Wondering how to get the best life insurance in Canada for you and your family? The recent pandemic has made many of us more acutely aware that life is precious and that we need to look after the ones we love. 44% of us now plan to buy life insurance because of the effects of COVID-19, but not everyone is confident in understanding what life insurance is, the cost of a typical policy, and other details. This life insurance tip sheet will help get you started in your research in order to make the best choices for your loved ones’ future.

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. It is intended to help the people you leave behind continue life in a way that’s as close as possible to what they are accustomed to. That includes the ability to make mortgage payments, pay household bills and any other debt, as well as cover future expenses. In Canada, it is a contract between you and an insurance provider that you make monthly or annual payments (better known in the industry as “premiums”). In return, under specific conditions—namely, death—your family or other people you name will be paid an agreed-upon amount.

Do you need life insurance?

It’s fair to say that not everyone needs life insurance: No dependents, no debt, no problem. If you are unsure if you need life insurance, FSCO has compiled a list of questions to help you decide:

  • How much do I contribute to my family’s budget? If I die, will my survivors (partner, children and dependents) be able to take care of themselves?
  • Do I have any other dependents, such as parents, grandparents or siblings?
  • As a single parent, what kind of support payments am I receiving or paying? If I die, how will these continue?
  • Do I want my mortgage paid off in the event of my death?
  • Can I put money aside for my children’s education (RESP)?
  • Do I want to leave money to any other family members or organizations?
  • Will I leave behind unpaid debts that will reduce the value of my estate or that may burden my family?
  • How will my business be affected after I die?


Life insurance could play a part in your long-term financial goals. Permanent life insurance policies build cash value, an amount of money that accumulates in the policy. In the future, you could use the cash value of your policy to boost your death benefit, pay your premiums, supplement your retirement income or take out a policy loan.

How does it work?

Think of life insurance like depositing money into a safety net that will safeguard your loved ones and your assets. It can also repay your debts when you no longer can.

Your life insurance policy is a contract between you and an insurer. You agree to pay a fee called a premium and the insurer agrees to pay your beneficiaries or your estate an amount of money upon your death. The payout to your beneficiaries, known as the death benefit, is a tax-free lump-sum which can be used to pay for your funeral. It can also be used to pay off student loans and other debts, provide for your loved ones, donate to charity or set up a trust.

Some terms you need to know

  • Premiums: A yearly or monthly fee that you pay for an insurance policy.
  • Estate: The sum of all your property, possessions, financial assets and debts.
  • Beneficiary: The person, persons or organizations you name to receive the payout (death benefit) when you die. If no one is named, the payment goes to your estate.
  • Death benefit: The amount of money that the insurance company agrees to pay to your beneficiaries when you die.

How much do you need?

How much life insurance you need depends on a number of factors, including how much money your survivors will need when you die and the value of your assets. Completing a financial needs analysis—which evaluates your current financial situation, your assets, debts, your personal situation, your personal goals and the needs of your family—can help you. Most insurance agents and companies provide models, examples and recommendations online. Because there are many individual factors that determine how much is right for you, once you’ve completed an analysis, you’ll want to speak with one of our isure brokers. The average Canadian life insurance policy is $200,000; however, the rule of thumb is “10 times your annual income.”

According to Moneysense.ca, here’s a simple calculation that can help you come up with your own number:

LIFE INSURANCE POLICY AMOUNT = Outstanding debt + (Net annual income X number of years you want to provide for family) + Mortgage still owing + children’s education

What a life insurance policy covers

The type of life insurance policy you choose is up to you. There’s a vast range of policies available, and it really comes down to what kinds of expenses you need to cover in the event of your death. The main things to think about when considering a policy are:

  • Any outstanding debts (including loans, joint credit card balances and lines of credit)
  • Mortgage
  • Childcare costs
  • Education fees
  • Ongoing bills
  • Day-to-day expenses
  • Funeral and burial costs

Once you’ve purchased a policy, you’ll pay monthly premiums until either your policy expires or you pass. When you die, your beneficiaries will receive the predetermined, non-taxable lump sum specified in your policy. There are benefits and drawbacks to all the different types of life insurance; which one is right for you depends on what stage of life you’re at, the level of coverage you need and how much you’re able to put toward your premiums.

What is not covered by life insurance

An exclusion is something your life insurance policy does not cover. Exclusions can include death by suicide within two years of purchasing your life insurance policy, death from high-risk activities, such as sky-diving, and death from pre-existing medical conditions. For other exclusions, speak with your insurance agent or company.

How much does life insurance cost?

When you apply for term or permanent life insurance, your insurer will assess your degree of risk. They will look at several factors, then place you into a risk category which helps them determine your premiums and your coverage. Usually the younger and healthier you are, the lower the risk and the lower the premiums.

Some of these factors include:

  • Coverage amount
  • Policy type (term vs. permanent)
  • Policy length (for term insurance only)
  • Age
  • Gender
  • Smoking status
  • Health
  • Lifestyle

If you are you looking to purchase life insurance coverage but can’t decide between the many types, you’re not alone. With all the choices available, many people struggle to find a policy that’s right for them. However, isure is here to help. Contact one of our licensed insurance brokers today so we can help you find a policy tailored to your individual needs.

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