How much is life insurance in Canada?

12 minute read Published on Jun 22, 2023 by BrokerLink Communications

A mother and father with two elementary school aged daughters on their back. All are smiling while walking in the fresh air.

Life insurance is an integral part of the financial strategy because it provides invaluable security for you and those you love in the event of an unexpected event. However, with an extensive array of policies available, finding the right coverage can be challenging. BrokerLink can help with that.

Our team of insurance brokers is committed to assisting you in navigating the complexities of life insurance and selecting the best policy for your particular situation and financial situation. We work closely with you to ensure that you have access to the greatest selections available from some of the leading life insurance companies in Canada, and we have a wide range of insurance providers at our disposal. At BrokerLink, we believe that life insurance should give you the peace of mind you need to enjoy life to the fullest.

To learn more about how life insurance works in Canada, keep reading.

Types of life insurance

The complexities of life insurance can be intimidating, leaving people unsure of where to begin. As a result, many people avoid purchasing life insurance altogether. However, don't let a lack of knowledge prevent you from making informed decisions. With the help of this guide to life insurance in Canada, you can gain an excellent grasp of life insurance and feel confident in choosing the best plan for your needs. Here is a closer look at the different types of life insurance options that are available to you:

Term life insurance

Term life insurance is a policy that provides policyholders coverage for a fixed length of time, typically ranging from 10 to 30 years. If the policyholder dies during the policy's duration, their beneficiaries receive their proceeds. If the policy expires while that person is still alive and well, no payment is made. It's important to remember that when the duration of the policy lapses, it can be renewed or substituted with another one.

Permanent life insurance

If you want a life insurance policy that will cover you for the rest of your lifespan, then permanent life insurance might be the best option for you. Permanent life insurance, compared to term life insurance, does not have a termination date. Furthermore, with permanent life insurance, part of the monthly premiums you pay are used to accumulate cash equivalents over time. This means you have the ability to borrow against the cash value of your policy if necessary.

Joint life insurance

A joint life insurance policy insures two individuals under one policy. This kind of policy pays out when one of the members dies. Common-law partners may be able to buy joint life insurance in addition to married individuals. Joint life insurance covers both parties under one contract, which can be less expensive than two separate policies.

How are life insurance premiums calculated?

When you purchase life insurance, you pass on the monetary burden of passing away to the insurance provider. When you die, the insurance company assures you to pay a death benefit to your beneficiaries in exchange for the premiums you have paid.

The insurance provider must set costs that reflect the risk profile of their customers. Therefore, factors that increase the probability of mortality will raise your life insurance premiums. Here is a closer look at some of the variables your insurance company will consider while calculating your premium:

Age

The cost of life insurance tends to rise as you get older. This is because the older you become, the more probable it is that you will die. Because the risk assumed by your insurer is lower when you're young and in good health, life insurance tends to be more affordable at that age and the price increases gradually as you age.

Gender

Did you know that, on average, women live longer lives than men? Because of the disparity in life expectancy, women typically pay less for life insurance coverage than men. Because women are more likely to live longer lives, insurance firms consider them to be less risky to insure.

Driving record

When you submit applications for life insurance, your driving history is frequently checked to assess your risk level. Your driving record can influence the likelihood of accidents and, thus, your risk of death, which insurers consider when evaluating your application. If you have a poor driving record, meaning you have a record of collisions or traffic tickets, you may be regarded as more of a danger and thus face higher premiums. If you have a good driving record, you may be considered lower risk and get lower rates.

The medical history in your family

When you apply for life insurance, an insurance company will inquire about the medical history of your family. This is because certain illnesses, such as cardiovascular disease or cancer, have a genetic basis. If any of those in your immediate family have had these illnesses, you may be at a higher risk of developing them as well.

Current health

Your health has a significant impact on the cost of life insurance premiums. Insurance companies might require you to take a medical exam, share details about your lifestyle habits, and disclose any medications you're taking in order to assess your health. Your premiums can be affected by factors such as your weight, blood pressure, and cholesterol levels. Your premiums may be higher if you have pre-existing medical conditions or participate in risky behaviours such as tobacco use.

Job title

Your occupation also has a significant impact on the cost of your life insurance. To calculate your premiums, life insurance companies consider the risks related to your job. If you work in a hazardous profession, such as firefighting or policing, you may face higher insurance rates due to the increased risk than someone who works in an office.

Hobbies

Lastly, if you participate in high-risk activities such as parachute jumping, scuba diving, or climbing mountains, your premiums may be raised. This is because your insurance provider determines these activities to be risky, increasing your chances of an accident or injury.

Mistakes to avoid when buying life insurance

Your life matters. So, making sure you have the correct insurance coverage is essential, as disasters can happen at any moment. As such, here are some mistakes to avoid when buying insurance:

Holding off on buying insurance

Getting life insurance early in life is a wise decision. Because rates are generally lower for younger policyholders, the earlier you buy, the better. Because of various medical conditions, the cost of insurance has a tendency to increase as you get older. As a result, if you buy your policy when you're young, your rates are going to increase gradually over time. So, don't put it off any longer, start your life insurance today.

Not being completely transparent

Your insurance broker is going to ask you a number of questions to help determine your life insurance premium. So be truthful and avoid lying, as withholding information may prevent you from receiving coverage if you need to file a claim later down the line.

Buying a policy only because it is cheap

It is critical to find an insurance policy that is both cost-effective and adheres to your needs, but keep in mind that more coverage can be advantageous. While a basic plan may provide some protection, expanding coverage may be worthwhile.

At what age should you get life insurance?

Life insurance can be a wise investment for anyone, irrespective of age or circumstance. We recognize that everyone's situation is unique and that having the right coverage can make a world of difference. Whether you have financial dependents, substantial debts, or plans for your children's future, life insurance can provide you with peace of mind and protect those closest to you should anything unexpected occur.

Even if you're under 30, life insurance may be a worthwhile investment. If you have a lot of debt or valuable possessions, life insurance can protect you and help you safeguard the future of your finances. Furthermore, buying life insurance at a younger age often results in lower premiums, making it a cost-effective investment that will benefit you long term.

What is the average life insurance cost?

The cost of life insurance coverage can vary widely based on many factors, such as your age, health, occupation, lifestyle habits, and the type and amount of coverage you select. As a general rule, term life insurance is typically less expensive than permanent life insurance, and your premiums can be as low as a few dollars per month, whereas a more comprehensive permanent life insurance policy may cost a couple hundred. Therefore, the best thing you can do is contact your broker for a free quote and shop around for the most affordable option for your needs that offers flexibility.

What should I look for when it comes to life insurance?

If you know what to look for, finding the right life insurance policy can be a breeze. Here are three critical factors that your life insurance policies must contain:

Affordability

It's critical to find a life insurance company that fits your budget while also providing sufficient coverage. Look for a company that has low premiums and comprehensive insurance policies that meet your specific requirements by partnering with a broker. This will enable you to compare quotes and find one that fits your needs and budget without sacrificing protection.

A company with an esteemed reputation

It is critical to select a life insurance provider on whom you can rely, as they will be the ones to care for your family members if you pass away. Take the time to research the track record of the provider you're considering ensuring you're making the right choice. Search for customer reviews online to see what others are saying about the company.

Quick payouts

Life insurance is a significant investment that can provide financial security to those you love after you pass away. When choosing a policy, make sure that your beneficiaries obtain the total payout amount right away upon your death. This will give you peace of mind that your loved ones are looked after throughout a trying period.

A medical history that is accepted

When shopping for life insurance, it's critical that you recognize that your medical history will influence the cost of your premiums. Certain insurance providers may charge you more if you have a pre-existing medical condition. That's why it's critical to do your research and shop around for a company that will be more understanding of your medical history. This allows you to find a policy that corresponds to your budget while also providing the coverage you require to protect the people you love.

The right insurance for you

When it comes to life insurance, it's critical to understand the various types available to you. Each policy has its own set of features, benefits, and drawbacks, so you must select the one that best meets your requirements. For example, term life insurance covers you for a set period of time. It's ideal for those who only need coverage for a brief duration of time, such as until their children reach adulthood or their home loan is paid off.

In contrast, whole life insurance covers you for the rest of your life. It has no expiration date and includes a savings component that your insurance company puts in. Lastly, universal life coverage is a type of whole life insurance with an investment component. This approach enables you to accumulate tax-free value in cash that can be utilized for a variety of reasons over time.

How much life insurance coverage do you need?

A question we often receive at BrokerLink is how much life insurance do I need? And to be honest, this is something we aren’t able to answer without speaking with you. Identifying how much life insurance coverage you require can be a difficult task because it differs based on your personal circumstances. A good place to start is to make sure your policy covers your financial obligations, income replacement, mortgage, and costs associated with education. It's best to speak with one of our knowledgeable brokers to determine your specific requirements.

Why choose BrokerLink

BrokerLink is committed to providing dependable and efficient insurance solutions that are tailored to your specific needs. Our goal is to give you the peace of mind you require to concentrate on what really counts in life. We have you covered whether you need coverage, including life insurance, home insurance, car insurance, and more.

We collaborate with a number of reputable insurance companies to help you compare policies and find coverage that meets your specific needs. Our priority is to provide you with dependable and cost-effective choices that you can rely on. We recognize that everyone's situation is unique, which is why our team of experienced brokers will take the time to learn what you need specifically and propose the best policy for you.

Don't hesitate to get in touch with us if you are feeling overwhelmed by the life insurance selection process. We're here to assist you in locating the coverage you require to protect the people you love and maintain your peace of mind.

Contact us to learn more

We understand that navigating the world of life insurance can be a complicated and overwhelming process. That is why we strive to provide personalized solutions that are tailored to your specific requirements. We have a variety of locations across Canada that can accommodate you, regardless of whether you prefer a phone call, an email, or an in-person meeting. We also recognize how valuable your time is, which is why we created an easy-to-use online quote tool that generates reliable insurance estimates promptly and at no cost to you.

Don't hesitate to contact us today; our goal is to make obtaining insurance as simple and painless for you as possible.

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How much is life insurance in Canada FAQs

What is the average life insurance premium for smokers?
Smoking or using tobacco products is not only bad for your health, but it can also hurt your wallet when it comes to life insurance costs. Smokers are considered higher-risk customers by insurance companies because they are more likely to develop health problems such as cancer or a stroke. Smokers may anticipate paying two to three times more for life insurance than nonsmokers due to the higher risk they pose. It's also worth noting that most insurers treat vaping similarly to smoking, so if you vape, you may have to pay more for your insurance.

Should I get life insurance even if my work offers it to me?

Individual life insurance coverage is frequently overlooked by people who rely solely on their employer's group life insurance coverage. While group insurance can be inexpensive and practical, it may not meet the protection requirements when you're in need of it. One of the most significant drawbacks of group life insurance is its restricted coverage, which might not be sufficient to protect the people you love in the event of your sudden passing. Another disadvantage is the lack of policy control and limited portability, meaning you might forfeit coverage if you change jobs or leave your employer.

Furthermore, group life insurance benefits are frequently taxable, so your beneficiaries might get less money than anticipated. This is where a personal term life insurance policy can help. Therefore, if you’re currently on a group life insurance policy, it may be worth looking into purchasing a separate policy for yourself that can be tailored more uniquely to your needs.

How does life insurance fit within my estate planning?

You may be wondering, “how does life insurance fit within my estate planning?” Essentially, when you die, your estate is assessed and taxed according to the current market value of all your assets, which includes real estate, business stock, and investments. This can be a substantial sum, reducing the value of your estate and leaving those you love with an enormous tax burden. That is why including a policy for life insurance in your estate plan can be beneficial. By establishing a policy with sufficient cash, you can ensure that any remaining taxes are paid and that your estate is not negatively impacted.

One of the advantages of life insurance reimbursements is that it is private. The money is distributed directly to the beneficiaries named in your policy and refrains from becoming part of your estate. This implies that your affairs are resolved privately, and your estate's terms and details are not made public.

Is life insurance taxable in Canada?

A typical question insurance brokers receive is, "is life insurance taxable in Canada?" And to answer this, in Canada, most life insurance policies provide a tax-free death benefit to the beneficiaries designated in the policy. This means that the recipients will not be required to pay income tax on the sum they were given. However, if the policyholder fails to specify a beneficiary or if the beneficiary is the policyholder's estate, the death benefit may be taxed because it becomes a component of the estate.

It is essential to note that, according to the scope and complexity of the estate, the beneficiaries may be required to pay additional estate taxes and fees. It is advised that you specify the beneficiary and keep the policy up to date with any changes in personal circumstances or life occurrences in order to prevent potential taxation on the death benefit. This can help make sure your family members receive the entire benefit without incurring any extra financial obligations.

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