What is permanent life insurance & how does it work in Canada?

Protecting your loved ones in the event of your untimely death is serious business. That’s why insurance companies offer you so many options. But understanding those options can be a bit of a challenge. We sat down to explain one of the least understood types of life insurance out there – permanent insurance, and its various types including whole life insurance.

What is permanent life insurance?

Permanent life insurance represents a category of life insurance products that provide lifetime coverage. In other words, permanent insurance offers coverage until the policyholder passes away.

As the name suggests, permanent life insurance is best suited to protect ‘permanent’ or ‘lifelong’ needs such as estate tax liabilities, care for a disabled child or dependent, liquidity for closely-held businesses and even funeral expenses.

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How does permanent life insurance work in Canada?

Most kinds of permanent life insurance policies tend to include a savings or investment component, in addition to the pure lifetime insurance coverage. Part of the premium is used to pay for investments, which accumulate within the policy on a tax-deferred basis and generate a cash value that can be accessed as needed by the policyholder.

The policyholder may use the cash value as savings available for retirement through partial or full withdrawals or by taking loans against the cash value by offering it as collateral to a lender.

Due to the lifelong coverage and the embedded investment component, the premiums for permanent life insurance are much higher than other products.

Term life insurance is better suited as a strict protection product rather than an investment and planning tool.

What are the different types of permanent life insurance policies?

Permanent life insurance comes in two types: Whole life insurance and universal life insurance. These insurance options cater to the various financial needs and goals of the applicants. Explore these insurance options in detail:  

Whole life insurance  

Whole life insurance provides lifelong coverage with fixed premiums. It includes a savings component, often referred to as “cash value,” which grows at a guaranteed rate over time. Key benefits of whole life insurance include:  

  • Guaranteed death benefit payout
  • Predictable premium payments
  • The ability to borrow against the cash value if needed

Universal life insurance  

Universal life insurance offers more flexibility compared to whole life policies. Policyholders can adjust their premiums and death benefit amounts to suit their financial situation. It also includes an investment component, where the cash value grows based on market-linked performance. Key features of universal life insurance include:  

  • Adjustable premiums and death benefits
  • The potential for higher returns on the cash value 
  • The option to increase or decrease coverage as needed
types of life insurance like permanent life insurance

How much does permanent life insurance cost?

Permanent life insurance costs can vary depending on the type of policy. For non-participating whole life insurance, a healthy person in their 30s can expect to pay about $65 per month for $100,000 in coverage. Participating whole life insurance, which offers benefits like dividends, is slightly more expensive, with an average cost of $75 per month for the same coverage amount.

The cost of permanent life insurance also increases with age. Purchasing a policy later in life results in higher premiums, as the insurer has less time to collect payments before the guaranteed payout is due. The following chart provides an example of average rates for whole life insurance based on age.

Here’s what the price of permanent life insurance for a male applicant can look like in Canada:

Cost of permanent life insurance in Canada

Age $100K coverage – Non-participating $100K coverage – Participating
20 $47/month $54/month
30 $65/month $75/month
40 $92/month $110/month
50 $149/month $164/month
60 $245/month $263/month
70 $462/month $444/month

*Quotes based on $100k in coverage for a non-smoker in regular health on a life-pay plan. Quotes based on average prices from leading insurance companies in Canada.

Who needs permanent life insurance?

Permanent life insurance is ideal for individuals with specific long-term financial needs or goals such as wealth transfer, estate planning, lifelong financial protection, and savings growth. Here are some scenarios where it may be the right choice:  

  • Wealth transfer: Ensures a tax-free inheritance for beneficiaries 
  • Estate planning: Covers estate taxes or supports legacy planning  
  • Lifelong financial protection: Offers guaranteed coverage for those needing permanent solutions  
  • Dependents with long-term needs: Supports families with dependents requiring lifetime care 
  • Business owners: Provides liquidity for buy-sell agreements or key person insurance
  • Savings growth: Builds cash value for supplemental retirement income or emergencies

What’s the difference between term insurance and permanent insurance?

Permanent life insurance provides financial protection for an unspecified amount of time, from whenever you start the policy until the day you die. The policy will pay the death benefit to your beneficiaries at any time you pass away as long as you have been paying the policy premiums and have not cancelled the policy.

On the other hand, with term life insurance, you are covered and benefits are paid if you pass away within a specific period of time. The usual terms tend to come in increments of ten years, although some life insurance companies allow you to pick the specific years of coverage you want.

Here is a comparison between permanent and term life insurance:

Comparison between term and permanent life insurance

Aspect Permanent life insurance Term life insurance
Coverage duration Lifelong (as long as premiums are paid) Fixed term (e.g., 10, 20, or 30 years)
Premiums Higher, but remain level over the life of the policy Lower, but increase significantly upon renewal
Cash value Builds cash value over time, which can be borrowed or withdrawn No cash value
Cost efficiency Best for long-term goals, estate planning, or legacy creation Cost-effective for temporary needs 
Flexibility Offers investment options and can serve as a financial asset Simple and straightforward with no investment component
Suitability Ideal for long-term wealth building, high net-worth individuals, or those needing lifelong coverage Best for young families, temporary financial obligations, or limited budgets
Death benefit Guaranteed, with potential for growth through dividends (depending on policy) Guaranteed during the term but lapses at the end of a policy
Conversion option Not applicable  Often convertible to permanent life insurance

Is permanent life insurance the same as whole life insurance?

Whole life insurance, implying that you are covered for your entire life, is sometimes loosely used to refer to all categories of permanent insurance. However, there are different types of permanent life insurance Canadians can choose from. Besides whole life insurance, many Canadian companies also offer universal life insurance, term-to-100 insurance, or even variable life insurance. We cover the different types of permanent insurance in great detail here.

The most important differences between the different types of permanent life insurance products have to do with whether you want:

  • To have an investment component and
  • To actively manage the investment account or let the insurance company managers run with it

Once you understand the differences you can choose between whole life insurance, universal life insurance or term-to-100 insurance.

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Can you cash out permanent life insurance?

Yes, you can cash out permanent life insurance in Canada. The policy’s cash value, which grows over time, can be accessed through withdrawals, loans, or surrendering the policy.  

1. Full surrender  

  • Cancel the policy and receive the cash surrender value (cash value minus fees)
  • Ends the policy permanently and may incur taxes on any gains  

2. Policy loan  

  • Borrow directly against the policy’s cash value with interest  
  • The death benefit remains active but is reduced if the loan is not repaid 

3. Collateral loan  

  • Use the policy’s cash value as collateral for a loan from a third-party lender
  • Keeps the policy intact while allowing access to funds without affecting the death benefit

Withdrawals and loans reduce the death benefit and may have tax implications. Surrendering cancels the policy, providing you with the accumulated cash value but canceling your coverage altogether.

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

How long does permanent life insurance last?

Permanent life insurance lasts for your entire lifetime, as long as premiums are paid. Unlike term life insurance, which expires after a specific period, permanent life insurance provides lifelong coverage and includes a cash value component that grows over time. 

This makes it a reliable option for long-term financial planning, estate preservation, or leaving an inheritance. Its longevity ensures your beneficiaries are protected regardless of when the benefit is needed.

Find out more about life insurance for business owners in Canada

What are the benefits of permanent life insurance? 

Permanent life insurance offers several advantages, such as lifetime coverage, cash value growth, guaranteed payout, customizable add-on options, and more, making it an attractive option for those seeking lifelong financial security. Key benefits include:  

  • Lifetime coverage: Guarantees protection for an individual’s entire life, as long as premiums are paid  
  • Cash value growth: Builds a savings component over time, which grows tax-deferred and can be accessed through loans or withdrawals
  • Guaranteed payout: Ensures a tax-free death benefit for beneficiaries, regardless of when the primary insurer passes away  
  • Flexible financial options: Offers access to the policy’s cash value for emergencies, retirement income, or investment opportunities  
  • Customizable add-ons: Riders, such as critical illness or disability benefits, enhance coverage to suit individual needs  

What are the downsides of permanent life insurance?

Permanent life insurance is more expensive than a term policy. The investment component of a permanent life insurance policy can also sound complex, especially with universal life insurance where the policyholders have a say in how the premiums are invested. 

The cash value component of a permanent life insurance policy has a slow initial growth, but grows exponentially in the later years of the policy.

Is permanent life insurance a good investment option?

The investment component of permanent (read whole life) policies has merits in facilitating a disciplined investment schedule, ability to access surplus cash when needed, like retirement, and tax-efficient estate transfers. While all of these sound alluring, make no mistake: the primary purpose of permanent life insurance is still protection so that your dependents have financial security when you pass away.

Permanent insurance should not be treated as a primary investment vehicle. The return embedded in such policies, while guaranteed is usually modest. The built-in management fees are higher than what fund managers may charge. There is a cost (‘surrender charge’) to accessing such cash during your lifetime.

Premiums for permanent life insurance may be better deployed in alternative investment vehicles such as RRSPs, RESPs or even to pay down your mortgage. So if you have maxed out on some of those registered products, then whole life policies can be a good place to deploy some of your surplus cash.

Which is better, permanent or term life insurance?

The choice between permanent and term life insurance depends on your needs. Term life insurance is affordable and provides coverage for a set period, ideal for temporary needs like mortgage payments or raising children. 

Permanent life insurance offers lifelong coverage and builds cash value, making it better for estate planning or long-term financial goals. If cost is a concern, term insurance works well. But, for lasting benefits and asset growth, permanent insurance is the better choice.

How can I get permanent life insurance quotes?

If you are looking to purchase a permanent life insurance policy in Canada, there are many options available to you. As the best online life insurance brokerage in Canada, we have access to permanent life insurance quotes from the best life insurance companies in Canada. Schedule a call with one of our in-house insurance brokers so you can help you find the best whole life insurance quotes from leading Canadian insurance companies.

Do you still have some questions about the different types of life insurance plans out there? That’s understandable and exactly why we wrote the Honest Guide to Life Insurance. Check it out, or jump straight into our life insurance calculator to instantly see how easy it is to protect your loved ones for less.

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Frequently asked questions

How does the cash value component of permanent life insurance work?  

The cash value is a unique feature of permanent life insurance that acts as a savings or investment component. A portion of your premiums is allocated to build this cash value, which grows over time, often on a tax-deferred basis. 

You can borrow against it, withdraw funds, or even use it to pay premiums in certain circumstances. However, borrowing or withdrawing can reduce the policy’s death benefit if not repaid. The cash value provides financial flexibility, making permanent life insurance both a protection tool and a financial asset.

What types of policies fall under permanent life insurance?  

Permanent life insurance includes various policy types, such as whole life and universal life insurance. These insurance options offers benefits such as fixed premiums, a guaranteed death benefit, and predictable cash value growth, allowing policyholders to adjust coverage as needed. Each type caters to different financial goals, so it’s important to evaluate your needs before choosing a policy.

Is permanent life insurance taxable in Canada?

Permanent life insurance benefits are generally not taxable in Canada. The death benefit paid to beneficiaries is tax-free, providing financial security to your loved ones. However, the cash value growth within the policy is tax-sheltered while it remains in the policy.

If you withdraw funds or surrender the policy, you may face taxes on the amount that exceeds the initial deposit. To fully understand the tax implications, it’s wise to consult an insurance professional such as our experts at PolicyAdvisor.

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Term vs Whole Life Insurance: Choosing the Best Option for 2025

Life insurance is more than just a protective tool—it’s a crucial part of securing your family’s future. However, understanding the differences between term and whole life insurance is essential to making the right choice.

Each serves a unique purpose, offering varying levels of protection and flexibility. In this article, we break down both types to help you choose the policy that best suits your needs.

What’s the difference between term and whole life insurance?

The key difference between term and whole life insurance lies in their duration, cost, and benefits.

Term life insurance covers a specific period, such as 10, 20, or 30 years. If the policyholder passes away during this term, a death benefit is paid to beneficiaries, but there is no payout if the term ends while the policyholder is still alive. This makes term insurance ideal for temporary needs like paying off a mortgage or funding education.

Whole life insurance, by contrast, offers lifelong coverage and includes a cash value that grows over time, which can be accessed during the policyholder’s life. Its higher premiums reflect the added savings element and guaranteed protection, making it suitable for long-term goals like estate planning and legacy building.

Term vs Whole life insurance: Key differences

Term life insurance Whole life insurance
Temporary coverage for a fixed time period e.g. 10 years, 20 years, 25 years Guaranteed lifelong coverage
Best suited for temporary needs (mortgage, children’s education, lifestyle protection) Best suited for permanent needs (estate planning, retirement income, final expenses)
Premium payments only stay the same until the end of the term Premium payments stay the same for life
Low premiums for the initial term Higher premiums because of lifetime coverage and savings component
Death benefit but no cash value component Death benefit and access to a growing cash value
Pay premiums for life Options to pay off premiums early
Death benefit stays the same Death benefit may increase with dividends
Loans/withdrawals cannot be taken against term life policies Policy loans can be taken and dividend payments may be withdrawn
Death benefit only paid out on policy holder’s death Benefits can be accessed as dividends or loans during policy holder’s lifetime
Death benefit payout not guaranteed — you can outlive your policy Guaranteed death benefit payout
Can be converted into permanent policies Does not need to be converted
Will lapse is premiums unpaid for 30 days Will continue to be in force as long as cash value can cover premium

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What is term life insurance?

Term life insurance is a type of life insurance policy that provides coverage for a specific period, or “term,” such as 10, 20, or 30 years. If the policyholder passes away during this term, their beneficiaries receive a tax-free death benefit. However, if the policyholder outlives the term, the coverage ends, and no payout is made.

Term life insurance is ideal for meeting temporary financial needs, such as paying off a mortgage, funding children’s education, or replacing income in the event of premature death.

Term life insurance pros and cons

Pros Cons
Simple to understand Coverage is temporary
Low costs for the first term Death benefit is not guaranteed — you can outlive your policy
Can be converted into whole life insurance Premiums increase if you renew your policy for another term
Price stays the same for the entire term (Guaranteed Level Premiums) No investment or cash value component
Flexible — you can tailor your term to fit specific short-term needs Cannot borrow or cash in on the policy

Read our full Guide to Term Life Insurance in Canada

What is whole life insurance?

Whole life insurance is a type of life insurance that provides coverage for the policyholder’s entire life, as long as premiums are paid. In addition to offering a guaranteed death benefit, it also includes a cash value component that grows over time at a guaranteed rate. This cash value can be accessed through loans or withdrawals during the policyholder’s lifetime.

Whole life policies typically have higher premiums compared to term life insurance because of their lifelong coverage and savings feature. Such policies are well-suited for long-term financial planning, such as estate planning, wealth transfer, or covering final expenses, and may also pay dividends, which can further increase the cash value or death benefit.

Whole life insurance pros and cons

Pros Cons
Permanent coverage — never expires Premiums can be expensive
Price stays the same for the entire term (Guaranteed Level Premiums) Investment returns may not be as large as with other investments
Savings component — cash value accumulation and annual dividend payments
Can borrow or cash in on the policy

Read our full Guide to Whole Life Insurance in Canada

Which is better, permanent or term life insurance?

The choice between permanent and term life insurance depends on your needs. Term life insurance is affordable and provides coverage for a set period, ideal for temporary needs like mortgage payments or raising children. 

Permanent life insurance offers lifelong coverage and builds cash value, making it better for estate planning or long-term financial goals. If cost is a concern, term insurance works well. But, for lasting benefits and asset growth, permanent insurance is the better choice.

Whole vs term life insurance: Cost comparison

The cost of term life insurance is significantly lower than whole life insurance because it provides coverage for a limited period and doesn’t build cash value.

For non-smokers aged 25-34, term life premiums can be as low as $13-$15 per month, while whole life premiums for the same age group range from $250-$275. Smokers pay higher premiums across the board, with term life costing $30-$35 for ages 25-34 and whole life costing $300-$350.

As age increases, premiums for both types rise, but whole life consistently remains more expensive due to its lifelong coverage and cash value component.

Average term and whole life insurance rates for smokers and non-smokers

Age Group Term Life – Nonsmokers Term Life – Smokers Whole Life – Nonsmokers Whole Life – Smokers
Male / Female Male / Female Male / Female Male / Female
25-34 $15 / $13 $30 / $25 $275 / $250 $350 / $300
35-44 $20 / $18 $45 / $35 $350 / $300 $475 / $400
45-54 $50 / $40 $100 / $80 $500 / $425 $700 / $575
55-64 $100 / $80 $180 / $150 $750 / $625 $1,100 / $900
65+ $200 / $150 $350 / $300 $1,200 / $1,000 $1,800 / $1,500

*Representative values based on average monthly costs of term and whole life premiums from Canada’s best life insurance companies.

Is a term life insurance application easier than whole life insurance?

In general, it’s easier to get a term policy than a whole one. This is another difference between term and whole life insurance that makes a lot of Canadians choose term instead — it tends to be affordable, simple to understand, and easy to get.

The application process for whole life policies may ask more questions or be more strict about medical questions. This is because the insurance company takes on more risk with this kind of policy, so they need to make sure it’s worth it for them.

Can you have both term and whole life insurance?

Yes, you can have both term and whole life insurance in Canada. This approach, often called “combination coverage” or “layering,” allows you to meet different financial needs at various life stages.

Term life insurance provides affordable coverage for temporary needs like paying off a mortgage, funding education, or income replacement during your working years. Whole life insurance, on the other hand, offers lifelong protection and builds cash value, which can be used for estate planning, retirement, or covering final expenses.

Term insurance handles immediate, time-limited obligations, while whole life insurance ensures permanent coverage and a savings component. By combining both policies, you can balance affordability with long-term financial security.

Are there any alternatives to term and whole life insurance?

  • Universal life insurance: Offers lifelong coverage like whole life but with added flexibility, allowing you to adjust or skip premium payments and modify the death benefit
  • Variable life insurance: Provides lifelong coverage and a guaranteed death benefit. The cash value grows based on your chosen investments, making it riskier and costlier
  • Indexed universal life insurance (IUL): A type of universal life insurance where the cash value grows based on the performance of a specific stock index. It carries higher risks similar to variable life insurance
  • 1-year term life insurance: Designed for short-term needs, such as between jobs, offering affordable coverage while you explore long-term insurance options

Should I switch my term life insurance to whole life insurance?

Switching from term life insurance to whole life insurance depends on your financial goals and evolving needs. Term life insurance is ideal for covering temporary obligations, while whole life insurance provides lifelong coverage and builds cash value.

You might consider switching if your financial priorities have shifted to include estate planning, wealth transfer, or retirement savings. However, whole life premiums are significantly higher, so it’s important to assess whether the added benefits align with your budget and goals.

If you need both affordability and permanent coverage, you may also explore a combination of both policies instead of a full switch. Consulting our licensed advisors can help you decide if this move fits your overall strategy.

Are there any alternatives to term life insurance and whole life insurance?

If you’re looking for alternatives to term and whole life insurance, universal life insurance, simplified issue life insurance, and critical illness or disability insurance offer flexible and targeted coverage options.

Universal life insurance provides lifelong protection with investment flexibility, making it ideal for those seeking customizable savings. Simplified issue life insurance offers quick approval without extensive medical exams, suitable for moderate coverage needs.

Critical illness and disability insurance provide financial support during serious illnesses or disability, complementing life insurance for enhanced protection.

Type of insurance  Key features Best for…
Universal life insurance Lifelong coverage, flexible premiums, investment component Those seeking permanent coverage with savings options
Simplified issue insurance No medical exam, quick approval, moderate coverage Individuals needing quick coverage with minimal underwriting
Critical illness/disability Lump sum or monthly benefits during illness/disability People wanting financial support for serious health issues

Do I need both term and whole insurance?

Whether you need both term and whole life insurance depends on your financial situation and long-term goals. Combining both can provide comprehensive protection by covering different needs.

If you have both short-term and permanent financial goals, having both policies can balance affordability with lifelong security. This strategy allows you to meet immediate needs with term insurance while securing long-term financial benefits through whole life insurance.

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Life Insurance Tip

The low cost of term coverage comes with a caveat. If you want to renew your policy when your term ends, your premiums will cost a lot more. Insurance is more expensive as you age because it’s more of a risk for insurance companies.

Which is better to have, whole life or term life insurance?

Choosing between whole life insurance and term life insurance depends on your needs. Term life insurance is ideal for affordable, temporary coverage to protect your family or cover financial obligations like a mortgage. It offers a death benefit but doesn’t build cash value.

Whole life insurance, on the other hand, provides lifelong coverage, a guaranteed death benefit, and builds cash value over time, making it ideal for long-term financial planning and estate protection.

If you’re looking for the best term or whole life insurance policy, speak to a PolicyAdvisor expert to compare and find the best plan for your needs and budget. With PolicyAdvisor, you’ll receive free instant quotes, the lowest rates in the market, and lifetime after-sales support. Schedule a free consultation today!

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Frequently asked questions 

Why is term life cheaper than whole life?

Term life insurance policies are generally the most affordable type of coverage when compared to permanent life insurance options like whole life. This is because term policies offer temporary coverage for a set period, without the lifelong protection provided by whole life. They also lack investment components, meaning they don’t build cash value or pay out dividends.

Is whole life versus term life insurance better for seniors?

In general, the most common type of insurance policy for Canadian seniors is whole life insurance. They give seniors life assurance that they can leave something behind for loved ones, and plus give them the benefit of cash value growth.

But, there is no hard-and-fast rule that whole life insurance is better for seniors in every case. The best policy for you really depends on your life and insurance needs.

Which companies offer term life or whole life coverage?

Most of Canada’s biggest life insurance companies offer both term and whole life. This includes many of the ones we work with, like Assumption Life, Beneva, Canada Life, Empire Life, Equitable Life, Sun Life, etc.

Check out our insurance reviews before you make a decision on a certain company. And be sure to compare the best life insurance quotes from each company right here on PolicyAdvisor.

What age to get whole life insurance?

The best age to get term or whole life insurance depends on individual financial goals, but generally, it is ideal to purchase life insurance in your 20s or 30s. The younger you are when you purchase a term or whole life policy, the lower your premiums will be. Premiums are typically based on your age and health, so securing a policy in your 20s or 30s ensures you lock in more affordable rates.

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Whole Life vs. Universal Life Insurance: Which One is Right for You?

Knowing the ins and outs of different life insurance policies is essential to choosing the right type of coverage for your needs. In this article, we compare whole life insurance vs universal life insurance: two common types of permanent insurance that give you coverage for life but also differ in important ways.

What do whole life and universal life have in common?

Whole life insurance and universal life insurance share some important key features. Namely, they both:

  • Provide lifelong life insurance coverage as long as premiums are paid
  • Come with an investment component and cash value component, which can be used as collateral for policy loans
  • Pay a tax-free death benefit, just as term plans do
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What is the difference between whole life and universal life insurance?

These two types of life insurance also have key differences in terms of premiums, death benefits, cash value, and dividends that set them apart. Let’s take a look:

Difference between whole life and universal life insurance

Aspect Whole Life Insurance Universal Life Insurance
Premiums
  • Locked in when policy is signed
  • Level premiums do not change for duration of policy
  • Flexible
  • Policyholders choose how much to pay
  • Can increase
Death benefit
  • Guaranteed
  • Minimum amount locked in when policy is signed
  • Not guaranteed
  • Can be adjusted by the policyholder (influences cost of insurance)
Cash value
  • Fixed interest rate
  • Guaranteed growth
  • Generates interest
  • Grows on a tax-deferred basis
  • Growth depends on performance and changing interest rates
Dividends
  • With participating whole life only
  • No dividends
Investments
  • Managed by life insurance company
  • Little supervision needed
  • Managed by policyholder
  • Close supervision needed

What is permanent life insurance?

Permanent life insurance lasts for your entire life. Unlike a term life insurance policy, which only covers a specific period of time, permanent plans cover the policyholder until they pass away.

As with all life insurance, permanent policies pay out a death benefit to your beneficiary. They’re best used for long-term needs, like taking care of estate taxes, caring for dependents, and paying for end-of-life expenses like funeral costs.

Additionally, unlike term insurance, most permanent life insurance policies have an investment component that accumulates a cash value. This is one of the most attractive features of permanent policies, in addition to the all-important death benefit options. Many Canadians use this investment component to supplement their retirement income.

Permanent life insurance usually comes with two investment options:

  • Participating policies: These generate dividends that are paid out to you every year.
  • Non-participating policies: There are no dividend payments but the cost of insurance is lower.
Read our review of the best whole life insurance companies in Canada.

What is whole life insurance?

Whole life insurance (WL) is a type of permanent life insurance coverage that accumulates a cash value. As with all permanent life insurance plans, it provides lifelong coverage. As long as premium payments are made for the duration of the policy, beneficiaries are guaranteed to receive a tax-free death benefit when the insured dies.

With whole life policies, the cost of insurance is decided at the start of your contract and remains fixed for the policy’s duration. This means you are guaranteed to pay the same premium rate for the rest of your life, unlike with renewable term plans.

How does whole life insurance work?

When you apply for a whole life policy, premium rates are decided based on the amount of coverage and other factors like your age, health, and lifestyle. In some cases, you may be asked to take a medical exam.

Once your policy is approved, you are responsible for paying premiums either annually or monthly, depending on your agreement with the life insurance provider.

Every time you pay premiums, a portion of the money goes towards keeping the policy active and covering administration fees, while another portion is invested by your life insurance provider. This money is your policy’s cash value. It increases with a fixed interest rate and on a tax-deferred basis.

You also have access to cash value during your lifetime. Or, if you cancel the policy, you can walk away with a cash surrender value of whatever has accumulated minus applicable surrender charges. This can be accessed whether you have participating or non-participating whole life insurance.

When a whole life policyholder passes away, their beneficiary is guaranteed a death benefit. This is paid by the life insurance company as a one-time, tax-free payment. This money can be used as income replacement for family members, to cover final expenses, as an inheritance, or anything else the beneficiary chooses to use it for.

What are the pros and cons of whole life insurance?

Whole life insurance has several pros such as lifetime coverage, guaranteed death benefit, cash value accumulation and more. But there may be some disadvantages such as higher premiums, limited growth potential, making it complex to understand. 

Pros

  • Lifetime coverage: Whole life insurance provides coverage for your entire life, as long as premiums are paid  
  • Guaranteed death benefit: Beneficiaries receive a fixed payout regardless of when you pass away  
  • Cash value accumulation: A portion of your premiums builds cash value, which grows tax-deferred and can be borrowed or withdrawn  
  • Wealth transfer and estate planning: Whole life insurance is often used to pass on wealth efficiently or cover estate taxes 

Cons 

  • Higher premiums: Whole life insurance is more expensive than term life insurance, making it less affordable for some  
  • Limited investment growth: The cash value growth is typically lower compared to other investment options  
  • Complexity: The combination of insurance and savings can make the policy harder to understand and manage 
  • Opportunity cost: Funds tied up in premiums may yield better returns if invested elsewhere

What is universal life insurance?

Universal life insurance (UL) is also a type of permanent life policy that provides lifelong coverage and a tax-free death benefit when the policyholder dies.

But what stands out the most about this type of insurance is its flexible premiums, death benefits, and investment options. This is perhaps the biggest difference between universal and both whole and term policies.

With a universal policy, you choose how much they want to pay in premiums. Of course, there is a minimum payment amount, which covers the cost of insuring the policyholder as well as administration fees.

However policyholders can decide how much more they want to contribute to their policy’s cash value portion. The minimum premium cost can also vary over the course of the policy, depending on whether the size of the death benefit changes.

In addition to flexible premiums, this type of policy can give you a greater say in how your cash value is invested. You can choose between three different investment options, which vary in terms of interest rate and risk:

  • Daily Interest Account (DIA)

Interest is calculated and credited every day. The interest rate is set by the insurer and may fluctuate.

  • Guaranteed Interest Account (GIA)

Guaranteed interest rates for a specific period of time, such as 1, 5, or 10 years.

  • Variable Interest Options (VIO)

Interest depends on index performance, mutual funds, or other managed portfolios. Potentially bigger returns but also higher risk.

How does universal life insurance work?

Applying for a universal life insurance policy looks similar to other permanent life insurance policies: your minimum premium rate is decided by the life insurance provider based on amounts of coverage, as well as age, health, and lifestyle.

To keep the policy active, you must ensure that your policy’s premiums are paid as agreed with your insurer. When you pass away, your beneficiaries will be entitled to a one-time, tax-free death benefit.

But unlike with whole life insurance, you can decide how much money you want to pay into a UL policy’s cash value. Because of this, people may often consider universal life when they’re looking for an investment strategy.

For instance, they may treat their universal life policy as an investment account where they deposit money to be invested. The cost of the life insurance policy is deducted by the insurer, and the remaining balance can then be invested and generate tax-deferred interest.

Is universal life insurance risky?

Universal life coverage is considered risky compared to whole life insurance. Whereas whole life insurance offers many guarantees (fixed premiums, death benefit, policy dividend options), universal life insurance offers flexibility and a wider range of investment options. Naturally, this comes with greater risk.

That being said, the level of risk associated with a universal life insurance plan depends on the type of investments chosen. Universal life policyholders should always keep in mind that their cash value depends on their rate of return.

The greatest risk is if you rely on your policy’s cash value to pay your premiums. If your investments underperform and you do not have enough money in your cash value account to cover premiums, your policy can lapse. This could leave you without the crucial death benefit options that life insurance is meant to provide in the first place. It is therefore important to keep a close eye on the investment portion of your universal plan.

Whether this form of life insurance is the right choice for you depends on your appetite for risk. Even if you’re just thinking over permanent life insurance options, you should speak with a licensed life insurance expert like the ones at PolicyAdvisor.com before you make your choice.

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What are the pros and cons of universal life insurance?

Universal life insurance has certain advantages such as flexible coverage, tax advantages, varied investment options, and access to withdraw or loan from the cash value. However, there are some disadvantages such as higher premium costs, risk on investment of cash value and surrender charges.

Pros

  • Adjustable coverage: You can modify the death benefit amount to align with changing financial needs 
  • Tax-advantaged growth: The cash value grows tax-deferred, which can be beneficial for long-term wealth accumulation
  • Investment options: Many policies allow you to choose investment portfolios, potentially earning higher returns  
  • Loan or withdrawal access: The cash value can be accessed for loans or withdrawals, providing liquidity for emergencies or opportunities  

Cons

  • Complexity: The combination of insurance and investment makes the policy harder to understand and manage 
  • Higher costs: Fees and administrative charges can reduce returns, especially in the early years  
  • Investment risk: Returns on the cash value are tied to market performance, which could lead to losses or reduced growth   
  • Surrender charges: Early termination of the policy may result in significant fees, reducing the cash value

Is universal life insurance cheaper than whole life insurance?

Universal life insurance can be much cheaper than whole life insurance, for a few different reasons.

With whole life insurance, you pay higher premium rates over the course of the policy to ensure a guaranteed premium rate, death benefit, and cash value.

With a universal life insurance product, on the other hand, you can choose to decrease your policy’s death benefit and premium payments based on your needs. Universal life insurance is also less expensive because the policyholder takes on more risk by generating cash value through investments rather than a fixed interest rate.

how to access insurance cash value

How much does whole life insurance vs. universal life insurance cost? 

Life insurance premiums can depend on factors like age, sex, health, and lifestyle.

But, to give you an idea, a non-smoking male in his mid-30s can expect to pay roughly $160 per month for a whole life insurance policy worth $250,000.

The same man can expect to pay about $120 per month for universal life insurance. But, remember, the cost of universal life insurance varies: you can choose to pay more to increase your universal life cash value.

Read more about how much life insurance costs in Canada

Whole life vs. universal life insurance: Which is better?

The choice between whole life and universal life insurance depends on your financial goals and priorities. Whole life insurance offers stability with fixed premiums, a guaranteed death benefit, and predictable cash value growth, making it ideal for those who value simplicity and lifelong coverage. 

In contrast, universal life insurance provides flexibility, allowing you to adjust premiums and death benefits while offering investment options for potentially higher cash value growth. However, it requires more active management and comes with investment risks. 

If you prefer a straightforward, reliable policy, whole life insurance may be better. If flexibility and growth potential align with your needs, universal life insurance could be the smarter choice.

Key factors to consider when choosing between whole life and universal life insurance

When considering choosing between whole life and universal life insurance, factors such as financial goals, risk tolerance, budget, and long-term goals come into mind. Here’s a comparison:

Factors to consider when choosing between whole life and universal life insurance

Factors to consider Whole life insurance Universal life insurance
Financial goals Offers stability with guaranteed benefits and cash value growth Provides flexibility with adjustable premiums and death benefits
Risk tolerance Suits those preferring predictable growth without market exposure Appeals to individuals comfortable with market-linked returns
Budget Requires higher, fixed premiums for lifetime coverage Allows adjustable premiums based on financial circumstances
Long-term goals Ideal for estate planning or wealth transfer Suitable for retirement funding or flexible financial planning

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Frequently asked questions

Which is more flexible: whole or universal life insurance?

When it comes to flexibility, universal life insurance is the clear winner.

Whole life insurance is known for its consistency. It has guaranteed premium rates, death benefits, and cash value growth.

But universal life policies let you decide how much you want to invest in the policy’s cash value component. And this type of policy gives you more control over investments, letting you decide on the level of risk to potentially maximize gains. The death benefit is also flexible; you can choose to decrease or increase the size of the benefit depending on your changing needs.

Which gives a greater cash value?

It really depends. Universal policies may have a greater potential for growth, but also greater risk. On the other hand, cash accumulation is more steady in whole life policies over time.

Whole life insurance has guaranteed and more or less predictable cash value growth. Every time you pay your monthly or annual premiums, a portion is added to your cash value, which grows based on a fixed interest rate. Universal life cash value accumulation depends on factors like your premium payments.

In a strong market, universal life insurance can have much higher returns than whole life insurance policies. In a weak market, however, returns are not guaranteed. This is why it’s important not to get dazzled by the potential growth alone.

Which builds cash value quicker?

Universal life insurance has the potential to grow cash value more quickly if you invest in your policy early on and investments perform well.

With whole life insurance, the portion of premiums that goes towards cash value decreases over time — as the cost to insure you goes up. This means that the cash value grows at a more rapid rate in the early years of the policy, but then begins to slow.

Is universal life insurance better than whole life insurance?

When it comes down to it, no type of policy is “better” than another. The best policy is determined based on your needs.

If a stable and easy-to-manage policy is what you want, then whole life insurance will be better than universal life. Of the two, it’s the lowest-risk option for policyholders.

If you want flexibility and a greater say in how your money is invested, then universal life insurance will be the best choice.

Can you convert universal life to whole life or vice versa?

No, it is not possible to convert whole life insurance to universal life insurance or vice versa. So, choose wisely before you decide to buy!

We know that with permanent coverage, there are so many diverse options and combinations that it can be tricky to plan your best move. But that’s why the PolicyAdvisor experts are here to guide you and help if you’re looking for alternative options for an existing policy. Give us a call today or schedule one in the future so we can review the best options for you and your family’s financial security.

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What is whole life insurance and how does it work in Canada? (2025)

Whole life insurance is a type of permanent life insurance that offers lifelong coverage and a cash value component, making it both a protective and investment tool.

Unlike term life insurance, which lasts for a set period, whole life insurance remains in force as long as premiums are paid. This article explains whole life insurance and how it works so you can invest in a policy that keeps you and your loved ones protected.

What is a whole life policy in insurance?

A whole life insurance policy is a permanent life insurance plan that provides coverage for the insured’s entire lifetime, as long as premiums are paid. It offers both a death benefit and a cash value component.

The death benefit is the amount paid to beneficiaries upon the insured’s death, while the cash value is a savings feature that grows over time, offering guaranteed returns. In Canada, whole life insurance is popular because it combines protection with a form of savings or investment.

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What can whole life insurance be used for?

Whole life insurance can be used for a variety of purposes such as to cover funeral expenses, build wealth, pay for premiums, estate planning and more.

  • Cover funeral expenses
  • Build wealth
  • Pay premiums
  • Support a family
  • Protect your children
  • Leave a legacy
  • Preserve an inheritance
  • Support a business
A whole life insurance policy can be used during your lifetime and can help benefit your beneficiaries after you pass away.

How does whole life insurance work?

A whole life insurance policy requires you to pay a fixed premium amount to keep the policy active. A portion of these premiums goes toward the death benefit, while the rest is invested in the policy’s cash value. 

Over time, the cash value grows on a tax-deferred basis. You can borrow against it or withdraw funds under certain conditions. The policy remains in force as long as premiums are paid, ensuring that the death benefit is paid out when the insured passes away.

What are cash value and cash surrender value?

Cash value and cash surrender value are both “living benefits” that you can access from your whole life policy while you are alive.

Cash value is the amount of money that builds in a whole life insurance policy through the investment component. You can access this in multiple ways but only when you’re alive. Simply put, it is the policyholder’s share of the death benefit that can be claimed during the policyholder’s lifetime.

Cash surrender value is the actual amount of money you get from cash value after fees if you cancel or surrender your whole life policy.

what is cash surrender value

Types of whole life policies

Whole life insurance policies can be broadly categorized into participating and non-participating types. Participating policies allow policyholders to receive dividends, which can be used to reduce premiums, purchase additional coverage, or be taken as cash.

These dividends are not guaranteed but depend on the insurer’s financial performance. In contrast, non-participating policies do not offer dividends but often come with fixed premiums and guaranteed benefits, providing more predictable coverage.

Both types offer lifelong protection and a cash value component, but the choice depends on individual financial goals and risk preferences.

1 Participating

  • Covers you for your entire life
  • Has a cash value component
  • Pays annual dividends
  • Has more growth potential
  • Has level premiums that don’t change
  • Guaranteed to pay out a death benefit
  • Can increase the death benefit amount

2 Non-participating

  • Covers you for your entire life
  • Has a cash value component
  • Has level premiums that don’t change
  • Guaranteed to pay out a death benefit
  • Does not pay dividends
  • Has limited growth potential

Advantages of whole life insurance

The main benefits of whole life insurance Canada are that it offers lifelong coverage, builds cash value, and pays a guaranteed death benefit.

  • Lifelong coverage – Your policy will never expire once premiums are paid
  • Cash value – Premium payments are reinvested and grow cash value that you can access during your lifetime by borrowing against it, using it as collateral, withdrawing it, or more
  • Dividends (participating policies only) – Annual dividend payments can be used to reinvest, withdraw, buy more insurance, or more
  • No market volatility – The investment component is managed by the insurance company and it does not fluctuate with the market
  • Guaranteed death benefit – Life insurance will pay out when you pass away no matter what
  • Stable, growing death benefit – Your death benefit or coverage amount can grow over time with cash value or dividends
  • Level premiums – The amount you pay will stay the same for the duration of the entire life insurance policy
  • Limited pay options – Your policy can be paid off in a short time frame so you don’t have to worry about it later
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Disadvantages of whole life insurance

The disadvantages of whole life policies are they are expensive and have limited flexibility in choosing the coverage period.

  • Premiums can be expensive – Whole life policies can cost more than other types of life insurance
  • You can’t choose a coverage period – You cannot select coverage for just a set period; it can only last forever
  • Investment potential may not be as large as with other investments – Growth from a portfolio managed by the insurer will be moderate

What is the downside of whole life insurance?

While whole life insurance provides lifelong coverage and a cash value component, it comes with high premiums and limited flexibility. Some disadvantages of whole life insurance are:

  1. High premiums: Whole life insurance is significantly more expensive than term life insurance
  2. Complexity: The policy structure can be complicated, involving fees, cash value accumulation, and investment components
  3. Limited flexibility: Once set, premiums and coverage amounts are often fixed

Cost of whole life insurance in Canada

The cost of whole life insurance ranges between $40 and $450, depending on personal factors like your age, sex, and health, and also on your policy’s details. Check the chart below for some sample quotes.

Whole Life Insurance Quotes in Canada (2024)

Age $100K Coverage – Non-Participating (Female) $100K Coverage – Participating (Female) $100K Coverage – Non-Participating (Male) $100K Coverage – Participating (Male)
20 $42/month $44/month $47/month $54/month
30 $57/month $63/month $65/month $75/month
40 $85/month $92/month $92/month $110/month
50 $127/month $138/month $149/month $164/month
60 $202/month $217/month $245/month $263/month
70 $376/month $376/month $462/month $444/month

*Quotes based on $500k in coverage on a life-pay plan. Quotes based on average prices from leading insurance companies in Canada.

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 insurance. 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 as 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 whole life insurance?

Yes, your money grows in a whole life insurance policy through its cash value component. In Canada, whole life insurance 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.

Can you cash out life insurance before death?

Yes, you can cash out life insurance before death if the policy has a cash value component. You can do so through a policy loan, partial withdrawal, or complete policy surrender.

  • Policy loan: Borrow against the cash value, usually at a competitive interest rate
  • Partial withdrawal: Take out part of the cash value without cancelling the policy
  • Surrender: Cancel the policy and receive the full cash value minus fees

How much whole life insurance should I buy?

Choosing the right amount of whole life insurance depends on your financial goals and the needs of your loved ones. While whole life insurance 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’d need $1.6 million in coverage. This method ensures that your family can replace your income until you’re no longer working.

What are the payment options for whole life policies?

Whole life insurance offers several flexible payment options to fit different financial needs. You can opt for lifetime payments, where premiums are spread across your entire life, keeping the annual cost lower.

Alternatively, limited payment plans allow you to pay off the policy within a set timeframe, such as 10, 20, or 30 years, or by a specific age like 65. For those looking for convenience, a single premium option is available, where a lump sum is paid upfront, securing lifetime coverage without any further payments.

Children’s whole life insurance

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 canceled 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

Case study: A whole life insurance example

Let’s look at how whole life coverage works in a case study. In this example we’ll look at John, a 30-year-old Canadian who’s thinking about estate planning. He wants a lifetime insurance policy so he can leave something behind for his family after he passes away.

The chart below shows his projected cash value over time.

Age: 30

Gender: Male

Policy type: Whole life (non-par)

Death benefit: $250,000

Annual premiums: $1,565

Payment type: Life pay (premiums paid every year for entire life)

Feature Whole life insurance Universal life insurance
Cash value Yes Yes
Dividends No (for participating policy) Yes
Investment choice No Yes (limited to select portfolios)
Premiums Steady for the entire policy Varies (depending on investment returns)
Tax advantages Tax-free death benefit for your estate Tax-free death benefit for your estate
Policy disadvantages Lower returns than traditional investing Generally more expensive premiums

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

Remember, John can use the cash value from his policy to build up his savings while still making sure his family would have enough money to carry on when he’s no longer around.

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Can you borrow from whole life insurance?

Yes, you can borrow against the cash value of a whole life policy. This is called a policy loan and comes with several benefits like a no credit check and flexible repayment.

  • No credit check: The loan is secured by your cash value
  • Flexible repayment: You can choose when and how to repay the loan. However, if the loan is not repaid, it will reduce the death benefit. Interest also accrues on the borrowed amount
  • Tax-free loan: A whole life policy loan remains tax-free as long as you do not exceed the amount you have paid in premiums

How to find the right whole life insurance policy?

Choosing the right whole life insurance 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

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

If you’re 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 like 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.
  • Funeral insurance
    A type of permanent life insurance that is designed specifically to cover end-of-life expenses. Also called Final Expense Insurance.
  • 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.
Learn more about the different types of life insurance in Canada

Difference between universal and whole life insurance?

Universal and Whole are both types of permanent life policy. But one of the main differences between a universal policy and a whole life policy is that universal gives you more control over your investments. This means it has greater growth potential, but it’s also more risky.

Feature Whole life insurance Universal life insurance
Cash value Yes Yes
Dividends No (for participating policy) Yes
Investment choice No Yes (limited to select portfolios)
Premiums Steady for the entire policy Varies (depending on investment returns)
Tax advantages Tax-free death benefit for your estate Tax-free death benefit for your estate
Policy disadvantages Lower returns than traditional investing Generally more expensive premiums

What age to get whole life insurance?

Although there is no ideal age to get a whole life insurance, 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 whole life insurance 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

Is whole life insurance a good investment?

We do not recommend buying life insurance exclusively as an investment strategy. Its purpose is to provide lifelong protection and financial security your family can rely on, not to provide capital gains.

The average rate of returns for whole life insurance varies, but is usually around 2-4% per year. This is not bad. But, if you’re only looking for an investment vehicle to generate high returns in a short amount of time, you would be better off with other options.

Learn more about whether life insurance is a good investment

Should I buy whole life insurance or put my money into savings?

If you’re wondering whether you should buy whole life insurance or put the money into savings, a whole life policy is a much safer bet. Here’s why:

  • Unexpected emergencies can arise and cause you to dip into savings
  • The death benefit payout your family receives is usually far greater than you would be able to save and far greater than you pay in premiums in that same amount of time
  • There are added tax advantages because the death benefit is paid out tax-free, so your family gets to hold onto more of the money

What happens if I surrender my whole insurance policy?

You can surrender your policy by ending it at any time. In that case you would get the cash surrender value and no longer have coverage. You may have some options to change your coverage into a policy with a lower death benefit, or to a term life policy.

But it depends on your provider — you should ask your insurance advisor about your options.

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 is 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 to access cash value

We’ll help you find the best whole life insurance policy!

If you’re looking for the best whole life insurance policy, speak to a PolicyAdvisor expert who will help you compare and choose the best plan based on your requirements and budget.

With PolicyAdvisor, you also get free instant quotes, the lowest rates across the market, and lifetime after-sales support. Schedule a free consultation with one of our licensed advisors today!

Need insurance help?

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Frequently asked questions

How can I find cheap whole life insurance quotes in Canada?

Find the cheapest whole life insurance quotes online using our free quoting tool. Our platform scans the market in seconds to show you your best life insurance match instantly.

You can also check out our listing of current life insurance promotions in Canada. Or book a free consultation call with one of our licensed advisors.

How long does it take to build cash value?

It usually takes years to build up a substantial amount of cash value — anywhere from 10 years or more. You can also help speed things up by paying more into the policy.

Alternatively, some policies are made to help you build cash value as quickly as possible. UV Insurance Company is a great example of this with their Whole Life High Values permanent policy.

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.

Do I need a medical test to get a whole insurance policy?

It depends, but a medical exam is not needed in many cases. In general, if you’re a Canadian citizen or resident in good health and you’re getting under $500K in coverage, you will probably not be asked to take a medical exam.

Are whole life insurance policies taxable?

The relationship between taxes and whole life insurance can be viewed from various perspectives. Generally, certain aspects of whole life insurance are non-taxable, such as death benefit payouts, dividends if reinvested in the policy, policy loan proceeds below the adjusted cost basis, and third-party collateral loans using the cash value.

On the other hand, some elements are taxable, including cash dividends, policy withdrawals exceeding the adjusted cost basis, and policy loans that go beyond the adjusted cost basis. It is essential to consult a licensed insurance advisor or tax professional to understand how these rules pertain to your specific situation.

Can I use a whole life policy to “be my own bank”?

No, you cannot use your insurance policy to become your own bank.

You may have seen this claim on social media platforms like TikTok, where some people claim you can use whole life insurance for “infinite banking.” But if something seems too good to be true, it usually is.

The concept of “infinite banking” does exist, but it’s very complicated. And it doesn’t work the way some catchy videos suggest.

Can I convert my term life insurance policy to a whole life policy in Canada?

Yes, many Canadian term life insurance policies offer a conversion option, allowing you to switch to whole life insurance without a medical exam. This is beneficial if you want permanent coverage or have developed health issues that might make it difficult to qualify for a new policy. Converting ensures lifelong protection and the added benefit of cash value growth. However, premiums will likely be higher after conversion.

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.

How does whole life insurance affect my eligibility for government benefits in Canada?

The cash value of a whole life insurance policy can affect eligibility for certain government benefits. For programs like Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), only income is assessed, not assets. However, if you withdraw cash from your policy, it may count as income, potentially reducing your GIS benefits. Proper planning can help minimize any impact on government assistance.

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.

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What is Life Insurance and How Does it Work in Canada?

About one-third of Canadians are currently without life insurance and 1 in 4 millennials in the country admit they are unlikely to purchase any kind of insurance in the near future.

The basics of life insurance are just not on our radars. So if you thought ‘Term to 100’ was the title of a Drake song, don’t be embarrassed, you’re not alone.

Life insurance 101 isn’t common knowledge in Canada, which is exactly why it’s a subject worth exploring, especially if you’ve increasingly found yourself in the company of real estate agents, in-laws, or babies.

But where to begin? Is a death benefit a charity concert? Does “participating insurance” come with a ribbon? Is “return-of-the-premium” a new Star Wars flick?

Let’s just start with the basics…

What is life insurance?

Life insurance is an agreement between you and a life insurance company. The agreement is if you die, they will pay a death benefit (a lump sum of tax-free money) to someone you choose. In exchange, you agree to periodically pay them an insurance premium: a small amount of money over time.

You both decide on the amounts of cash coming in and out and the timeframes involved, but in a super simplified form, that’s really it.

How does life insurance work?  

Life insurance provides financial protection to your loved ones in the event of your death. There are four key aspects of how life insurance works: 

  1. Agreement and premium payments: Life insurance is a contractual agreement between an insurance company and a policyholder. The policyholder pays monthly or annual premiums, and in return, the insurer agrees to pay a death benefit to the beneficiaries in the event of the policyholder’s death
  2. Beneficiary designation: Policyholders can designate both, primary and contingent beneficiaries. Minors cannot be named as primary beneficiaries
  3. Claim process: Upon the policyholder’s demise, the beneficiaries can file a claim process with the insurer by submitting essential documents. Once the documentation is verified, the insurance company will pay the lump sum death benefit to the primary beneficiary
  4. Living benefits: Some permanent life insurance policies such as whole life insurance allow the policyholder to access a portion of the death benefit during their lifetime. This is known as cash value

What does life insurance cover?

A life insurance policy payout can be used by the beneficiaries in any way they want to, including for: 

  • Funeral and burial expenses 
  • Replacing lost income
  • Covering outstanding debts
  • Funding your children’s education
  • Covering everyday living expenses

Life insurance terminology

Here are some handy definitions for common life insurance terminology:

Term Definition
Policyholder The person who owns the life insurance policy
Insured The individual whose life is covered by the policy
Insurer The company that provides life insurance coverage
Premium The amount paid regularly to maintain the policy
Beneficiary The person or entity designated to receive the death benefit
Death benefit The amount paid to beneficiaries upon the insured’s death
Cash value The savings component of a permanent life insurance policy that grows over time
Policy term The length of time the insurance coverage is in effect
Riders Additional provisions that can be added to a policy to customize coverage

What are the different types of life insurance in Canada?

There are two main types of life insurance:

  • Term life insurance, which lasts for a period of time called a term
  • Permanent life insurance, which covers you for the rest of your life

Most Canadians wind up with term insurance, either through individual plans or through their employer as a group plan.

Learn more about the different types of life insurance.

Term life insurance

Term life insurance makes the promise if you die, we’ll pay, but only if that were to happen within a specified period of time, or ‘term’. These terms are generally 10, 20, or 30 years, but you can choose smaller or larger term lengths or coverage that last until a specific age.

Whole life insurance

Whole life insurance covers you for your entire life and there is a cash value associated with your policy. Sometimes, whole life policies will also pay dividends based on the insurance company’s profits. This is known as participating insurance.

Limited-pay whole life insurance

Limited-pay insurance is similar to whole life, except the payment plan is condensed. For example, the term could be 20 years: once you’ve paid your premiums over that 20-year period, your insurance is guaranteed for life and you’re off the hook for premiums. This type of coverage is typically the most expensive policy option. This is because premiums are front-loaded to offset the years where you will no longer be paying.

Universal life insurance

Universal life insurance is the same as whole life insurance, except you have more choice of where your cash value is invested. If you’re a savvy investor, this gives you the opportunity to generate a larger return than what is guaranteed from a traditional whole life policy. That said, it requires you to actively monitor the investment choices you’ve made with the cash value. Alternative investment solutions may help you achieve your financial goals faster.

Term to 100 life insurance

Even though the word term is in the name, term to 100 is a whole life insurance policy that covers you until your death. The difference is with this policy there is no cash value or investment component, making the premiums a little cheaper. As a bonus, if you do live beyond age 100, you are no longer required to pay premiums and retain your coverage. Term to 100 life insurance policies are unique to Canada.

Annual renewable term life insurance (ART)

A less popular life insurance option, annual renewable term life insurance (ART) is designed for those looking for short-term life insurance coverage. ART is available on an annual basis with the possibility of renewal and can protect people who are between jobs, who want to improve their health before locking in a longer-term policy, or those with short-term debt.

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Is life insurance worth it?

If you have dependents, life insurance premiums are worth the cost. Life insurance provides peace of mind knowing that your family will be taken care of financially when you pass away.

If you don’t have dependents, there could be other circumstances where the benefits of life insurance is worth the price of premiums. These can include:

  • Taking advantage of your youth and health to ensure a lower premium and future insurability
  • Providing a charitable gift to your favorite cause or organization
  • Leaving a financial gift or legacy to children or grandchildren, regardless if they are dependents or not

Does life insurance have cash value?

Permanent life insurance policies accumulate a cash value as the insurance companies invest your premiums. Policies such as whole life and universal life insurance have this investment feature. You can either cash it out, save it, loan against it, or apply the value to your existing policy.

Learn more about the cash value of life insurance.

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How much does life insurance cost?

The cost of life insurance depends on several individual factors. For most young, healthy adults life insurance costs are quite reasonable on a 20-year term policy.

For instance, a 30-year old, non-smoking Ontario woman of average health, would only pay $21 per month for a $500,000 death benefit on a 20-year policy. If you’re personalizing your insurance policy so that it suits your specific needs and budget, life insurance can and should be affordable.

Coverage 10-Year Term 20-Year Term
$250,000 $11/month $14/month
$500,000 $15/month $21/month
$1,000,000 $23/month $36/month

Premiums for female, non-smoker, 30-years old

Personal factors affect your life insurance cost. Factors include:

  • Age: Insurance premiums rise in cost as you age.
  • Smoking Status: Smokers pay more for life insurance.
  • Gender: Generally, men have higher life insurance premiums than women.
  • Health: Insurance providers see health problems as adding to the risk of insuring you.
  • Family Medical History: Insurance providers also calculate the risk of known hereditary illnesses.

Details of your life insurance policy will also affect the price of your monthly premium. These aspects include:

  • Term Length: The longer your coverage period, the higher the premiums.
  • Coverage Amount: A larger death benefit will also dictate higher insurance premiums.
  • Type of Insurance: Term life insurance is less expensive than whole life insurance.

What are life insurance premiums?

Life insurance premiums are the amount of money you agree to pay the insurance company, usually monthly or annually, in order to receive coverage. The higher your age, the longer your term, or the larger your death benefit, the higher your premiums will be.

Do I need life insurance?

Perhaps a better question is, do the people in your life need it?

Insurance is for clearing out debts (personal or business-related) and supplying an income replacement source to someone who relies on you because you’re no longer around.

Buying life insurance lets you secure assets for your family’s future by investing in an alternate income source. Without life insurance and the security of this death benefit, you’re putting all your family’s financial eggs in one basket: you, being alive and able to earn an income.

You may assume you have life insurance through your work’s group benefits, but such policies require a close look to ensure it covers everything you need.

How much life insurance do I need?

You should get as much life insurance as you can afford. Most wish to leave a multi-million dollar fortune to their family and loved ones when they die. But that’s not financially realistic for most.

Determine what “affordable premium” means to you. Build a budget to assess your family’s current financial needs, their future needs, your current liabilities and debts, and any costs associated with your death. That’ll reveal what kind of coverage amount you should aim for and the costs associated with it.

Some use the 10x your annual income rule, but we highly recommend using our life insurance coverage calculator to get a quick but comprehensive recommendation.

When should I buy life insurance?

Life events create the need for life insurance. Buying a home, having children, and getting married are good indicators that there are those in your life who depend on your income to maintain their quality of life. Premiums rise as you age, so purchasing insurance earlier in life can save you money.

Should I get life insurance through work?

Getting life insurance through work can be a convenient and cost-effective option, but it’s important to consider your specific needs and circumstances. Here are a few points to help you decide:

  1. Employer-provided life insurance is often easier to obtain and may come at a lower cost since it’s typically part of a group plan. The premiums are often subsidized by your employer, making it an affordable option
  2. While convenient, the coverage amount offered through work might be limited, often equating to one or two times your annual salary. This may not be sufficient to cover all your needs
  3. One of the downsides of employer-provided life insurance is that it’s not always portable. If you change jobs or lose your job, you might lose your coverage. Having a separate individual policy ensures that you maintain coverage regardless of your employment status

What happens to a term life insurance when it expires?

When your insurance policy expires you have several options. Typically you

  • can convert a policy to whole life coverage
  • renew the policy at a higher premium
  • apply for a brand new life insurance policy
  • let the coverage expire if you no longer need it

Learn more about what to do if you outlive your term life insurance policy.

Can I renew a term insurance policy?

Most term life plans come with a renewability clause, that lets you extend your coverage upon expiry without having to redo your medical exam.

The downside of renewing your coverage is the cost: your premiums are reassessed (increased) to match your older age. Thus, some Canadians prefer to apply for a new insurance policy at the end of the term.

What personal information do I need to share with my insurance company?

Life insurance companies have a mandatory set of questions they ask during the underwriting process. They include:

Based on your answers to these questions, you’ll be placed into a risk category and offered premiums accordingly.

Additional in-person medical exams will be required from time to time, especially when applying for larger coverage amounts.

Learn more about how to prepare for a life insurance medical exam.

What is an attending physicians statement?

The provider may also ask for a health report (called an attending physicians statement or APS) from your family doctor or any specialists you see about ongoing health conditions.

Who should you name as your life insurance beneficiaries?

Your beneficiaries are those you name in your policy that receive the death benefit when you die. It’s important to list the right people so that your policy’s payout is used as you intended. If you do not name a beneficiary or there is ambiguity at the time of your death then probate can affect your life insurance benefit.

Are there different types of beneficiaries?

Yes, there are revocable and irrevocable beneficiaries.

  • Revocable Beneficiary: a beneficiary that can be changed without their consent.
  • Irrevocable Beneficiary: a beneficiary that has to sign off on any changes to the policy, including coverage and beneficiary changes.

Should you name your children as beneficiaries?

In Canada, minor children cannot legally receive the funds from a life insurance policy until they reach the age of majority. Thus, many people create a trust to manage the funds of life insurance death benefits meant for their children.

A trust is an estate planning tool that allows you to choose another party (the trustee) to manage financial assets for a beneficiary until a pre-determined time or when they reach the age where they can legally manage their own funds.

Learn more about managing life insurance benefits with a trust.

Who needs life insurance?

Canadian life insurance can help different people with varying circumstances, like:

  1. Couples: Life insurance is important for couples, as it ensures that one partner’s death doesn’t create a financial burden for the surviving partner. It can help cover living expenses, debts, and future financial goals
  2. Business owners: Business owners should consider life insurance to protect their business interests. It can provide funds for succession planning, cover outstanding business debts, and help ensure the business continues smoothly in the event of their death
  3. Seniors: Seniors may need life insurance coverage to cover final expenses, such as funeral costs, and to leave a financial legacy for their heirs. It can also help with estate planning and ensure that the estate is not burdened with unexpected costs
  4. Parents with young children: Parents with young children should consider life insurance to secure their children’s financial future. It can help cover education costs, daily living expenses, and ensure that their children are cared for financially in their absence
  5. Single individuals: Single individuals without dependents may still benefit from life insurance. It can help cover personal debts, funeral costs, and leave a financial gift or charity donation
  6. Professionals with high incomes: High-income professionals often have significant financial responsibilities and goals. Life insurance can help protect their income, ensure the continuation of their lifestyle for their family, and address any large debts or estate taxes
  7. Parents with adult children: Parents with adult children may want life insurance to provide a financial cushion or to leave an inheritance. It can also help with estate planning and cover any remaining debts
  8. Individuals with significant debts: If you have substantial debts, such as a mortgage or student loans, life insurance can ensure that these debts are paid off and don’t become a burden to your loved ones

Should I add life insurance riders to my policy?

A life insurance rider is an optional feature added to your life insurance policy to better address your unique insurance needs. An insurance rider typically requires an additional payment which is added to your monthly premium, though some riders may also be included at no extra cost. There is a wide range of available riders. Common riders include additional term riders, critical illness riders, and guaranteed insurability.

Learn about life insurance for riders or read more about:

Which is the best life insurance policy?

The life insurance policy you should choose isn’t an answer in the back of the book. Life insurance is a deeply personal purchase and there are a lot of factors to consider. Not only should you factor in your family’s current financial needs, but you should also account for future costs like tuition fees, funeral arrangements, estate taxes, and any other debts or obligations you would want settled should you die. There a lot of options to choose from and a myriad of coverage combinations when you search for life insurance quotes. But, you should only purchase a policy you can afford and that you’re confident makes the most sense for you and your family.

Luckily, we’ve built a pretty great tool that can help you figure that out.

Head to our life insurance calculator, learn more about the best term life insurance or best whole life insurance in Canada, or check out the ratings below.

Term Life Insurance Company Rating
Assumption Life ★★★★★
Beneva ★★★★
BMO Insurance ★★★★★
Canada Life ★★★★
Canada Protection Plan ★★★★★
CIBC Insurance
Desjardins ★★★★
Empire Life ★★★★★
Equitable Life ★★★★
Foresters Financial ★★★★
Humania ★★★★
Industrial Alliance (iA) ★★★★★
ivari ★★★
Manulife ★★★★★
RBC Insurance ★★★★★
Sun Life ★★★
Wawanesa ★★★★

Should I get life insurance for my children?

As a parent or grandparent, there are benefits to purchasing a life insurance policy for your child or grandchild. Life insurance for children ensures future insurability for your child, regardless of health issues. The policy also offers an effective way to build wealth and can be an attractive alternative to Registered Education Savings Plans (RESPs).

Do you need insurance to travel to Canada?

Certain visas that allow for travel or stays in Canada do require insurance coverage. Super visa insurance is mandatory for those seeking approval for their super visa status. While other visitors to Canada need insurance, it is not mandatory for entrance into the country.

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Frequently asked questions

What does life insurance cover?

Life insurance provides a death benefit to your beneficiaries, which is typically tax-free. It can cover expenses such as funeral costs, outstanding debts, income replacement, education costs, and estate taxes, helping to ensure financial stability for your loved ones.

How does a term life insurance policy work?

A term life insurance policy offers coverage for a specific period, such as 10, 20, or 30 years. If the insured dies during this term, a death benefit is paid to the beneficiaries. If the term ends and the insured is still alive, the policy expires unless renewed or converted to a permanent policy.

How does life insurance payout work?

When a policyholder dies, beneficiaries file a claim with the insurer, providing a death certificate and policy details. Once the claim is approved, the insurer pays out the death benefit, usually as a lump sum, though other payout options may be available.

Why life insurance?

Life insurance ensures your loved ones are financially protected if you pass away. It helps cover living expenses, pay off debts, fund education, and manage estate planning, providing financial security for your family.

How to use life insurance while alive in Canada?

In Canada, permanent life insurance policies can offer access to cash value through loans or withdrawals. Some policies may also include riders for terminal or critical illnesses. You can also surrender the policy for its cash value, though this will end the coverage.

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What is term life insurance and how does it work in Canada? (2025)

Term life insurance is right up your alley if you’re just getting started with #adulting — like getting your finances in order, learning how taxes work, and thinking about whether you should start investing.

Life insurance is a great way to build a better financial future for your family. And term life insurance is the most affordable and easy option for this kind of security.

This article is your handy guide to the basics of life insurance. We explain what it is and how it works. And, we answer your biggest questions, like how much does term life insurance really cost, what happens when the term ends, whether you can get your money back, and more.

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Need insurance answers now?

Call 1-888-601-9980 to speak to our licensed advisors right away, or book some time with them below.

What is term life insurance?

Term life insurance is a type of life insurance that lasts for a specific period of time known as a term, which can be a fixed number of years or until you reach a certain age. This is why it’s called “term life insurance”.

Term life policies are usually offered for periods ranging from 10, 20, or 30 years to specific ages such as age 65. Some companies will also allow you to pick a term, in which case you can choose your own life insurance coverage period to meet your needs.

Check out our review of the Best Term Life Insurance Companies in Canada

Key features of term life insurance

  • Temporary
    Term life insurance lasts for a specific period of time, usually 10-30 years.
  • Affordable
    This type of policy has the lowest cost. Some policies can cost less than $20/month for young, healthy people.
  • Flexible
    You can have a term policy for 5, 10, 20, or 30 years. Some insurance companies let you pick your own number of years too. So, you can match your term length to anything you need it to cover.
  • Simple
    Term life insurance is very easy to understand because it doesn’t have an investment or savings component like some other types of life insurance do.
  • Renewable
    At the end of your term, you have the option to renew your policy for another set number of years. Although, this may not always be the most affordable option. We’ll explain more later on.
  • Convertible
    Term life insurance policies can be changed into permanent life insurance without having to take a medical exam.
  • Level premiums
    The amount you pay an insurance company every month or year is called a “premium“. Term life insurance premiums stay the same for as long as the term lasts.
WHAT IS
TERM LIFE INSURANCE?
Term life insurance is a type of insurance policy that covers you for a specific period or “term”.

Term lengths are usually 10-40 years, or until age 65 (when you retire). You can customize your term to match specific needs, like the length of your mortgage or until your children reach adulthood.

Term life insurance has a low cost because it’s temporary. It’s also flexible and easy to understand.

Question mark

Should I get term life insurance? 

You should get a term life insurance policy if you:

  • Want affordable life insurance for a set number of years
  • Are going through a major life event as a young adult, like getting married, having children, buying a home, etc.
  • Have temporary needs like supporting a financial dependent, paying school fees, paying debts, etc.
  • Have outstanding mortgage payments
  • Are on a tight budget

Term life insurance has many uses that can help your family cover the cost of temporary needs if you unexpectedly pass away in the near future and they don’t have your income to support them anymore.

For instance, most Canadians buy term policies to protect their mortgage or make sure young children can go to college in the future.

If you’re not sure about whether term insurance is a good plan for you, speak with a licensed life insurance broker. We’ll be able to assess your unique circumstances and give you personal, honest guidance to make the best choice.

Your beneficiaries can use a payout from your term life insurance policy in various ways.

What are the advantages of term life insurance?

The main advantages of term life policies are:

  • Affordable coverage
  • Simple to understand
  • Flexible
  • Renewable
  • Convertible
  • Level premiums

What are the disadvantages of term life insurance?

The main disadvantages of term life policies are:

  • Temporary
  • No cash value, investment components, or dividends
  • Premiums increase dramatically on renewal
  • Death benefit not guaranteed if you outlive your policy

How does term life insurance work?

With term life insurance, you pay a certain amount of money, called a premium, to an insurance company for a set number of years. In turn, the company agrees to give money to anyone you choose if you die within your term.

The person you choose to receive the money is called your beneficiary. Most people choose their close relatives, like their spouse, children, or parents. But you can pick a friend, business, or charity too if you want.

Let’s look at how some of the key factors of term life insurance work.

You decide the number of years you want your term to be. Most Canadians get between 10 to 30-year terms. But you can also get a policy to match a specific time, such as:

  • The term of your mortgage
  • Until you reach retirement age
  • Until your children have graduated
  • Any specific needs you have

Usually, the shortest term you can get for term life insurance in Canada is 1 year and the longest is up to 40 years. But this also depends on the provider.

Some companies won’t offer less than 5 years and some may not offer more than 30 or 35 years, especially for seniors.

You could get a 1-year term that renews every year. But this is quite expensive, so we don’t recommend it.

You can make premium payments every month or every year. Some companies give discounts if you pay yearly, so you could save up to 8%. We talk more about term life insurance premiums and show you some figures in the section on cost in this article.

Term life insurance is an affordable way to protect your family's financial future.

You can usually get anywhere from $50,000 to $10,000,000 in insurance coverage for a term policy. It depends on the insurance company.

The coverage amount is how much money the insurance company would pay to your beneficiaries if you pass away while you have an active term life policy.

There are several factors you should think about when considering how much life insurance you may need.

In general, the oldest age you can get a term life policy in Canada is 70 years old. It’s not a good idea to wait until later in life, though.

Insurance costs more the older you are. It also costs more if you have health concerns. It’s normal for us to develop health concerns as we age. Your premiums would be a lot higher if you wait until you’re older.

By the time you’re in your 60s or 70s, you may also not have not short-term needs. Most older Canadians have a permanent insurance policy instead of term.

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Jiten Puri
CEO, PolicyAdvisor.com
Term is the cheapest type of life insurance policy. It’s a good option if you’re on a budget and you want financial protection that doesn’t come at a high cost.

What happens when my term ends?

If you reach the end of your policy’s term, you have a few options:

  1. Let your policy expire
  2. Renew your policy
  3. Get a new policy
  4. Convert your policy

1. Let your policy expire

You can stop paying premiums and walk away from your insurance coverage.

2. Renew your policy

If you still need insurance, you can renew for another term. We don’t recommend this because your premiums will be a lot more expensive.

The insurance company won’t ask you to do a medical exam again if you renew. So, they won’t be sure about your risk profile. Because of this, they’ll charge you more.

3. Get a new policy

This is a better option if you still need coverage. Buying a new term life policy will often cost less than if you renew your old policy.

4. Convert your policy 

You could also change your term life policy into a permanent life policy. There are some rules about doing this. Some life insurance companies may ask you to wait until a few years into your policy to convert. Or before you reach a certain age.

You don’t have to do a medical exam to switch your policy from term to permanent coverage. So, it’s a good option if your short-term needs are over but you still have long-term needs.

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Renewing vs converting your policy

There’s no one-size-fits-all answer for whether you should renew your term life insurance or switch to a permanent policy. It will depend on your unique situation and needs.

➡️ If you renew:

Term life insurance policies can get much more expensive on renewal. This is because the insurance company will not ask you to do a medical exam. So, they can’t be sure of your health and how risky it would be for them to give you a policy.

At the same time, by the time your policy ends, you will be older. And, as we’ve noted, life insurance costs more the older you get.

Learn more about the pros and cons of renewing your policy.

➡️ If you convert:

You can convert your term life insurance into permanent life insurance if you need it for long-term needs like covering funeral costsestate taxes, or other end-of-life expenses.

Your premiums will be more expensive if you choose to convert, but it’s normal for permanent life insurance to cost more than term life insurance. This is because most permanent policies come with a savings and investment component that lets you access what’s called cash value during your lifetime.

So, while you will pay more, you also get more benefits too. And you would not have to take a medical exam to convert.

If you’re unsure about your options, speak with one of our licensed insurance experts. We can take a look at your current needs and help you determine which course of action would be in your best interest.

what to do when term life insurance ends

How much does term life insurance cost?

Term life insurance costs vary depending on several factors. In general, people who are young, healthy, and don’t smoke get the lowest life insurance rates in Canada.

Term life insurance products are the cheapest in the market. Premiums are often lower than it would cost you to buy a cup of coffee every day.

Take a look at the chart below to see some of the average Canadian term life premiums from some of the country’s leading companies.

Term life insurance quotes in Canada

Age 10-year term 20-year term 30-year term
20 $14 $20 $24
30 $15 $22 $33
40 $20 $34 $64
50 $45 $83 $166
60 $140 $281 Not available

 *Quotes based on $500k in coverage for a non-smoker in regular health. 

What affects term life insurance premiums?

Term life insurance premiums depend on factors like:

  • Age
  • Sex
  • Health
  • Medical history (including family history)
  • Smoking status
  • Occupation
  • Lifestyle/hobbies
  • Type of policy
  • Term length
  • Amount of coverage

Life insurance costs less the younger you are because, in most cases, you don’t have a high risk of passing away soon. This is why it’s a good idea to sign up when you’re young, because then you can get low prices and keep that same low price for as long as your term lasts.

Policies also cost less if you don’t smoke or do risky activities like skydiving. And, they also often cost less for women because Canadian statistics show women tend to live longer than men.

Things like term length and coverage amount don’t work this exact same way. You may think that a shorter term means a lower price. Sometimes that is the case. But sometimes it may be more cost-effective to go with a longer term.

How much term insurance coverage should I buy?

A general rule of thumb is to get at least 10-15x your yearly income in life insurance coverage. But how much coverage you should buy also depends on things like:

  • Your budget
  • Any bills or outstanding debt that would have to be paid off
  • How much your family would need to keep up with the cost of living
  • Inflation

Most of us would want to leave a lot of money behind for our loved ones. But you may not really need a million-dollar policy.

The best way to find out how much term insurance you should buy is to use a life insurance calculator. We have a free one you can use to find out how much insurance you would need in minutes.

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When is the best time to buy term life?

The best time to get term life coverage is when you’re young and healthy. This is when your premiums will cost the lowest. And, this is when you’re most likely to benefit from a term life policy.

The best time to buy life insurance will always be today. Your premiums will always cost less the younger you are, and you can also avoid the risk of something happening without having the coverage you need.

How to get the lowest term life insurance quotes in Canada?

If you’re ready to start checking out term life insurance options, you can get the lowest term life insurance quotes in Canada all in one place on PolicyAdvisor.com!

Our easy platform lets you compare online quotes from the best providers. This is an easy way for you to find the lowest rates and best deals.

Or, you can speak with our licensed life insurance brokers. We’re here to help, so book a call and let us help you find the lowest rates!

How can I apply for term life insurance?

You can apply for term life insurance online at PolicyAdvisor.com. Our easy-to-use platform lets you browse plans and submit an application in minutes. It’s a simple process. Just input your preferences and some information. We handle the rest!

Connect with an advisor 

Compare the best term life insurance quotes on PolicyAdvisor.com. And our expert life insurance agents are happy to connect if you need some help!

We’ll answer your questions, explain everything in simple terms, and help you find the best life insurance plan for your family. You don’t have to pay a dime either! We offer personal help free of charge. There’s no obligation to buy.

Term life insurance gives you simple, affordable, and flexible insurance coverage.

Frequently asked questions

Do I have to do a medical test to get a term insurance policy?

It depends. These days, insurance companies may not ask for a medical test in many cases. They may just ask a few health questions.

In general, if you’re a Canadian citizen or resident in good health and you’re getting under $500K in coverage, you will probably not be asked to take a medical exam.

Learn more about life insurance medical exams

Do I get a refund if I cancel my term life insurance policy?

No, you will not get money back if you cancel a term life policy. Think of it this way: term life insurance coverage is like renting an apartment. During your “lease” term, you get the benefit of housing. When the lease is up, you walk away.

Term life policies work the same. During the term, you have the benefit of financial protection. Once the term is up, you can walk away knowing you had peace of mind for the agreed term.

What are the other kinds of life insurance?

Aside from term, the other kind of life insurance you can get in Canada is called permanent life insurance. These policies cover you for the rest of your life and have an investment component.

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

Most people who buy permanent life insurance get a whole life policy.

Learn about the different types of life insurance in Canada

If you’re not sure which is better for you, contact us. Our friendly licensed advisors are here to help and happy to help you figure out which plan would work best!

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The Canadian guide to travel insurance for students

There’s no denying that travel can be a great experience for students. It broadens horizons, introduces new cultures, and can be a great way to learn more about the world. However, it’s important to remember that travel can also be dangerous.

Accidents happen, and sometimes they can lead to serious injuries or even death. That’s why it’s so important for students to have travel insurance.

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What is travel insurance?

Travel insurance is a type of insurance that helps to cover the cost of medical care if you become sick or injured while travelling. It can also protect you from financial loss if you experience a trip interruption or cancellation.

Emergency medical and dental treatments are expensive in Canada, and as an international student, you likely won’t be covered by provincial healthcare. This means that if you experience an emergency, you could be responsible for a large medical bill and out-of-pocket expenses.

Likewise, for Canadian students travelling or studying abroad, it’s important to know that your provincial health plan likely doesn’t extend to other countries.

Learn more about travel insurance.

What types of students need travel insurance in Canada?

Travel insurance for students can mean many different things depending on your home country and reason for travel. They can include:

  • International students studying in Canada
    Students from outside of Canada who come to the country to study are not covered by a provincial or territorial government health insurance plan.
  • Canadian students studying in another country
    When Canadians travel outside of Canada, they do not retain access to public healthcare options in other countries. Many schools require students hold a medical insurance plan before they begin classes.
  • Canadian students travelling abroad
    Many students are afforded the opportunity to travel internationally in the summer months or even when they complete their degree or program. Emergency medical coverage is also important in these circumstances.

Why do Canadian students need travel insurance?

If you are a student and plan to travel outside Canada ‒ even for a single day ‒ you should buy travel health insurance before your trip or vacation.

There are a number of risks students face when travelling, and travel coverage can help protect them from financial loss in the event of an emergency. If you need medical assistance while abroad, insurance can help cover the cost of your medical bills or return back to Canada if necessary.

Travel insurance is an important consideration for any trip, and it’s especially important if you’re travelling for months on end to a country with higher costs for medical treatments.

Why do international students studying in Canada need travel insurance?

Your trip to Canada is meant to be an experience. If an unexpected medical emergency for visitors to Canada occurs, it can cost you thousands of dollars per day in medical expenses that are not covered by Canada’s public healthcare system.

Travel medical insurance can relieve that potential financial burden and give you peace of mind during your stay, knowing you are covered for any unexpected medical expenses.

Check our our review for the Best Visitor Insurance for International Students in Canada
There are many different types of Travel Insurance for students, foreign workers, snowbirds, super visa holders, and others travellers to/from/within Canada.

What should travel medical insurance cover for students?

Every travel medical insurance policy for visitors is unique, as one has many options when applying for coverage. The main benefits a student should consider are coverage for emergency medical services (including dental), medical transportation, and repatriation (the transportation of your body should you pass away outside of your country of origin).

Most travel medical insurance policies typically cover:

  • Emergency medical treatment for illness or injury
  • Hospital expenses
  • Prescription medications
  • Emergency dental services
  • Essential medical equipment (crutches, wheelchairs, slings, braces, etc.)
  • X-rays and other diagnostic services and laboratory procedures (bloodwork, ultrasounds, etc.)
  • Required ground, air or sea ambulance services
  • Follow-up post-medical appointments
  • Medical evacuation
  • Ambulance travel to the nearest hospital

Student travel medical insurance policies may cover additional non-emergency medical benefits:

  • Annual medical exams
  • Eye exams
  • Dental exams and cleaning

Lastly, student travel policies often include a modest accidental death or dismemberment benefit to be paid out to oneself or a beneficiary should they become dismembered or lose their life, respectively.

travel insurance for students

Does student travel insurance cover pre-existing conditions?

Most student travel medical insurance policies do not cover a pre-existing medical condition by default. Given the relatively young age of most applicants, pre-existing conditions are not the top concern for students applying for coverage.

However, if you are a student with a pre-existing medical condition, securing coverage that takes your medical condition into account is incredibly important. If your condition is stable, it is typically easier to secure coverage.

In many cases, if you have shown no symptoms or diagnosis of a pre-existing medical condition for 90 to 180 days prior to the effective date of the policy and have not had treatment for the condition during that time, it will not be considered a pre-existing condition during your coverage period.

You should always check the wording of any potential policy for details and to see if your medical condition would be covered during trips outside of your home country.

Some conditions may get excluded from your travel medical insurance coverage during the underwriting process. A pre-existing condition exclusion could include:

They can also include relatively mild conditions for which you have taken prescription medication such as:

Insurance providers will look at the specific state of your illness or condition to evaluate the risk associated with the pre-existing condition. They then make their decision accordingly for your travel insurance plan.

Some providers offer policies that will cover pre-existing conditions, though the premium will be higher to compensate for the added risk.

One should request an explanation of the limitations and restrictions on any pre-existing medical condition, tests, and treatments they may have had.

Frequently Asked Questions

Which is the best travel insurance company for students?

The best travel insurance company is the one that best suits your needs. Several Canadian insurance companies offer policies specifically catered to students. Providers construct their policies differ from one another, thus each trip may have a best-suited policy from a unique provider. Some of these providers include:

Manulife

  • Offers up to $2 million CAD in coverage
  • Non-emergency medical benefits are included in coverage, including annual medical and eye exams
  • Accidental death or dismemberment also included; including accidents resulting in death, blindness or dismemberment
  • Free Assitance Centre; 24/7 helpline which can help you answer questions about your trip before or after departure

Tugo

  • Offers up to $2 million CAD in coverage
  • Offers coverage for medical expenses incurred by students enrolled in a school in Canada and Canadian students enrolled in a school outside of Canada
  • Non-emergency medical benefits are included in coverage, including annual medical and eye exams, as well as maternity care

Allianz

  • Specific policies for international students studying in Canada
  • Offers up to $5 million CAD in coverage
  • Coverage lasts up to a full year after student has completed studies and works in Canada
  • Option to add spouse and dependents to policy
  • In our review of the Best Travel Insurance for Visitors to Canada, we recommend Allianz as the best choice for international students in Canada

MHS International

  • Specific policies for international students studying in Canada
  • Offers up to $2 million CAD in coverage
  • Three different coverage tiers: Silver, Gold, and Platinum with increasing benefit amounts as you move up
  • Policy offers coverage outside of Canada as long as majority of stay is in Canada (except USA; 30 days coverage only)

Destination Travel Group

  • Offers up to $2 million CAD in coverage
  • Coverage for both students enrolled in a school in Canada and Canadian students enrolled in a school outside of Canada
  • Maternity coverage of up to $25,000 for pre-natal care and involuntary termination of pregnancy or complications
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Do students need travel insurance plans if they have credit card coverage?

While credit card coverage is a great add-on, the coverage is often limited. This is especially true considering the extended trip length many students take.

Credit card travel plans provide basic travel coverage, but they have a limited coverage period. As well, it is often only in force if your trip was purchased with the same credit card, and the extended time a semester abroad takes would disqualify coverage in most cases.

Learn more about credit card travel insurance and its limitations.

Can I get coverage through my student union?

Many university and college student unions offer group coverage for students while they attend studies at their respective schools, and include the fees for coverage alongside tuition. While this is an option for international students on each side of the border, the period of coverage for these plans is only in effect while you are enrolled in studies. They rarely offer the flexibility or breadth of coverage an independently owned plan can offer.

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