriting guidelines and risk assessment. Two insurers may assess the same applicant differently based on factors such as age, health history, occupation, smoking status, and coverage amount. 

Can I be denied term life insurance based on age?

Yes, age can affect whether you qualify for term life insurance, as insurers typically set minimum and maximum age limits for new applicants. Older applicants may have fewer term options available, higher premiums, or may not qualify for certain policy terms. 

What is term life insurance in Canada?

Term life insurance is a type of life insurance that provides financial protection for a set number of years. If the insured dies during that coverage period, the insurer pays a tax-free lump sum to their chosen beneficiaries. Since term life insurance does not have a savings or investment component, it typically costs much less than permanent life insurance. This is great for applicants seeking higher coverage amounts for lower premiums. 

For example, a healthy 35-year-old parent may be able to purchase $500,000 in coverage for somewhere between $25 and $40 per month. The same amount of coverage for whole life insurance could cost around $250 to $400 per month. This makes whole life roughly ten times more expensive than a term life policy.

Term life insurance in Canada: At a glance

Types of term life insurance in Canada

Although term life insurance provides temporary coverage, insurers offer it in several structures to suit different needs. The most common options are Term 10, Term 20, and Term 30 policies, while some insurers also provide level term, annual renewable term (ART), and return of premium (ROP) term policies.

Here’s a quick overview of the different types of term life insurance in Canada:

Pros and cons of term life insurance

How does term life insurance work in Canada? 

Term life insurance has one of the most straightforward processes among insurance policies. You choose how much coverage you need and how long you want it to last. In exchange for regular premium payments, your insurer agrees to pay your beneficiaries a tax-free death benefit if you pass away during the policy term.

Here’s how a term life insurance policy usually works:

Step 1: Choosing the right coverage amount

Choose a coverage amount that would secure the financial future of your family and protect your loved ones from outstanding debts or other costs. As a general rule of thumb, many applicants choose coverage anywhere between 7 and 15 times their annual income.

Step 2: Choose your policy term

Once you have selected the coverage amount, you need to choose how long your coverage should remain in place. Most Canadian insurers offer the following periods:

Step 3: Complete your application and pay your premiums

Once you have chosen your coverage amount and period, you will need to complete your application and name the beneficiary. Most applicants choose their close relatives, such as their spouse, children, or parents, as the beneficiary.

Once the application is completed, you will need to pay your premiums. You can make premium payments monthly or annually. Some insurers offer lower overall costs if you choose to pay annually instead of monthly.

Step 4: Your beneficiaries receive the death benefit

If you pass away while your policy is active, your beneficiaries submit a claim to the insurance company. Once the claim is approved, the insurer pays the death benefit as a tax-free lump sum. 

Unlike investment or estate assets, term life insurance proceeds are typically paid directly to named beneficiaries, helping them access funds more quickly during a difficult time. 

How to choose the right term life insurance coverage amount?

Choosing the right amount of term life insurance is one of the most important decisions you will make when buying a policy. The coverage amount should be enough to help your loved ones maintain financial stability by replacing the lost income and support you provide if you were to pass away unexpectedly.

When deciding the coverage amount, you should keep in mind factors such as:

• Outstanding mortgage balance
• Personal loans or other debts
• Daily living expenses
• Future childcare costs and education expenses
• Funeral and final expenses
• Income replacement for several years

For many families, a common rule of thumb suggests choosing coverage between 7 and 15 times their annual income. This offers a sizable amount that can cover most future expenses with ease. 

Using the DIME method to calculate term life insurance

Another method of calculating how much coverage you need is to use the debt, income, mortgage, and education (DIME) method. It is a simple way to estimate how much term life insurance you may need by considering four major financial obligations your family may need to cover if you pass away.

Let’s assume Sarah is 35 years old, married, has one young child, and is the primary income earner for her family.

Here’s an estimate of her term life insurance needs using the DIME method:

Based on the DIME method, Sarah may consider approximately $1.7 million to 2 million in term life insurance coverage. This amount could help her family pay off outstanding debts and offer financial security for the foreseeable future. While it is a handy index, your ideal coverage amount may differ based on factors such as savings, investments, and long-term financial goals.

Do you need a medical exam for term life insurance?

Not always. Many Canadians can qualify for term life insurance without a medical exam. However, this depends on your age, health, lifestyle, and the amount of coverage you apply for. Many insurers now offer accelerated underwriting and simplified issue options, which allow eligible applicants to qualify without a medical exam. Some insurers also offer no-medical life insurance, although these policies may have lower coverage limits and higher premiums.

However, you may still need a medical exam if:

• You are applying for a high coverage amount
• You are older or have certain pre-existing medical conditions
• The insurer requires additional health information based on your application

Most term life insurance policies in Canada may require you to submit a health questionnaire and furnish information about your height, weight, blood pressure, and medical history. If you are a smoker, you may be subject to additional blood, urine, or cotinine tests. Some applicants may also be required to undergo an electrocardiogram (ECG).

How much does term life insurance cost in Canada?

The cost of a term life insurance policy ranges between $21.60 and $741.60 per month. Your premiums depend on the coverage amount and personal factors, such as gender, age, smoking status, and health. 

Here is a sample term life insurance rate for $500,000 coverage:

*Monthly premiums for non-smoking male

Some insurers also offer lower overall premiums if you choose to pay annually instead of monthly. Speak with your advisor to compare the payment options and determine which offers the best value for your policy.

How are term life insurance premiums calculated?

Life insurance companies calculate your premium by assessing the likelihood of paying a claim during the policy term. This is primarily based on your age, health status, smoking status, coverage amount, and other related features.

Here’s a brief overview of the factors that may affect term life insurance premiums in Canada:

When should you purchase term life insurance?

The best time to purchase term life insurance is while you are still young and healthy, before taking on major financial responsibilities. Buying a policy earlier can help you lock in lower premiums, as life insurance generally becomes more expensive with age and as health changes.

In terms of financial responsibilities, you can consider purchasing term life insurance before major milestones such as starting a family, buying a house, or taking on significant debts or loans. The death benefit can help protect your beneficiaries from financial hardships should you pass away unexpectedly.

Learn which is the best time to buy life insurance in Canada

What happens when your term life insurance expires?

Once your policy expires, it does not pay out automatically. Instead, you have several options, depending on your insurer and personal circumstances.

Here is an overview of the choices you can make once your term life insurance policy expires:

If you renew your policy, you will have to pay an increased premium based on your age and other factors at the time of renewal. Renewing can be a good option if you still have financial responsibilities and wish to remain covered for an extended period.

On the other hand, many applicants also convert their term life insurance into a permanent life insurance policy before a specified age or deadline. It is great for those who want lifelong coverage or are interested in estate planning.

However, you can choose to purchase a new policy with different coverage amounts or policy terms to align with your changing needs or financial planning. Alternatively, you can also choose to let the policy expire if your financial needs are met or you have enough savings to offset future costs.

Can you cancel your term life insurance policy?

Yes, most term life policies can be cancelled at any time. If you no longer need coverage, you can cancel your policy by notifying your insurer or advisor. Once cancelled, your coverage ends, and your beneficiaries will no longer be eligible to receive a death benefit. In most cases, you will not receive a refund on the premiums you have already paid. 

Additionally, most Canadian insurers are required to provide a free look or cooling-off period after you receive your policy contract. During this time, you can review the policy terms and cancel the policy for a full refund of any premiums you have paid (provided you have not raised any claims during this time). While the industry standard is ten days, some insurers may offer up to 30 days.

Are there any exclusions to term life insurance?

While term life insurance generally covers natural and accidental death, there are certain exclusions where a claim may be reduced or denied. These exclusions vary by insurer and policy, so it’s important to review your policy contract carefully.

Here’s an overview of common exclusions to term life insurance:

How does term life compare to other life insurance policies available in Canada?

Aside from term, you can get permanent life insurance. Unlike a fixed term for 10 or 20 years, these policies cover you for the rest of your life and may have an investment component.

Some of the most common types of permanent life insurance are:

• Whole
• Universal
• Term-to-100

Here’s a quick overview of how term life insurance compares to other popular options:

For a detailed comparison of the plans, check out the different types of life insurance in Canada

Is term life insurance worth it in Canada?

Yes, term life insurance is worth it for most Canadians who are seeking affordable financial protection for a specific period. The policy offers high coverage at relatively low premiums, making it a good choice for individuals with debts, mortgages, and high financial liabilities.

A term life insurance policy helps your loved ones replace lost income and pay off major outstanding debt, ensuring the burden does not rest upon them. It is one of the most cost-effective options for safeguarding your family from financial responsibilities should you pass away.

However, if you need lifelong coverage or are seeking to build cash value and estate planning, a permanent life insurance policy may be more suitable. While the premiums are significantly higher than term life, it provides more financial protection and rewards you with cash value and lifelong protection.

If your goal is to protect your family’s finances and cover immediate debts without paying the higher cost of permanent life insurance, term life insurance offers excellent value and coverage.

Our advisor’s take on term life insurance

At PolicyAdvisor, we recently helped a 35-year-old parent secure affordable term life insurance to protect their family’s financial future. They were seeking enough coverage to replace their income, pay off their newly acquired mortgage, and support their children’s future while keeping monthly premiums affordable.

Client profile

• Age: 35
• Family: Married with two young children
• Primary concern: Income replacement and mortgage protection
• Coverage goal: $1 million in affordable life insurance

Why we recommended term life insurance

• Affordable premiums for a high coverage amount during their peak earning years
• Coverage aligned with their mortgage term to help pay off outstanding debt
• Flexibility to extend the term if financial protection is still required
• The option to convert to permanent life insurance when financial needs change

How to purchase term life insurance in Canada?

PolicyAdvisor’s licensed life insurance advisors can help you compare term life insurance quotes from Canada’s leading insurers based on your age, budget, health, coverage needs, and financial goals.

Whether you are looking to protect your family, cover your mortgage, or secure affordable coverage for a specific period, our advisors at PolicyAdvisor can help you choose the right term length, coverage amount, and optional riders to fit your needs.

Connect with an advisor

Looking for the best term life insurance quotes in Canada? PolicyAdvisor makes it easy to compare quotes from Canada’s leading life insurance companies.

Our advice is 100% free, with no obligation to buy. Whether you are comparing insurers, choosing a policy term, or deciding how much coverage you need, we are here to guide you every step of the way.

Frequently asked questions

Is the term life insurance death benefit taxable in Canada?

No. Life insurance death benefit is generally tax-free in Canada. The amount is paid tax-free to the named beneficiaries if the policyholder passes away during the term.

Can I have more than one term life insurance policy?

Yes, many Canadians own multiple life insurance policies to cover different financial needs or life stages. Additionally, you can combine term and permanent policies to satisfy different financial goals.

Can I convert my term life insurance into permanent life insurance?

Yes, many Canadian insurers allow you to convert your policy before a specified age or conversion deadline without additional medical underwriting. Check your policy or consult with your advisor for eligibility requirements.

What happens if I miss a premium payment?

Most insurers provide a grace period (usually 30 or 31 days) during which you can make the missed payment and keep your coverage active. If the premium remains unpaid beyond this grace period, your policy may lapse.

Can I renew my term life insurance policy after it expires?

Yes, in many cases. Many term life insurance policies in Canada are renewable within a specified period or until a specified age. If you choose to renew, your premiums will typically increase based on your age at the time of renewal.

Does term life insurance cover accidental death?

Yes, most term life insurance policies cover accidental death, alongside death due to illness or natural causes, provided the policy is in force and no exclusions apply.

What is covered under critical illness insurance?

Most critical illness insurance plans cover 26 common illnesses defined by the Canadian Life and Health Insurance Association (CLHIA).

Coverage for these health conditions may vary depending on the insurance company. Some insurers may also offer coverage for conditions other than the ones listed in the CLHIA guidelines.

The 26 conditions that most common carriers cover are:

Cancers and Tumours:

• 1. Benign Brain Tumour
• 2. Cancer (Life-Threatening)

Cardiovascular:

• 3. Aortic Surgery
• 4. Coronary Artery Bypass Surgery
• 5. Heart Attack
• 6. Heart Valve Replacement or Repair
• 7. Stroke (Cerebrovascular accident)

Neurological:

• 8. Bacterial Meningitis
• 9. Dementia, including Alzheimer’s Disease
• 10. Motor Neuron Disease
• 11. Multiple Sclerosis
• 12. Parkinson’s Disease and Specified Atypical Parkinsonian Disorders

Vital Organs:

• 13. Kidney Failure
• 14. Major Organ Failure on Waiting List
• 15. Major Organ Transplant

Accident and Functional Loss:

• 16. Acquired Brain Injury*
• 17. Blindness
• 18. Coma
• 19. Deafness
• 20. Loss of Independent Existence
• 21. Loss of Limbs
• 22. Loss of Speech
• 23. Paralysis
• 24. Severe Burns

Other

• 25. Aplastic Anemia
• 26. Occupational HIV Infection

Frequently asked questions

How quickly can I receive a payout after being diagnosed with a critical illness?

The speed at which you would receive your critical illness payout depends on your provider and policy terms. However, most providers, like RBC Insurance, will pay your benefit within 60 days of receiving completed claim forms and all the documents requested from your medical specialist.

Can I purchase critical illness insurance if I have a pre-existing condition?

Yes, you can purchase critical illness insurance in Canada if you have a pre-existing condition. However, you must disclose your condition details, ongoing treatments, and recent diagnoses during your application. Depending on the severity of your condition, the insurer may respond in one of these ways:

• Decline: The insurer may automatically decline your application, particularly for serious conditions like advanced cancer, cystic fibrosis, and multiple sclerosis
• Rated Policy: If your condition presents a higher risk, you may be offered a “rated” policy with higher premiums
• Standard Approval: If your condition isn’t considered high-risk, your application may be approved with standard terms

Is critical illness insurance worth it for individuals with a family history of covered illnesses?

Yes, individuals with a family history of critical illnesses, such as cancer, heart attack, and stroke, should strongly consider critical illness insurance, as they have a higher susceptibility to these conditions.

How does critical illness insurance coverage change as I age?

As you age, critical illness insurance coverage becomes more expensive, since premiums tend to increase with age. Coverage availability also becomes limited, particularly for individuals over the age of 60.

Additionally, you may become more susceptible to pre-existing conditions such as arthritis, osteoporosis, and diabetes, or may already have them, which can make obtaining coverage more difficult.

Can I renew my critical illness insurance policy, and are there any changes on renewal?

Yes, you can renew your critical illness insurance policy at the end of its term. Some companies, like Sun Life, automatically renew 10-year term policies at guaranteed renewal premiums. You may also have the option to increase your coverage; however, this might require additional medical underwriting.

What is the difference between critical illness insurance and terminal illness benefit in life insurance?

Critical illness insurance covers serious health conditions like cancer, heart attack, and stroke, and provides a tax-free lump sum payment upon diagnosis. A terminal illness benefit, typically included in permanent life insurance plans, pays 50-75% of the insurance amount if you’re diagnosed with a terminal illness and have two years or less to live.

 Are children covered under my critical illness insurance plan?

No, you can’t add children to your own critical illness insurance. However, you can buy a separate children’s critical illness policy that covers over 30+ health conditions and provides a lump sum payment if your child is diagnosed with a covered condition. Children’s critical illness insurance can be purchased anytime from birth until age 25.

What happens if I move out of Canada? Does my critical illness insurance still cover me?

Yes, your critical illness insurance remains in effect if you relocate from Canada, as long as you continue paying your premiums. However, there may be additional requirements when filing a claim. For instance, your insurer might need to verify that your diagnosis and treatment meet Canadian standards.

Is COPD covered by critical illness insurance? 

No, critical illness insurance is specifically designed for severe health conditions, such as cancer, heart attack, and stroke, and usually doesn’t cover COPD, or chronic respiratory illnesses. 

What is the age limit for life insurance in Canada?

In Canada, the maximum age limit for purchasing life insurance is between 75 and 85. For term life insurance, you can continue to renew your policy until you reach 85 years of age.

For whole life or universal life insurance, you can purchase a life insurance policy until you reach the company-approved age limit.

However, the exact age limit may vary from one company to another based on their underwriting guidelines. For instance, companies like Sun Life and Desjardins can offer life insurance to individuals up to 85 years of age.

Types of life insurance policies and their age limits

Although the age limit varies from one insurance provider to another, here are a few general age limits based on various types of life insurance. Take a look:

Find out more about the various types of life insurance in Canada through our detailed blog.

How age limit impacts life insurance policy premiums

Life insurance premiums increase with age due to the higher risks associated with older individuals. As people age, the likelihood of developing health issues or facing mortality increases. As a result, insurers raise premiums to cover potential claims. 

The risk of chronic conditions, hospitalization, and other health-related expenses grows over time. These risk factors prompt insurers to adjust premiums accordingly to ensure their own financial stability.

Factors influencing premium rates of life insurance policies

Here are a few factors influencing life insurance premium rates:

Cost of life insurance by age

Life insurance premiums may vary according to an individual’s age. The older a person gets, the higher the cost of life insurance may become. 

Check out our detailed table depicting the average monthly premiums paid by men and women of different age groups:

Term life insurance for ages 25-65

Whole life insurance for ages 25-65

Why age limits matter in life insurance policies

Knowing about the age limit of life insurance can be beneficial for most individuals seeking coverage. Here are a few reasons why age limit matters:

Risk assessment

Companies assess risk based on an individual’s age. As individuals age, their likelihood of health issues and mortality increases, which directly impacts premium rates. 

Insurers set age limits to manage their risk exposure effectively and ensure financial stability.

Financial planning and security

The true purpose of life insurance is to provide a financial safety net to the insured’s family. Prioritizing the age limit ensures that the insured can secure coverage while they’re financially stable. 

By planning ahead and getting life insurance within the standard age limit, the insured individual can ensure the overall financial security of their loved ones in their absence.

Long-term financial commitment

Since life insurance is usually a long-term investment, it requires the insured individual to have the financial stability and affordability for paying premiums. 

Getting life insurance at the right time ensures longer coverage periods with lower premiums. On the other hand, late applicants may only receive shorter coverages at a much higher premium.

If you’re a senior looking for the right life insurance fit, we’ve got you covered. Read our blog to find out more.

Types of life insurance for seniors

Seniors in Canada can avail life insurance options tailored to their unique health conditions and coverage needs:

Finding the best life insurance rates for seniors

Getting a competitive life insurance rate for seniors can be quite tricky but not impossible. For individuals over 50, a detailed comparison of multiple insurance policies and their quotes can help them find the right coverage at the most affordable price.

Tips for obtaining competitive quotes

Here are a few effective tips for obtaining the most competitive life insurance rates in Canada. Take a look:

Is there a type of life insurance where premiums do not increase with age?

Yes, some life insurance policies such as participating whole life insurance and group benefits, have fixed premium rates. 

Participating whole life insurance policies have level premiums — the premiums do not change for the entirety of the policy duration. 

Group life insurance policies typically have level premiums for all members regardless of age, gender, or health status. 

Gender differences in life insurance costs

Gender differences significantly impact life insurance costs. This usually occurs due to varying life expectancies and health risks associated with each gender.

Some of the key factors that influence the costs of life insurance are as follows:

Do women pay more by age for life insurance?

Women generally pay less for life insurance compared to men, even as they age. However, premiums for women still increase with age as the risk of health issues and mortality rises. 

Younger women pay comparatively lower premiums than older women for the same amount of coverage.

Frequently asked questions (FAQs)

Should a 75-year-old have life insurance?

Yes, a 75-year-old individual should have life insurance. Having life insurance can ensure that the individual’s family remains protected in their absence.

It can also help the family pay for their loved one’s funeral and cover any remaining mortgage amount.

Can I be denied life insurance because of age?

Yes, you can be denied life insurance because of age, especially if you’re applying for a new policy later in life. Many insurers have maximum age limits for certain types of life insurance policies, like term life insurance, and may decline coverage if you’re above that age. 

As you age, insurers may consider you a higher risk due to health concerns, leading to potential denial or higher premiums for coverage. 

Does life insurance expire with age?

If you have term life insurance, the policy will expire once the specified term period is over. However, whole life insurance ensures lifetime coverage as long as the insured individual continues to pay the premiums.