Having a life insurance policy in place can give you and your family peace of mind knowing that financial ruin can be avoided in the event of your death, especially if your family heavily relies on your income to pay the bills.
While life insurance can provide you with financial coverage, it also costs money. Your premiums will be another bill added to the pile. Considering this, it’s helpful to understand how much you would be paying for a life insurance policy and how it can fit within your budget.
The question is, how much does life insurance cost on average in Canada?
Insurance providers look at a number of factors to establish the cost of a life insurance policy. Everyone will be charged their own unique price based on these factors, which inevitably paints the picture of how much of a risk a particular individual would be to cover.
Life insurance premiums come down to risk. The longer you are expected to live, the lower your premiums will likely be, and vice versa. Insurance companies are in the business to earn a profit, so any factors that increase your risk to them will translate into higher costs for you.
The following factors will have a direct impact on the cost of your life insurance policy:
In exchange for premiums paid, you’ll receive a certain amount of coverage as specified in your life insurance contract. This amount will be paid out to your beneficiaries in the form of a death benefit when you pass away.
In Canada, the average life insurance coverage per household is currently $423,000, and the average age of policyholders is 42 years. That said, the amount of coverage per household varies based on different provinces across Canada, as you can see from the table below.
| Province | Coverage |
| BC | $442,000 |
| Alberta | $542,000 |
| Saskatchewan | $457,000 |
| Manitoba | $441,000 |
| Ontario | $440,000 |
| Quebec | $347,000 |
| New Brunswick | $354,000 |
| Nova Scotia | $335,000 |
| PEI | $386,000 |
| Newfoundland | $346,000 |
To give you an idea of how much life insurance can cost you, let’s take a look at what a handful of Canadian insurers charge a 42-year old non-smoking male for a 20-year term plan with $500,000 in coverage:
| Company | Price |
| Manulife | $50.08 |
| Policy Advisor | $57.15 |
| Canada Protection Plan | $65.25 |
When you take out a life insurance policy, you can choose between a term or permanent plan. A term life insurance policy provides coverage for a specified period of time that you choose based on your needs, budget, and what your insurance provider offers.
For instance, a 20-year term will provide coverage for 20 years. If you die during that time, your beneficiaries will be paid out a death benefit. Once that 2-year period expires, you will no longer be covered. However, you can choose to take out another policy or convert your policy to a permanent plan.
Term plans are ideal for those who are on a budget but want coverage during their working years when they still have a mortgage to pay or children to support.
A permanent life insurance policy, on the other hand, provides lifelong coverage. Your plan will remain in effect no matter how long you live, as long as your premiums are up-to-date.
As you would imagine, a permanent plan is more expensive than a term policy over the long run, simply because of the potentially longer coverage period. Having said that, premiums remain fixed for life. That means premiums won’t go up throughout the years.
Find out what happens when you miss a life insurance payment.
There’s no getting around regular bill payments to keep a life insurance policy active. But that doesn’t mean you have to pay more than you should. Consider the following ways to keep the cost of life insurance down:
The more coverage you want, the more you’re going to pay for it. A $500,000 policy, for instance, will be more expensive than a $250,000 policy.
As mentioned earlier, term life insurance is cheaper than permanent insurance.
Do some comparison shopping with different insurance companies to see where the lower rates are.
Smokers pay a lot more for life insurance than non-smokers, so if you smoke, consider quitting. And while you’re at it, do what you can to keep healthy in all other aspects of your life to extend your lifespan and reduce your risk in the eyes of your insurance provider.
If you come to a point where you want to renew your life insurance policy, consider requalifying for a new policy instead. If your health has improved over the years, you may be eligible for cheaper premiums compared to when you initially took out your original policy. If that’s the case, you may qualify at lower premiums.
Life insurance isn’t mandatory unlike other types of insurance, but it’s certainly good to have. You’ll have the comfort of knowing that your family will be financially protected in the event that you pass away earlier in life. But like any other type of insurance policy, it’s always good to shop around to find the lowest price possible.
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Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.
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