Choosing the Best Life Insurance in Canada
The truth is, talking about life insurance is not an easy discussion to have. Having to plan for your own loss of life can be mentally tough but in the financial world it’s viewed as necessary. At the end of the road, establishing the right life insurance plan can greatly support your living family members by giving them the monetary aid to continue forward. If you’re considered the key provider in your family’s financial situation, it is crucial that you create a safety net in case the inevitable happens. By purchasing life insurance, you’re essentially protecting the ones you love from financial hardship – and you can do so at a very reasonable cost. We’ve written this guide to inform you about life insurance and the most reputable providers in Canada.
THE BEST LIFE INSURANCE POLICY COMPANIES IN CANADA
Manulife Financial is undoubtedly one of Canada’s most recognized brands of life insurance, while also serving millions of clients globally. Established in 1887, Manulife is one of the nation’s pioneers in the insurance business. The company offers a variety of different insurance related services with a specialization in health and life insurance. Most notably, the company has an incredible amount of agency in the workplace insurance sector, since many companies choose Manulife for their employee coverage. Another great benefit to choosing Manulife is their “Combined Family Term Policy” which is essentially a joint-term policy that is offered at a discount (available by combining two single plans). Whenever you apply to Manulife with a partner you can benefit from a number of different savings for the exact same degree of coverage.
PolicyAdvisor Rating: 4.5/5 stars
Manulife Financial Considerations
- Great affordability for couples/partners
- Very fast approval for a traditional life insurance provider (Manulife offers a proprietary accelerated medical screening process to most individuals that involves a “fluidless” check up. With no urine or blood sample results to wait on, the coverage can be assigned much sooner)
- Quick review-friendly (you can access your policy documentation at any time through their eDelivery service)
Wawanesa Life Insurance is a subsidiary of The Wawanesa Mutual Insurance Company of Manitoba and both firms are widely respected within the province. First established in 1896 as another one of Canada’s earliest insurance companies, the company headquarters is still located near Wawanesa, Manitoba to this day. Even though the firm is based in Western Canada, it is operational and fully licensed to provide insurance within all provinces in the country. The company provides a large variety of term length insurance plans, anywhere from 10 to 30 year terms. In addition to serving clients with a large selection of term lengths, Wawanesa even has some of the lowest costs within the industry in Canada, and many customers have chosen it based on affordability.
PolicyAdvisor Rating: 4/5 stars
Wawanesa Life Insurance Considerations
- Highly affordable premiums (regardless of age, Wawanesa premiums are very competitive and relatively inexpensive)
- Many term-based policy options (10, 15, 20, 25, 30 years)
- Policy laddering-friendly (with so many different coverage points, you could benefit by having multiple policies at different periods of time)
Acting as an insurance-related branch on behalf of the Canadian retail banking giant, BMO Insurance is a key player in the BMO Financial Group which was first established in the year 1817. BMO has an incredible reputation in Canada from being so well-known and respected nationwide, making them a great choice for your insurance needs. Even though BMO is a giant in the market, they still offer competitive premiums and a decent selection of life insurance policies, especially if cost is one of your driving factors that guide you to making a final decision. The only shortcoming to BMO’s life insurance offering is its application process – it’s a little bit on the longer side. Applicants typically wait for over a month to hear back from the big financial institution, but if timing is not an issue then BMO is a solid pick.
PolicyAdvisor Rating: 4/5 stars
BMO Insurance Considerations
- Competitive costs (especially considering the size of the business)
- Longer than average turnaround time (since BMO provides traditional-style life insurance, you’ll have to wait for all medical procedures and screenings to be reviewed)
- Operates on legacy systems (not eDelivery compatible, you can only review your policy physically through paper documentation)
Canada Protection Plan is the country’s best life insurance provider for No Medical/Simplified issue applicants. Compared to the more conventional life insurance options on the market, Canada Protection Plan does not review complex medical records, which allows for a very fast turnaround time once you’ve submitted an application. The company is ideal for individuals with a complicated medical condition that have a tough time seeking approval with different insurers based on their health status. Anyone who has suffered from a serious condition (cancer, heart disease, or stroke) knows how difficult it can be to receive a fair premium, so Canada Protection Plan focuses on being more available. While CPP’s insurance products are easier to qualify for than most others, the amount of coverage you can apply for is limited and their premiums won’t be cheap. At the same time, the company is providing a great way to leave your loved ones with something rather than nothing.
PolicyAdvisor Rating: 4/5 stars
Canada Protection Plan Considerations
- Expensive and limited (primary applicants are individuals with critical underlying health conditions and the elderly)
- No medical exam
- Very fast approval time (Canada Protection Plan has one of the quickest approval systems in the Canadian life insurance market)
The iA Financial Group was first established in 1892 and is currently a market giant in Canada for both insurance and wealth management needs. The company also offers its services across the border in the United States. Their competitive advantage is an interest one, since they don’t really compete with other insurance companies in price or application speed. iA Financial Group’s stand out feature it’s smoker-friendly insurance policy. Although the company does not encourage the behaviour of smoking, their smoker’s life insurance is priced better than smoker’s life insurance with a different Canadian provider. Smoking and other common recreational drug use is directly related to how much you pay in premiums overall since it’s associated with a greater health risk, but iA Financial keeps their payments relatively affordable.
PolicyAdvisor Rating: 4/5 stars
iA Financial Group Considerations
- Ideal for smokers
- Premiums are mediocre (typically in line with the market, but they do compete for smoking clients)
- Tons of term length flexibility (applicants can choose a term anywhere from 10 to 40 years)
WHAT YOU NEED TO KNOW ABOUT CANADIAN LIFE INSURANCE PLANS
What is a Life Insurance Policy?
A life insurance policy is a form of insurance that pays out a lump sum of financial aid to family members and other beneficiaries of a deceased policyholder. While life insurance is very much a tender topic, there’s no denying its value as a financial protection service. The contract is executable as soon as the policyholder dies, and essentially operates as a tax-free benefit to help their beneficiaries make ends meet. You can purchase life insurance from any reputable insurer by negotiating the total amount of coverage (size of the lump sum) you want provided. In return for the right to own this contract, you’ll supply the life insurance company with a monthly premium until the time of death to keep the policy active. Your listed beneficiaries may access the tax exempt coverage for: living costs, funeral bills, education fees, charity donations, repaying debts owed, or paying taxes on current assets such as property. In Canada, there are two main categories of life insurance: term insurance and permanent insurance. It’s important to consider the pros and cons of each option so you can settle on the one that best suits your financial needs.
What is Term Life Insurance?
Term life insurance basically acts as coverage for an agreed upon time period. Speaking plainly, if you opt for term life insurance you’re not protected indefinitely – only within the plan’s valid amount of time. Because term life insurance is relatively inexpensive when compared to permanent life insurance, it’s a morbid bet against the clock. If the policyholder dies outside of the term’s conditions, the beneficiaries won’t be eligible to receive the lump sum because the contract is expired. Typically, term life insurance policies can purchased on the basis of either a set time period (5, 10, 15, 20 year term etc) or an age ceiling (75, 80, 85 years of age etc). Unlike a permanent life insurance policy, term policies do not have an inherent cash value, so each premium paid is effectively a sunk cost – if you decide to cancel your term life insurance plan for whatever reason, you’re not eligible for any cash back. The advantage of term life insurance lies within its flexibility, since you can negotiate fees and premiums based on your term length. But just like any other insurance plan on the market, failure to keep up with your premiums will invalidate your life insurance regardless of where you’re at in the term. This form of life insurance can be broken down further based on your relationship status:
JOINT TERM LIFE INSURANCE “FIRST TO DIE” – If you’re in a legally binding relationship you would be able to insure your spouse too within one bundled plan. The coverage for this contract is paid out when one of the partners becomes deceased, and is generally more affordable than having two separate life insurance plans. On the other hand, entering a join life insurance contract gives up a lot of flexibility – especially in the case of legal break ups like divorce, because this policy cannot be divided. Another drawback to a joint term insurance plan is that it only pays out once in a relationship, so the surviving partner must seek their own life insurance afterwards.
SINGLE STATUS TERM LIFE INSURANCE – As the name suggests, single policies provide each individual their own allotted coverage and term (you can still opt for single policies while in a relationship). Although most of the time having two single policies is less affordable than one joint policy, you can take advantage of the flexibility it provides if you ever decide to separate with your partner (since you have the authority to change beneficiaries).
What is Permanent Life Insurance?
Even though it’s known for being the more expensive alternative to term insurance, permanent life insurance is valid throughout your entire lifespan; assuming payments are met on time. Since your beneficiaries will receive financial aid at any time of death, it removes the risk and psychological strain of having to choose the right life insurance term length. You also get the added benefit of accumulating cash value with a permanent plan, so if you cancelled your policy for any reason you’d receive some amount of cash back (obviously less than the premiums you’ve paid throughout the insurance duration). As a result of owning a cash value policy, you’re able to leverage your permanent life insurance plan in a borrowing situation that requires collateral. Basically, if your lender is worried that you’ll default, they can still have their loan repaid through the manual cancellation of your life insurance. Permanent life insurance also comes in two separate categories:
WHOLE LIFE INSURANCE – This type of life insurance is clear cut and simple, it’s what everyone thinks about when they hear “permanent” life insurance plan. Whole life insurance involves paying fixed insurance premiums for an entire lifespan of coverage, which means that your premiums will not change over time. Since your premiums will remain the same, this policy will often come with a guaranteed cash value.
UNIVERSAL LIFE INSURANCE – The most complete package you can get when shopping around for life insurance. Universal life insurance is a branch of life insurance that involves pairing an investment account with the policy. With an investment account attached, the universal life insurance plan has a cash value equal to the assets combined worth. You may also withdraw funds or take out loans from this account, although it will cause the value of your investment account to shift. On the flip side, in addition to losing value, your account can also gain value over time depending on the performance of the investment vehicles you choose to hold (this can also increase or decrease the payout upon death). Your universal life insurance premiums and associated investment account holding returns are correlated – if you’re seeing losses on your chosen investments, you can expect the premiums to go up.
What is a Life Insurance Beneficiary?
Declaring your beneficiaries to your life insurance provider is critical if you want to have full control over where the coverage goes at payout. Your beneficiaries are where the “benefits” of your life insurance plan will end up, usually in the form of a split-up lump sum payment. The most common listen beneficiaries are relationship partners, friends, family members, and charities, but you can name virtually anyone. Furthermore, as the policyholder you’re able to distribute the life insurance payout in different portions if you feel like some beneficiaries should be entitled to more money than others. Depending on your insurance company’s standards or jurisdictional legal requirements, beneficiaries can be revocable or irrevocable. Revocable beneficiaries can have their coverage stake changed or switched out without their expressed permission, while irrevocable beneficiaries must provide their full consent in order for you to decide on changes. When naming beneficiaries, the best time to do it is at the beginning when you first purchase a life insurance policy. If you do not declare a single name, your coverage amount will be funnelled into your estate plan. Tip: It’s also a good idea to name “back up beneficiaries” also known as alternative/contingent beneficiaries. These individuals will receive the lump sum payout if your primary beneficiaries are not alive to receive the funds.
What Affects Life Insurance Premiums?
AGE – Out of all the factors that affect the size of your life insurance premium, age is the most influential. As a rule of thumb, the younger you are when you register for life insurance, the lower your premium will be. However there’s a good chance that your insurance provider will increase the size of your premiums over time (as you get older) because the risk of paying out also increases.
SEX – Although it can be seen as somewhat discriminatory, women typically have a longer life expectancy than men do (in North America). The difference between the two sexes results in male policyholders having to pay slightly higher insurance premiums.
INDIVIDUAL HEALTH STATUS – Most traditional life insurance companies will request that you get a comprehensive medical examination performed before they can give you an offer. Once you bring your current health documentation back to the insurer, they can make better judgements on the cost of your premium. Many health complications that result in illness or disease can result in higher premiums, although insurance companies can have different weightings for exactly how much they impact the premium by. On top of any ailments you may currently have, life insurance companies will also check your likelihood of falling ill in the near future by viewing certain health metrics like cholesterol, body fat percentage, blood pressure and more.
FAMILY HEALTH STATUS – Since so many illnesses can exist in a family line by getting passed on through genetics, insurance companies want to also know the medical history of your family. A long history of repeating or hereditary diseases will definitely factor in to the cost of your premium.
SMOKERS STATUS – If you’re labelled as a non-smoker, you can benefit from greatly reduced premiums. There are numerous proven medical complications that are related to smoking, including falling victim to cancer, therefore increasing your mortality risk. Being a smoker will increase the cost of virtually any life insurance premium.
WORK – Depending on your occupation’s hazard levels, you can reasonably expect changes in your life insurance premium. Generally speaking, blue collar professions and other job placements that involve heavy machinery, chemicals, or unsafe environments will lead towards higher life insurance premiums.
HOBBIES – Even outside of the work setting your lifestyle factors into the premium calculation. There are many activities that life insurance companies consider high risk, most of which are associated with an increased mortality chance. If you enjoy the adrenaline rush from car races or base jumping on weekends, you’ll likely face higher premiums.
LIFE INSURANCE TYPE – The details of your policy will also come into play when determining your premium. Depending on the plan’s specifics, you have some authority over how much premium you’d like to pay. In general, the more coverage you wish to have the more you’ll have to pay.
OUR THOUGHTS ON CANADIAN LIFE INSURANCE POLICIES
Although purchasing life insurance ultimately depends on individual preference and having a list of beneficiaries, life insurance can still be seen as a great way to provide financial support after passing away – even if you’d just prefer the lump sum go towards charities. Life insurance serves to give you the peace of mind that you’ll be able to financially support your loved ones in the event of your death, all for a relatively low monthly cost. Most individuals would agree that if you have an asset worth protecting, it’s a good idea to insure it. And remember, your life is the greatest asset of all.
If you’re in the market for total asset protection and want more than just your life insured, check out our review of Canadian home insurance and Canadian automobile insurance
Life Insurance Frequently Asked Questions (FAQ)
Should I get life insurance even though I am young?
It very much depends – it’s a personal question. If you have a number of people relying on you for financial support, it’s definitely a great financial tool to have under your belt. It’s also very likely that you will achieve family oriented lifestyle goals in the near future, such as marriage, having children, or moving in with a partner, so you will have several beneficiaries that you could help. Furthermore, it’s worth mentioning that the greatest benefit to getting life insurance when you’re young and healthy is a very low premium. Compared to middle aged adults and seniors, you will most likely pay next to nothing.
What is the difference between traditional insurance and no medical insurance?
Life insurance providers typically use one of two different methods to assess an individual’s risk to see what plans/premiums they qualify for. Tradition or conventional life insurance assessment has historically been the more attractive option for insurance companies, since it’s comprised of a full scale medical report. Applying for this form of life insurance means you’ll be providing your insurer with a 20-40 page long descriptive document that outlines your medical history, and it can take upwards of a month to receive it. If you’re applying while relatively healthy, this is generally the more affordable option. On the other hand, no medical or simplified issue insurance is a much faster way to become insured, but it’s considerably more expensive and less available. This is due to the fact that it does not involve a detailed medical report in the application process. No medical insurance policies will simply ask you general health concerns out of a medical questionnaire, ignoring most of your health history.
Will life insurance cover my funeral expenses?
As long as you work it out with either your insurance provider representative or directly with your beneficiaries, there’s no reason preventing the coverage from going towards paying for your funeral cost. Depending on the size of your lump sum payout and a rough estimation of how much a full funeral service would cost, you may want to review the amounts you’ve allocated within the list of beneficiaries.
How much does life insurance cost in Canada?
While permanent/whole life insurance is mainly for the affluent, term life insurance is much more affordable in comparison. The average non-smoking male in Ontario could pay anywhere from $15 to $180 per month depending on their age for a short-term insurance (10 years) but obviously the prices increase with coverage. Even a 20 year term is considered affordable at an average of $15 to $200 per month, compared to permanent life insurance which is almost always a few hundred dollars in monthly premiums per month regardless of age and health status.
How much life insurance should I get?
Although there is no one-size-fits-all answer, it’s seen as a good idea to ensure enough coverage for a minimum of 10 times your current income. In other words, if you are taking home $40,000 annually then you should consider a policy with at least $400,000 in coverage. To get a more accurate amount that’s personalized for you, you need to consider your overall financial health. In theory, if you have a large number of liquid assets and sources of capital gains, you don’t need that much coverage – assuming this wealth is going towards your estate plan. However, if you have a large financial obligation (considerable amounts of debts that need to be repaid) that you may not realize in your lifetime, it’s a good idea to pay for more coverage.
What kinds of deaths are covered and not covered by life insurance?
For a pretty much guaranteed claim approval the policyholder’s death has to be natural, accidental, or caused by an illness. The insurance provider may reject claims if the death did not fall under one of these categories. Strict categories where the lump sum will not be paid out include: suicide, self-harm, and intoxication. Depending on the provider, some may choose to pay out the coverage to victims of homicide while some may not.
When is life insurance not worth it?
Although the vast majority of individuals stand to benefit from having life insurance, there are a few very specific situations where an insurance policy does not deliver much value. If you’ve reached a stage in life where all of your beneficiaries are financially independent, it doesn’t make much sense to pay for unnecessary coverage. On the other hand, when you consider the situation financially, the cost to benefit of getting life insurance might yet be worth it – your beneficiaries will still appreciate a sizeable pay out at any point in time.