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đź“… Last Updated: November 29, 2023
✏️ Written By Caitlin Wood

Life insurance is a product that is offered by banks and insurance companies alike. When you purchase life insurance, you create a contract between yourself and the company which dictates that they will pay an agreed-upon sum to your beneficiary for a premium. The death benefit (money your beneficiary receives if you die) your beneficiary (usually a person who is financially dependent on you such as your children and/or spouse) receives is usually meant to cover the cost of their basic needs like rent/mortgage, food, debt, funeral costs and occasionally post-secondary education expenses or retirement funds for your spouse. 

How Does it Work? 

Depending on the coverage you need, you will pay a monthly fee or premium to your insurance company until your contract ends or until you pass away, whichever happens first. The contract will detail the amount of money your beneficiaries will receive. The money they receive will be tax-free and can be used according to their needs. However, be sure to always keep up with your insurance payments as missed payments can lead to your policy being cancelled or even your family not being covered if you pass. 

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Types Of Life Insurance Available To Canadian Consumers

There are plenty of life insurance providers in Canada that can offer a range of products. Here are some of the most common types of policies:

Term Life Insurance

Term insurance covers you until a specific age or for a specific time, making it a good choice for spouses, young people with higher living costs, and those with fewer assets.

  • Less expensive than permanent life insurance
  • Good for child care, mortgage payments, and other debts
  • Some policies cover one spouse if the other dies (Joint First-To-Die Insurance)
  • Coverage must be renewed for payout to be valid after death
  • The payout cannot be received twice if both spouses die (Joint First-to-Die Insurance) 
  • Premiums can increase when terms are renewed

Click here to find out how to financially deal with the death of a spouse. 

Permanent Life Insurance

Permanent insurance covers you for the rest of your life, so it’s usually the best choice if you want your beneficiaries to receive a guaranteed, tax-free payout when you die. 

  • Premiums are fixed at first and may decrease as you get older
  • Good for estate planning or leaving your beneficiaries an inheritance
  • Some policies provide coverage until you’re 100 years old
  • Higher premiums will apply
  • The cost of your premiums may outweigh the size of your payout
  • If you live to be over 100, the policy may need to be renewed

Find out what happens to your bank account when you die.

Whole Life Insurance

This is the simplest form of permanent life insurance. You’ll have steady rate coverage until you die or cancel your contract, and can sign up for a participating policy, where you can invest in your provider and share in their profits.  

  • Your beneficiaries can collect the payout in present-day cash value
  • Your “cash surrender value” grows the longer you pay into it
  • You can borrow against your CSV or cancel your policy to collect the payout
  • Your CSV will be taxed if you collect or withdraw from it before the policy ends
  • Some providers charge higher cash surrender fees as the policy grows
  • You might have to wait 5-10 years before CSV becomes an option

Universal Life Insurance

Universal life insurance also allows you to invest in your provider and involves a payout that’s available in present-day cash value. However, the payout’s size is more affected by how well the company’s specific stock index performs.

  • You may have more negotiating power when it comes to your premium
  • Investment options are more flexible than whole life insurance
  • If the provider’s stocks do well, your payout will earn interest
  • If the stocks don’t perform well, your CSV could lose interest
  • Your policy must have positive cash value to remain valid
  • Low rates can also lead to lower interest for your CSV

Variable Life Insurance

Variable insurance also lets you invest in your insurer, but you can instead focus on one or two sub-accounts, such as stocks, bonds, and mutual funds. The better the investments do, the more value the accounts will accumulate. 

  • Fees can be lower than whole or universal life insurance 
  • If the stock market is strong, your payout can increase
  • More investment options than whole or universal life insurance
  • If the market crashes, you could lose money on your investments
  • Options may be more limited than variable universal life insurance 

Learn to grow your money by investing in a high-interest savings account

Variable Universal Life Insurance

As a hybrid of universal insurance, this insurance allows you to pick from a wider range of investment portfolios. You can also borrow from a CSV and use it to cover your expenses, such as mortgage payments and other debts. 

  • More investment options than other insurance policies
  • Premiums and death benefit amount are adjustable
  • The payout won’t be taxed when your beneficiaries collect it
  • Policies can be pricier than more traditional policies
  • You must monitor your portfolio closely
  • You can only choose the investment options your provider offers

Group Life Insurance 

Group insurance covers multiple employees and many companies offer it with their benefits packages. Typically, your employer pays the premium and the coverage you’re eligible for is largely based on your salary.

  • Premiums can be cheaper than individual policies
  • You don’t have to die on the job for your beneficiaries to receive payment  
  • Easier approval conditions (less healthy or high-risk workers can still qualify)
  • May not provide as much coverage as an individual policy
  • Policies must be renewed and re-adjusted after each term
  • You must find a new policy if you quit or get fired

Best Life Insurance Providers In Canada


Emma is an online life insurance platform that was created in response to the challenges and lack of life insurance options available to women and young families. Through it, you can compare rates across multiple providers with a single application. Simply fill out Emma’s application form regarding your health and coverage needs to receive your quotes today.  


PolicyMe is also an online insurance solution that provides Canadians with the ability to buy affordable term life insurance and critical illness insurance in a matter of minutes. Their simplified underwriting procedure cuts through the complications of buying life and critical illness insurance, making the application process fast and easy.

Moreover, with instant decisions, Canadians can get the insurance they need without the hassle. When you apply with PolicyMe you’ll receive a life insurance policy that is issued by Canadian Premier Life Insurance Company. If you’re looking for a term life insurance policy, they currently provide their services across Canada.


PolicyAdvisor is an online life insurance brokerage that provides quotes from Canada’s top life insurers. Simply fill out their online application form and compare quotes and policies. Whether you’re looking for term life insurance, whole life insurance, critical illness life insurance, disability life insurance, no medical life insurance, or mortgage protection insurance, PolicyAdvisor can find you the best deals. is another online platform where you can compare rates for term life insurance, permanent life insurance or critical illness life insurance. Through, you can save up to 30% on the average market rate. Simply fill out online application form to get your quotes today. 

Insurance Hotline

Insurance Hotline is an online comparison platform that was first established in 1994. Since its establishment, it has offered a variety of insurance options including car insurance, travel insurance, home insurance, and life insurance. By using Insurance Hotline, you’ll be able to compare policies from over 30 different insurers and receive rates as low as $12 a month.

Who Needs Life Insurance?

Whether or not you need life insurance depends on how old you are and what kind of lifestyle you lead. Most people take out some form of it in their 40s or 50s and when they have people, such as their spouse or children, that depend on them financially.

Overall, the longer you wait to purchase life insurance, the more expensive it gets, so it’s best to get things in order before your golden years. Think about where you are now, where you will be in the future, and what could happen if you die unexpectedly. 

For instance, if you’re a full-time employee at a solid company that offers group coverage, you may not need your own policy, even after retirement. Then again, that coverage may not be as adequate as individual term or permanent life insurance would be, especially if you have a family.  

Finding The Right Life Insurance Policy

Remember, there are many different life insurance providers in Canada, so it can take time to find the right policy. Here are a few simple steps to get started:

  • Decide how much coverage you need – Consider your age, occupation, family situation, and health. Look at your current budget, versus how much your beneficiaries would rely on your payout. Although some types of life insurance can be expensive, the security they provide can be worth the price.
  • Shop around – Don’t go with the first insurer you find. Take time to compare prices and policies, check customer reviews, and get quotes. For example, term insurance is more affordable when you’re younger but permanent insurance can give you more peace of mind when you’re older.
  • Apply – When applying, you’ll have to provide several details, such as your contact information, employment status, and income. You may also be asked health-related questions to determine what sort of coverage you’re eligible for. 
  • Finalize your premium – Most insurers will offer you a monthly or yearly payment plan. Although one yearly payment can be easier on your budget, monthly payments may be smaller and more affordable. Don’t forget that some premiums can fluctuate according to various factors (age, term renewal, etc.). 

How Much Should a Life Insurance Policy Cost? 

As mentioned, there are a few factors that can affect the cost of your life insurance policy, including but not limited to your:

  • Plan – Term, universal, permanent, etc.
  • Age – Younger Canadians may receive cheaper coverage at first
  • Gender – Premiums for women can be lower than for men
  • Health – Unhealthy people might be charged higher premiums
  • Job – Workers with risky jobs or low incomes may not receive the best coverage 
  • Lifestyle – Dangerous activities also mean higher premiums (skydiving, etc.)
  • Family medical history – Pre-existing medical conditions have the same effect 
  • Routine – If you smoke, drink, or have other unhealthy habits, you’ll pay more
  • Driver’s record â€“ The more responsible you are behind the wheel, the better

Life insurance comes in all types and costs, so it’s important to get quotes and make sure you can afford your premiums. Think about what would happen if you lost your job or experienced another financial emergency while your policy is in effect. Ask your provider about the consequences of missing a payment before you sign any contracts. 

Deciding How Much Coverage to Get 

Now that you know what affects the cost of your life insurance, it’s time to figure out how much coverage you need. To determine that amount, ask yourself these questions:

  • How much and what kinds of debt do you have? What about your assets?
  • How long will your savings and investments last if you die or lose your job?
  • What recurring living costs do you and your family have (now and in the future)?
  • How will your family or beneficiaries pay for your funeral?
  • How will your partner/spouse provide for your children and themselves if you die?
  • What type of lifestyle do you lead? Are you regularly involved in risky situations? 
  • Do you try to stay safe and healthy?

Even if you’re in peak physical condition, you should consider life insurance, especially if people depend on you. After all, anything can happen. While better coverage is more expensive, it can definitely make things easier for those you leave behind. 

When and How is Your Life Insurance Policy Paid Out?

Some policies allow you to collect your payout early or borrow from a cash-value amount. In most cases, however, the payout will be given to your beneficiaries in one lump sum. You can even ask your insurer to hand it out in annuities or installments.  

Though it may primarily act as their inheritance, your beneficiaries can also use your life insurance payout to cover:

  • Funeral arrangements
  • Mortgage payments
  • Child care
  • Fees & taxes
  • Medical bills 
  • Co-signed debts
  • General living costs
  • Educational expenses

Insurance Brokers vs. Insurance Providers

Not sure if you should find a brokerage or work directly with an insurer? This is another reason to compare several sources of life insurance before you apply. Check out these advantages of each option: 

Advantages of Life Insurance Brokers 

  • You can find a broader selection of providers, products, and premiums
  • Your personal and financial situation may be assessed more thoroughly 
  • Your policy options won’t be as limited as with a single insurer
  • You may receive greater advice regarding policies and costs 

Advantages of Life Insurance Providers

  • You won’t be subject to any brokerage fees
  • Applying directly may allow you to secure more coverage
  • If you’re a good client, you may be eligible for better service and conditions
  • You could see a speedier turnaround on your investments

Life Insurance FAQs

How should I choose my beneficiaries?

It can be tough to afford coverage for all the people in your life. If your payout would not be large enough for everyone, think about those who would rely on it most, like your spouse, children, or other immediate family members. Will your partner have their own job? Will your children be grown and working by the time you die?

How do I cancel my life insurance policy?

All life insurance policies give you the option of cancelling. Watch out, you may be penalized if you break your contract before your term ends. Otherwise, you can get a refund on any premiums you’ve paid if:
  • You have term insurance and buy a “return-of-premium” rider, which refunds your premiums (minus fees) if you don’t die before your term ends.
  • Your “cooling-off period” is still in effect. Every insurance provider must legally permit you 10 days to cancel your policy, free of charge.

Will I need to take a medical exam to get life insurance?

Though it’s not always necessary, your insurer may require you to take a medical exam to determine how much coverage you’re eligible for. If you smoke, drink, have a medical condition that will affect your lifespan, or are considered unhealthy in some other respect, your premium can increase or you may not qualify for good coverage.

How do I claim a death benefit?

If a policyholder passes away and you’re their beneficiary, you’ll need to contact the insurer and fill out the appropriate claim forms yourself. You will also have to provide a valid death certificate and other relevant information. The insurer then has 30 days to investigate the claim and will usually make the payout within 60 days, if all goes well.
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