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Life Insurance Guide 2024

life insurance is money for your loved ones

Updated Feb 27, 2024

What is life insurance and how does it work?

Life insurance is designed to provide financial protection and support to your loved ones or business partner in the event of your passing away. Life insurance works by creating a legal contract between you the policy owner and your insurance company. In exchange for paying regular premiums, your insurance company agrees to pay a sizeable tax-exempt lump sum payout (the death benefit), to your beneficiaries

What is the main purpose of life insurance?

Life insurance offers a cash safety net that ensures your family's well-being and financial stability, when you're no longer there to provide for them. Life insurance provides money during times when its needed the most

Is it worth buying life insurance in Canada?

Yes, in general its worth buying some form of life insurance. Deciding whether to buy life insurance depends on your individual circumstances, financial goals, the needs of your loved ones and your budget

The following examples explain the benefits of life insurance:

  • Financial protection for loved ones to replace lost income and ensure your loved ones can maintain their lifestyle, pay off debts such as mortgages, loans, and credit card balances, and cover everyday expenses.

  • You'll have a peace of mind knowing your family will be taken care of

  • Fund your children's education, or help payoff a student loan

  • Pay for final expenses coverage, funeral costs, medical bills and lawyers fees sparing your family financial strain during an already difficult time

  • Protect your insurability by purchasing life insurance at a younger age to lock in coverage and premiums, safeguarding future insurability even if health conditions change

  • Estate Planning to provide additional money to cover probate fees, estate taxes and protect tax free wealth to pass on to your heirs

  • Equalize inheritance to ensure that all heirs receive a fair and equal inheritance, particularly if certain assets are difficult to divide equally

  • Provide liquidity to pay estate tax avoiding the need to sell assets quickly

  • Death benefit payouts provide tax free benefits

  • Whole life or universal life, both build and provide access to cash value, a source of additional savings over time. In the case of emergencies, you can borrow money against these policies using the cash values as collateral for loans

  • Most whole life (participating life) insurance policies pay dividends to policyholders based on the insurance company's financial performance. Dividends can be used as additional income, reinvested, used to pay premiums or buy additional life insurance

  • You can leave a significant charitable donation to a cause or organization that you care about

  • Life insurance policies such as annuities, provide a source of additional retirement income

  • Life insurance can provide income replacement for a non-working spouse who may not have individual income but contributes to the family's well-being

  • In some cases, life insurance can replace lost pension income for surviving spouses after retirement

Benefits of life insurance for business owners and self employed

  • Protect business loans ensure those obligations are covered if you pass away, preventing your family or business partners from assuming the debt

  • Protect key person protect against financial losses in the event of the death of a key employee or business leader

  • Business Succession Planning facilitate the smooth transition of business ownership from one generation to the next

  • Business Buy-Sell Agreements between business owners, ensuring a smooth transition of ownership in the event of the death of a partner

  • Business Overhead Expense Coverage can cover the business's ongoing expenses if the owner becomes disabled, ensuring the business remains operational

  • Business Continuity protects the business by providing money for a tax payment or buyout in the event of yours', your partner's or key employee's death

This is how life insurance works:

  1. decide how much coverage you need?

  2. shop for quotes

  3. apply for life insurance

Three policy options when applying for life insurance:

Decide which type of life insurance you would like to apply for? Do you want to avoid a medical? Or are you ok having a full medical and underwritten policy?

  1. Underwritten Policy: Usually requires a nurses visit and medical exam, and health file from your doctor. Many applications are now web-based using electronic signatures. Policies are issued electronically. If there are no medical issues flagged during underwriting then these are usually the lowest cost policies. We recommend full underwriting and medicals for larger insurance policies to minimize your costs

  2. Simplified Issue Policy: Short applications asks a few pages of medical questions. No medical requirements depends on your age and health at the time of application If you have no health issues and are a non smoker the policy will be approved then issued over the web. Costs more than an underwritten policy. Most life insurance customers purchase typical policy amounts in the $200,000 or $500,000 range using the simplified application and policy issue process. Simplified issue policies are available up to $750,000

  3. No Medical - Guaranteed Issue Policy: Short application's with minimal questions. Only a few companies offer these. Policies offer lower coverage and higher premiums. Most policies issued are in the $10,000 to $15,000 and will go up to the $50,000 coverage limit

Four main types of life insurance to consider:

When your choosing a policy select a life insurance policy that suits your needs, budget and circumstances. There are 4 main types of life insurance. These are term life, term 100, whole life and universal life. The type of policy you choose determines the coverage, duration, benefits and monthly premium costs

  1. Term life Insurance (note link to the term life insurance definition) term life provides temporary death benefit coverage for limited period of time. Lower costs make term life more affordable for most of us

  2. Term 100 insurance (note link to the term life insurance definition) term 100 provides coverage until you are 100 or pass away before the term is completed

  3. Whole life insurance (note link to the term life insurance definition) provides coverage until you are 100 years of age. With an accumulating cash value offers more options for increasing you coverage amounts or taking policy loans

  4. Universal life insurance (note link to the term life insurance definition) Universal life insurance is like a permanent whole life policy with an investment component that allows you to choose and manage the investments

  5. (Link the summary comparison table - that compares the 4 main types of life insurance)

  6. note - add the table comparing types of life insurance

When should I get Life Insurance?

It's a good idea to assess your current situation, future plans, the needs of your family or business to determine the appropriate time to purchase a policy. Don't forget life insurance rates increase with age. If you can fit this purchase into your budget it's better to buy life insurance when you are younger rather than older. There are some key life events and factors that can help you determine when to consider purchasing a life insurance policy:

  1. When you get married If you're getting married, life insurance can help protect your spouse's financial well-being in case something happens to you

  2. When you start a family When you have children or plan to have children, life insurance becomes even more important to ensure their financial security and cover the costs of raising them

  3. When you buy a home If you're purchasing a home and taking on a mortgage, life insurance can help ensure your loved ones can continue making mortgage payments if you're no longer there to contribute

  4. When you change jobs or careers If you're transitioning to another job, it might be a good time to consider increasing your life insurance coverage to match your new income

  5. When your in good health If you're in good health, you may qualify for better rates on life insurance. Securing a policy while you're healthy can help you lock in affordable premiums

  6. When you borrow lots of money If you're accumulating significant debt, such as student loans or credit card debt, life insurance can help prevent your loved ones from inheriting those financial obligations

  7. When you start a business If you're starting a business or becoming a business partner, life insurance can be crucial to ensure business continuity and protect your family's financial interests

  8. When you plan to look after aging parents If you're providing financial support for aging parents or other dependents, life insurance can help ensure they're taken care of if you're no longer able to provide for them.

  9. When you are young and insurable Generally, the earlier you secure life insurance, the lower the premiums are likely to be. Locking in coverage when you're young and healthy can save you money in the long run

  10. When you take on major financial commitments for any reason Any time you take on major financial commitments or responsibilities, it's worth considering life insurance to protect against unforeseen circumstances

  11. When you are doing some estate planning If you're engaging in estate planning or have significant assets, life insurance can be used as part of your estate plan to provide liquidity and support your overall financial strategy

A more detailed look at life insurance

When you're shopping for a life insurance policy there are number of considerations in addition to what type of policy to choose and how much coverage you need. Who will you leave the money too? What type of life insurance do you need? What riders should you select? Will the business be the owner of the life insurance policy? How long do you need the coverage to be in force (how many years should the coverage last?)

Beneficiaries are the individuals or entities you designate to receive the death benefit. They can be your spouse, children, family members, business partners, trusts or a charitable organization. You can update your beneficiaries as needed throughout the life of the policy

Policy holder (or policy owner) When buying life insurance you have the opportunity to separate the ownership of the policy from the person paying the monthly premiums

Policy payor is the person who pays the premiums. When buying life insurance you have the opportunity to separate the ownership of the policy from the person paying the monthly premiums

Insured Either you, your family or your business partners are the insured. The owner and the payor can be separate from the insured. The insured is usually you

Policy Coverage Period For term life insurance, the policy is in effect for a specified term (e.g., 5, 10, 20, or 30 years). If the policyholder passes away during the term, your beneficiaries receive the death benefit. If the you survive the term, the coverage typically expires, and no benefit is paid out

Whole Life Insurance Coverage Period Permanent life insurance policies (such as whole life or universal life) provide coverage for the entire lifetime of your policy as long as premiums are paid. These policies also have a cash value component that grows over time. And, can be accessed by the policy owner through loans or withdrawals

Cash Value Accumulation In whole life (permanent) insurance policies, a portion of the premium goes towards building the policy's cash value. This cash value can be used for various purposes, such as borrowing against it or withdrawing funds, although it can affect the death benefit if not managed properly

Additional Riders and Benefits Many policies offer riders or additional benefits that can be added to the base policy for an extra cost. Options like accelerated death benefit riders allow the you to access a portion of the death benefit if diagnosed with a terminal illness

Comprehensive list of life insurance policies to choose from, types of life insurance polices

1-year term

5-year term

10-year term

15-year term

20-year term

25-year term

30-year term

35-year term

40-year term

Level term to age 65

Level Term to age 70

Level term to age 75 or 80

Term to age 100

Term to age 100 pay for 20 years (20 pay)

Whole Life pay to age 100

Whole Life pay to age 65

Whole Life pay for 15 years (15 pay)

Whole Life pay for 20 year (20 pay)

Whole Life pay for 25 years (25 pay)

Whole Life quick pay lump sum

Universal Life

Term 100 minimum premium

Final expenses up to $25,000

No medical guaranteed issue up to $750,000

Simplified issued up to $500,000

Life insurance policy riders to choose from

Life insurance riders offer a way for us all to customize our policy contract by adding unique options in our contract. Most life insurance companies offer the following riders:

Guaranteed Insurability Rider (GIR): Some policies offer a rider that allows you to purchase additional coverage when specific life events happen; such as achieving a certain age, marriage and the birth of a child, all without undergoing medical underwriting.

Waiver of Premium Rider (WPR): This rider waives premium payments if you become disabled and unable to work

Guaranteed Convertible Rider (GIR): Most term life insurance policies offer a convertibility option, allowing you to convert the term policy into a permanent policy without a medical exam. Usually within an age range or age limit

Accidental Death Benefit Rider (ADB): Provides an additional death benefit if your death is a result of an accident

Waiver of Premium Rider (WP): Waives premium payments if you become disabled and unable to work

Critical Illness Rider (CIR): Pays a lump sum if you are diagnosed with a specified critical illness during the policy term. 25 critical illnesses are covered

Terminal Illness Rider(TIR): Allows you to receive a portion of the death benefit in advance if diagnosed with a terminal illness. Usually 10% to 25% of the death benefit

Disability Income Rider(DIR): Provides you with a regular income if you become disabled and unable to work.

Guaranteed Insurability Rider (GIR): Allows you to purchase additional coverage at specific life events without undergoing medical underwriting. Guarantied insurability is an important rider that allows you to purchase additional life insurance even if you have cancer. Many term policies include this rider

Return of Premium Rider (ROP): Returns a portion of the premiums paid during the policy term if the insured survives the policy's duration. Usually added to a critical illness policy

Long-Term Care Rider (LTCR): Provides benefits to cover long-term care expenses if you need assisted living or nursing home care.

Children's Term Rider (CTR): Provides coverage for the your children at a lower cost or at no additional premium.

Spouse Term Rider (STR): Extends coverage to the your spouse/partner under the same policy.

Joint first to die (JFTD): both you and your spouse/partner are owners and insured on one policy contract. When the first person dies the policy pays out to the remaining beneficiary

Joint last to die (JFLD): both you and your spouse/partner are owners and insured on one policy contract. When the last person dies the policy pays out to the beneficiaries - your family or business partner

Accidental Death and Dismemberment Rider (AD&D): Pays an additional benefit if you die or get dismembered as a result of an accident

Living Benefits Rider: Offers the ability to access a portion of the death benefit if you are diagnosed with a critical or terminal illness

Partial Withdrawal Rider: Allows you to make partial withdrawals from the policy's cash value without surrendering the entire policy

How much life insurance do I need?

Determining how much life insurance you need involves considering several factors related to your financial situation and the needs of your dependents or beneficiaries. There are life insurance calculators available here. Here are some steps to help you estimate the appropriate amount of life insurance coverage:

Calculate Your Debts and Expenses:

  • Add up all your outstanding debts, such as mortgages, student loans, credit card debt, and other loans. Consider your ongoing monthly expenses, including utilities, groceries, childcare, and other necessary costs.

Estimate Future Financial Needs:

  • Consider future financial needs like college tuition for your children, retirement savings for your spouse, and any other long-term financial goals

Income Replacement:

  • A common rule of thumb is to have life insurance coverage equal to around 5 to 10 times your annual income. This can help replace your income for your family in case of your passing.

Childcare and Education:

  • If you have young children, factor in the cost of childcare and education until they are self-sufficient

Final Expenses:

  • Consider funeral and burial costs, which can be substantial

Existing Savings and Investments:

  • Take into account any savings, investments, and existing life insurance coverage you already have

Spouse's Income:

  • If your spouse or partner has their own income, subtract that from the needed coverage amount

Future Changes:

  • Consider potential changes in your financial situation, such as changes in income, expenses, and family circumstances


  • Keep in mind that the cost of living tends to rise over time, so factor in inflation when estimating future financial needs

How is my life insurance premium calculated?

Insurance premiums are calculated based on a variety of factors that help insurance companies assess the level of risk associated with insuring you. The premium is the amount you pay to the insurance company to maintain coverage

Each insurance company weigh's these factors differently when calculating premiums. When shopping for insurance, it's advisable to get quotes from multiple companies to compare prices and coverage options. Keep in mind that some factors, like your age and health, can't be changed, but others, like lifestyle choices, can be modified to potentially lower your premiums. Use the life insurance calculator to answer how much life insurance do I need?

Common factors that influence how your insurance premium is calculated:

Age: Younger individuals often have lower premiums since they are statistically less likely to have health issues or pass away compared to older individuals

Health status: Your overall health plays a significant role. Insurance companies consider factors like your weight, blood pressure, cholesterol levels, and medical history. A medical examination or review of medical records may be required

Gender: In general, women tend to have longer life expectancies and lower health risks, which results in lower premiums compared to men

Lifestyle and habits: Lifestyle choices, such as smoking, excessive alcohol consumption, or engagement in high-risk activities, can lead to higher premiums due to increased health risks. Smokers typically pay premiums that 250 to 350% higher than non smokers

Occupation: Some occupations are considered riskier than others, and insurance premiums can reflect this. Dangerous jobs can lead to higher premiums. There are simplified issue policies available up to $750,000 for risky jobs and high risk leisure activities

Family medical history: A history of certain medical conditions in your immediate family can impact your premium. There are many options that allow you to still buy life insurance

Coverage amount: The higher the coverage amount (death benefit), the higher the premium will be. And the higher the requirements are for medicals and doctors reports

Type of policy: Different types of policies (e.g., term, whole life) have different premium structures. Permanent life insurance policies often have higher premiums than term policies. Many require additional underwriting.

Term length: For term life insurance, longer terms lead to higher premiums

Riders and add-ons: Additional features or riders added to your policy increase your premium costs

Location: Your geographic location can impact your premium due to differences in mortality rates and healthcare costs

Medical underwriting: The results of your medical assessment and health history will be taken into account during the underwriting process, affecting your premium

Renewability: Some policies offer level premiums that remain the same over time, while others may have increasing premiums as you age

How to choose the right insurance policy?

Consider then evaluate your individual needs, financial goals, and budget circumstances. Here are some steps to help you make an informed decision:

Assess your needs: Determine the reason for buying life insurance coverage and how much you need. Are you looking for temporary financial protection for your family: mortgage protection, income replacement, or tax and estate planning, and investment growth? Understanding your needs will guide you in selecting the appropriate type of insurance. Use term life insurance for temporary needs. Use whole life insurance for permanent needs. You can use the life insurance calculators to estimate how much life insurance coverage you need for any type of policy

Evaluate your budget: Consider how much you can comfortably afford to pay for insurance premiums. Different types of policies have varying costs, so ensure that the premiums fit within your budget without causing financial strain

Determine coverage amount: Calculate the amount of coverage required to meet your objectives. For life insurance, consider factors such as outstanding debts, future income needs, education expenses, and all financial responsibilities you want to cover

Compare policy types: Research and understand the differences between term life insurance, term 100, whole life and universal life insurance (term 100, whole life, and universal life are also called permanent life insurance). Each type has its benefits and limitations, so choose the one that aligns with your long-term goals and wont break the bank

Policy term: Choose a life insurance policy term length of coverage that aligns with your specific objectives. If you need coverage until a certain milestone (e.g., mortgage payoff or retirement), select a term that matches that timeframe

Decide policy riders and features: If you're considering whole life insurance (permanent life insurance), examine the policy's cash value, growth, investment options, and available riders. Look for features that match your financial objectives

Policy exclusions and limitations: Understand any policy exclusions and limitations that could affect coverage. Certain activities, hobbies, or pre-existing health conditions may be excluded from coverage. Make sure you are aware of any restrictions

Consider convertibility, renewability and flexibility: if you're unsure about your future needs, consider policies that offer convertibility options or riders that can adapt to changing circumstances

Premium payment frequency: Determine the premium payment frequency that suits your budget and preferences. In Canada premiums are typically paid annually or monthly. Paying annually may result in cost savings compared to more frequent payments

Check Insurance Company Ratings: Verify the financial strength and reputation of the insurance company you're considering. Independent rating agencies like A.M. Best and Standard & Poor's provide ratings based on the company's financial stability. Look for an insurer with positive ratings from independent rating agencies to ensure they can fulfill their financial obligations when or if you make a claim

Compare Quotes: Obtain quotes from multiple insurance providers for the coverage amount and type you require. Comparing quotes will help you find competitive pricing features and benefits for your new policy

Read Policy Illustration Documents Carefully: Before making a decision to select a quote, thoroughly read and understand the policy illustration documents, including terms, conditions, exclusions, and any limitations

Complete an Application: Once you've chosen an insurance policy and company, you'll need to complete an application. This will involve providing personal information, health history, and lifestyle details. Your life insurance broker will do all of the application paperwork needed

Underwriting Process: Understand the underwriting process required for the policy. Some policies may require a medical exam. Others may offer simplified or no-medical underwriting options. Be prepared to provide accurate health and lifestyle information during the application process. Answer all questions honestly. Life insurance companies can decline your claim if you provide false personal, health, or lifestyle information on your application form. Each insurance company reviews your application and medical information to assess your risk profile and determine the premium

Medical Examination: Depends on your age the coverage amount and your health, the insurance company may require a medical examination. This could involve a physical, blood tests, and other health assessments

Receive and review Offer: Once the underwriting is complete, the insurance company will issue you with an policy offer contract that outlines the coverage, premium, additional features and contract terms and conditions. Carefully review the offer to make sure it aligns with your needs and expectations. If there are any questions or concerns, reach out to the insurance company or your agent for clarification. If you're satisfied with the offer, you can accept the policy and make the initial premium payment COD Cash on delivery

Payment: Make regular premium payments as specified in the policy. Failure to make payments could result in the policy lapsing

Keep Records: Keep copies of your policy documents, payment receipts, and any correspondence related to your life insurance policy

Review Periodically: As your life circumstances change, reassess your insurance needs periodically. Regularly review your policy to ensure it still meets your objectives and make adjustments as necessary. Life events such as marriage, having children, or changes in income may warrant adjustments to your coverage

Seek Professional Advice: Consult with a licensed insurance broker. A knowledgeable professional can explain policy details, recommend suitable coverage options, customize your policy and help you understand the fine print

Consider working with an independent insurance broker who can help you complete a full needs analysis. And, provide personalized guidance based on your needs and help you understand then navigate the options

File Claim to collect the Death Benefit In the event of your death during the policy term, your beneficiaries named in the policy receive the death benefit. This benefit is usually paid out in a lump sum, although some policies offer other payout options. Most claims are paid out in 2 to 4 weeks

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