Life insurance 101

By PolicyMe

If you’ve just bought a home, gotten married, or had a baby, your bills might be piling up faster than you can count them. So you might be tempted to put off buying life insurance.

But the reality is that if you’ve just hit one of these big life milestones, buying life insurance is probably more important than ever.

Here’s what you need to know about life insurance in Canada.

What is life insurance?

To put it simply, life insurance is a financial safety net for your family. It protects them in the event that you die unexpectedly and your income is no longer around to support them.

When you buy a life insurance policy, you pay premiums each month for the coverage. In exchange, if you die while holding your policy, your insurance company will give your family a death benefit. A death benefit is a tax-free lump sum payment that equals your policy coverage amount (e.g. a $500,000 policy will have a $500,000 death benefit).

Your family can use the money in any way they’d like. For example, they can use it to pay off the mortgage, cover everyday living expenses, or fund your kids’ post-secondary education.

Do you need life insurance?

Life insurance protects your family in case you die while your family is still dependent on your income. So if you have loved ones who depend on you financially (e.g., to make mortgage payments or cover children’s expenses), you need life insurance.

On the other hand, if no one depends on your income, you don’t need life insurance. So if you’re single and don’t have dependents or if you have enough savings to cover your dependents’ expenses, you can pass on getting coverage—lucky you!

Types of life insurance in Canada

When you buy life insurance, you can get one of two types: term life insurance or permanent life insurance.

Term life insurance gives you coverage for a certain number of years (usually, 10, 20, or 30). If you die during your policy term, your family will get your death benefit.

Most young families choose term life insurance because it’s the simplest and cheapest type of coverage. It lets you pay for insurance only during the years when you really need it (i.e., when your family depends on you financially).

In comparison, permanent life insurance lasts for the rest of your life. This means that your family will get your death benefit no matter when you die.

It may be tempting to get permanent life insurance because it’ll protect your family until the day you die. But the reality is that most people don’t need permanent insurance because they’re able to live off their savings once they retire.

Because permanent insurance is much more expensive than term insurance, having permanent coverage when you don’t need it will mean flushing lots of money down the drain.

Here’s how rates for term vs. permanent insurance stack up:

 

Demographic

$250,000 20-year term life insurance policy

$250,000 permanent life insurance policy

Male aged 30

$18/month

$135/month

Female aged 30

$15/month

$121/month

Male aged 40

$28/month

$204/month

Female aged 40

$22/month

$178/month

Male aged 50

$72/month

$327/month

Female aged 50

$51/month

$279/month

 

What does life insurance cost?

The amount you’ll pay for life insurance depends on a few factors:

  • coverage amount
  • policy type (term vs. permanent)
  • policy length (for term insurance only)
  • age
  • gender
  • smoking status
  • health
  • lifestyle

For example, here’s how rates for term insurance might differ depending on your age, gender, and coverage amount:

 

Demographic

$250,000 of coverage for 20 years

$500,000 of coverage for 20 years

$750,000 of coverage for 20 years

Male aged 30

$18/month

$30/month

$46/month

Female aged 30

$15/month

$23/month

$34/month

Male aged 40

$28/month

$49/month

$72/month

Female aged 40

$22/month

$35/month

$53/month

Male aged 50

$72/month

$130/month

$195/month

Female aged 50

$51/month

$85/month

$129/month

For many people in their 30s, a 20-year, $500,000 term policy is enough to protect their families. And this costs only about $30/month or less!

Want to know how much you would pay for coverage? Get an instant quote on PolicyMe.

When should I buy life insurance?

The best time to buy life insurance is when someone begins to depend on you financially. This could be when you get married, have a baby, or start caring for an aging parent.

Adding another expense to your plate when you’re young and just starting a family might seem crazy. But remember that life insurance is the best way to protect that new family of yours financially. Plus, when you buy insurance at a young age, you’ll pay a lower monthly rate for the entire length of your policy.

How to buy life insurance in Canada

There are three ways to buy coverage in Canada:

  • Directly from an insurance company online (like Manulife)
  • Through a local independent insurance broker
  • Through an online independent insurance broker

To help you decide which insurance company to buy your policy from, read our reviews of top Canadian life insurers.

 

Not sure what kind of coverage your family needs?

Get a free personalized recommendation in just 5 minutes using PolicyMe’s online life insurance checkup.

By PolicyMe

If you’ve just bought a home, gotten married, or had a baby, your bills might be piling up faster than you can count them. So you might be tempted to put off buying life insurance.

But the reality is that if you’ve just hit one of these big life milestones, buying life insurance is probably more important than ever.

Here’s what you need to know about life insurance in Canada.

What is life insurance?

To put it simply, life insurance is a financial safety net for your family. It protects them in the event that you die unexpectedly and your income is no longer around to support them.

When you buy a life insurance policy, you pay premiums each month for the coverage. In exchange, if you die while holding your policy, your insurance company will give your family a death benefit. A death benefit is a tax-free lump sum payment that equals your policy coverage amount (e.g. a $500,000 policy will have a $500,000 death benefit).

Your family can use the money in any way they’d like. For example, they can use it to pay off the mortgage, cover everyday living expenses, or fund your kids’ post-secondary education.

Do you need life insurance?

Life insurance protects your family in case you die while your family is still dependent on your income. So if you have loved ones who depend on you financially (e.g., to make mortgage payments or cover children’s expenses), you need life insurance.

On the other hand, if no one depends on your income, you don’t need life insurance. So if you’re single and don’t have dependents or if you have enough savings to cover your dependents’ expenses, you can pass on getting coverage—lucky you!

Types of life insurance in Canada

When you buy life insurance, you can get one of two types: term life insurance or permanent life insurance.

Term life insurance gives you coverage for a certain number of years (usually, 10, 20, or 30). If you die during your policy term, your family will get your death benefit.

Most young families choose term life insurance because it’s the simplest and cheapest type of coverage. It lets you pay for insurance only during the years when you really need it (i.e., when your family depends on you financially).

In comparison, permanent life insurance lasts for the rest of your life. This means that your family will get your death benefit no matter when you die.

It may be tempting to get permanent life insurance because it’ll protect your family until the day you die. But the reality is that most people don’t need permanent insurance because they’re able to live off their savings once they retire.

Because permanent insurance is much more expensive than term insurance, having permanent coverage when you don’t need it will mean flushing lots of money down the drain.

Here’s how rates for term vs. permanent insurance stack up:

 

Demographic

$250,000 20-year term life insurance policy

$250,000 permanent life insurance policy

Male aged 30

$18/month

$135/month

Female aged 30

$15/month

$121/month

Male aged 40

$28/month

$204/month

Female aged 40

$22/month

$178/month

Male aged 50

$72/month

$327/month

Female aged 50

$51/month

$279/month

 

What does life insurance cost?

The amount you’ll pay for life insurance depends on a few factors:

  • coverage amount
  • policy type (term vs. permanent)
  • policy length (for term insurance only)
  • age
  • gender
  • smoking status
  • health
  • lifestyle

For example, here’s how rates for term insurance might differ depending on your age, gender, and coverage amount:

 

Demographic

$250,000 of coverage for 20 years

$500,000 of coverage for 20 years

$750,000 of coverage for 20 years

Male aged 30

$18/month

$30/month

$46/month

Female aged 30

$15/month

$23/month

$34/month

Male aged 40

$28/month

$49/month

$72/month

Female aged 40

$22/month

$35/month

$53/month

Male aged 50

$72/month

$130/month

$195/month

Female aged 50

$51/month

$85/month

$129/month

For many people in their 30s, a 20-year, $500,000 term policy is enough to protect their families. And this costs only about $30/month or less!

Want to know how much you would pay for coverage? Get an instant quote on PolicyMe.

When should I buy life insurance?

The best time to buy life insurance is when someone begins to depend on you financially. This could be when you get married, have a baby, or start caring for an aging parent.

Adding another expense to your plate when you’re young and just starting a family might seem crazy. But remember that life insurance is the best way to protect that new family of yours financially. Plus, when you buy insurance at a young age, you’ll pay a lower monthly rate for the entire length of your policy.

How to buy life insurance in Canada

There are three ways to buy coverage in Canada:

  • Directly from an insurance company online (like Manulife)
  • Through a local independent insurance broker
  • Through an online independent insurance broker

To help you decide which insurance company to buy your policy from, read our reviews of top Canadian life insurers.

 

Not sure what kind of coverage your family needs?

Get a free personalized recommendation in just 5 minutes using PolicyMe’s online life insurance checkup.

About PolicyMe

PolicyMe is a rapidly growing insurtech startup making life insurance simpler and more affordable for everyone who needs it. PolicyMe's online platform provides a digital experience for customers to navigate the entire insurance buying process, helping Canadians get personalized advice, compare quotes and apply for life insurance in just a few clicks.
The company was founded by Andrew Ostro, Laura McKay and Jeff McKay in 2018, and is based in Toronto, Canada.

Seriously, what else can you do in 3 minutes?

Boil half an egg?

You might like these posts, too.

Married with kids? Follow these savings tips.

Married with kids? Follow these savings tips.

By PolicyMe Getting married is expensive. Being married is expensive. Kids are even more expensive.  We all see the pattern here. Life is expensive, and you want to save money where you can.  Once you have kids, skipping out on certain expenses can seem appealing—why...

read more
6 strategies to pay down your debt

6 strategies to pay down your debt

Debt. A four-letter word feared by many, and for good reason. Trust me, I’ve been there. It was a relatively small amount of debt, but any amount can be a great burden to carry. Whether you’re carrying debt from your credit cards, student loans, a mortgage, or other...

read more
The monthly cost of home ownership

The monthly cost of home ownership

First thing first, congratulations are in order! You’re a homeowner. After years of careful saving, combing through listings, house tours, and more, you found yourself the perfect place to call home. It’s a great feeling when the keys are handed over to you for the...

read more

How are we doing?

How are we doing?