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Life Insurance in Canada

Updated: June 12th, 2023

When moving to Canada, having insurance in Canada is vital. If something happens to you in Canada, you want to ensure your family and loved ones are looked after in your absence. However, getting life insurance in Canada may differ greatly from the process you use at home. Upon delving deeper into Canada life insurance, you will discover many plans and policies that cater to diverse needs and varying financial situations. Life insurance in Canada can be broadly categorized into two primary types – term life insurance and permanent life insurance. Each type has its features, pros, and cons.

As you navigate the complexities of Canada life insurance, it's crucial to take note of factors such as the coverage amount, premium rates, riders (additional benefits), and the insurer's financial strength. Our guide also delves into comparisons between top life insurance providers in Canada to facilitate a more informed decision-making process. This allows you to gauge their track record, customer service quality, and overall reputation within the industry.

How Does Life Insurance Work in Canada?

How Does Life Insurance Work in Canada?

In Canada, insurance comes in multiple forms, including the following: 

Life insurance Canada is a form of personal insurance. The main function of life insurance in Canada is to provide financial protection for your loved ones in the event of your death. This can include replacing lost income, paying off outstanding debts, covering funeral expenses, and providing funds for your children's education. Life insurance can also be used as an investment vehicle, allowing you to accumulate tax-sheltered savings that can be used for various purposes, such as retirement or funding a business.

Life insurance in Canada has a long-standing history, dating back to the 19th century. Over the years, life insurance has evolved to meet the changing needs of Canadians, with new products and services being introduced to provide better coverage. This rich history demonstrates the importance of life insurance as a financial planning tool for Canadians. It highlights the industry's commitment to protecting the financial well-being of families across the country.

Canada life insurance is a contract between you and the insurance company, where you pay premiums in exchange for a lump sum payment to your beneficiaries upon your death. The primary purpose of life insurance is to provide financial security and peace of mind to those you leave behind. It can cover expenses such as funeral costs and mortgage payments and even help maintain your loved ones' standard of living. With several types of life insurance available, it is crucial to understand the differences and choose the right plan for your needs.

Term Life Insurance

Term life insurance is a straightforward and affordable option that provides coverage for a specified period, usually 10, 20, or 30 years. If you pass away during the term, the insurance company pays a tax-free death benefit to your designated beneficiaries. Term life insurance premiums are generally lower than other types of life insurance, making it an attractive option for young families and those on a budget. However, once the term expires, coverage ends, and you may need to renew your policy or purchase a new one, often at a higher premium.

Permanent Life Insurance

In today's uncertain world, protecting one's financial future has become a priority for many individuals. Investing in permanent life insurance is one way to ensure financial security for oneself and one's family. In Canada, permanent life insurance provides long-term coverage that does not expire, as long as the policyholder continues to pay the premiums. 

This type of insurance offers a death benefit to the beneficiaries and can accumulate cash value over time, making it a valuable investment option. Two popular forms of permanent life insurance in Canada are Whole Life Insurance and Universal Life Insurance.

Whole Life Insurance

Whole life insurance is a type of permanent life insurance that offers lifelong coverage, guaranteed premiums, and a guaranteed death benefit. This policy provides the policyholder with a fixed premium payment for the duration of the policy, ensuring that the cost of coverage remains constant throughout their lifetime. As the policyholder continues to pay their premiums, the policy's cash value grows at a guaranteed rate. 

This cash value can be accessed during the policyholder's lifetime through loans or withdrawals, providing additional financial options in times of need. In addition to its death benefit, whole life insurance allows policyholders to participate in the insurance company's earnings through dividends, which can increase coverage or reduce future premiums.

Universal Life Insurance

Universal life insurance, another form of permanent life insurance in Canada, offers more flexibility than whole life insurance. This type of policy allows the policyholder to customize their premium payments and death benefits according to their needs and circumstances. The cash value component of universal life insurance grows based on the performance of underlying investments chosen by the policyholder. 

Unlike whole life insurance, universal life insurance does not guarantee a minimum rate of return on its cash value component. However, this also means it has the potential for higher returns if the underlying investments perform well.

Both whole and universal life insurance provides valuable long-term coverage for Canadians looking to protect their families and secure their financial future. While whole life insurance offers guaranteed premiums, death benefits, and cash value growth, universal life insurance provides greater flexibility in premium payments and the potential for higher returns on investment. 

Choosing between these two types of permanent life insurance depends on the individual's unique financial goals, risk tolerance, and personal preferences.

When comparing different insurance products, consider factors such as the cost of premiums, the length of coverage, and the potential for cash value growth. It is essential to consult with an insurance advisor or broker who can help you assess your needs and recommend the most suitable policy for your situation.

It's important to note that insurance companies criteria for issuing a policy may vary depending on your insurance type. Age, sex, medical history, credit history, and previous claims may be considered. Additionally, there are different types of life insurance coverage, including term and permanent insurance, each with unique features designed to meet different needs. If you want to ensure you're eligible for Canadian life insurance, you can hugely benefit from a full evaluation from an RCIC before you start.

How To Apply for Canada Life Insurance

How To Apply for Canada Life Insurance

If you're considering applying for life insurance in Canada, here are the typical steps involved:

Step 1: Determine Your Coverage Needs and Budget

Evaluate your financial obligations, dependents' needs, and long-term financial goals to determine how much coverage you need. Life insurance companies in Canada offer a wide range of coverage options to suit the diverse needs of Canadians. Some common coverage options include:

  • Basic Coverage
    • Provides a standard death benefit to your beneficiaries in the event of your death.
  • Joint Coverage
    • Covers both you and your spouse, paying out a death benefit upon the first partner's death.
  • Child Coverage
    • Offers life insurance coverage for your children, typically as a rider on your policy.
  • Critical Illness Coverage
    • Pays a lump sum benefit if diagnosed with a covered critical illness, such as cancer, heart attack, or stroke.

Step 2: Compare Various Life Insurance Companies in Canada

Research different life insurance policies and companies to find the best fit for your needs.

Manulife Financial

As Canada's largest insurer, Manulife Financial is a household name for insurance. With almost $40 billion in premiums collected annually, it offers various financial services, including life insurance. Whether you're looking for term or permanent life insurance in Canada, Manulife Financial has you covered.

Canada Life

Founded in 1847, Canada Life is one of the country's oldest and largest insurers. With $396 billion in assets and an impressive A+ financial strength rating from A.M. Best, it's no wonder many Canadians trust Canada Life for their life insurance needs.

Sun Life

Established in 1865, Sun Life Financial is one of the oldest insurance providers in Canada. Sun Life Financial is a trusted name in the industry, offering a wide range of products and services, including life insurance.

Great-West Life

With six subsidiaries under its belt, Great-West Life is a holding company offering various insurance and financial services. It has provided financial security to Canadians for over 125 years and has earned a reputation for being a reliable and trustworthy insurance provider.

RBC Insurance

RBC Insurance offers various life insurance products, including term life, universal life, and critical illness insurance. RBC Insurance caters to the needs of Canadians of all ages and has been in business for over 150 years. With its strong financial backing and excellent customer service, RBC Insurance is a popular choice for those seeking a reliable insurance provider.

Industrial Alliance

Industrial Alliance is one of the largest life insurance companies in Canada, boasting over 4 million clients. It offers various insurance and financial services, including individual and group life insurance, savings and retirement plans, and more. Its commitment to providing financial security to Canadians has earned it a reputation as a trusted and reliable insurance provider.

Empire Life

Empire Life has been in business for over 90 years and offers a variety of life insurance products, including term life, whole life, and universal life insurance. Empire Life’s commitment to providing personalized service and its focus on innovation make it an excellent choice for those looking for a life insurance provider that caters to their specific needs.

BMO Insurance

BMO Insurance is a member of the BMO Financial Group, one of Canada's largest financial institutions. They offer term and permanent life insurance, accident, travel, and critical illness insurance. BMO Insurance also offers income annuities and guaranteed investment funds.

Desjardins Insurance

Desjardins Insurance was created in 1944 under the name of "Société d'assurance des caisses populaires" (SACP), which is now known as Desjardins General Insurance. It is the insurance unit of Desjardins Group, Canada's largest credit union association. Desjardins Insurance is also known for using innovative technologies, such as IBM Watson, to enhance its services and provide value to its customers.

Beneva Insurance 

Beneva is a Canadian mutual insurance company established in mid-2020 by merging La Capitale and SSQ Insurance. The company offers comprehensive loan insurance, which provides policyholders with a monthly amount to assist in paying the loan premiums.

Choosing a life insurance provider in Canada can be a daunting task. Still, by considering the top insurance companies in Canada, you can ensure you have the financial security you need. These companies offer a wide range of insurance and financial services, allowing you to choose the one that best suits your budget and needs.

Step 3: Consult an Insurance Advisor or Broker 

Discuss your options and obtain professional advice from an insurance advisor or broker. Ask trusted relatives, friends, or business associates if they can recommend an agent or broker. If you're new to Canada, one of the best ways to start is to speak to an expert in starting a new life in Canada, like a Regulated Canadian Immigration Consultant (RCIC).

Step 4: Complete the Application Form and Submit Any Required Documentation 

Fill out the application form and provide any necessary documentation, such as proof of income or medical records. Each company has a different application form, so be sure to get your application form from your choice out of the insurance companies in Canada.

Step 5: Undergo a Medical Examination if Required 

Some insurance companies may require a medical examination to assess your health and determine your eligibility for coverage. Learn more about how medical issues can affect your life in Canada.

Step 6: Review and Sign the Policy Documents

Once your application is approved, review and sign the policy documents.


Is Life Insurance Taxable in Canada?

In Canada, life insurance proceeds paid to your beneficiaries upon death are not taxable income. However, certain situations may result in tax implications, such as when the policy's cash value is accessed through loans or withdrawals. If you have questions about your life insurance policy's tax implications, consult a tax professional or financial advisor.

How Much is Life Insurance in Canada?

The cost of life insurance in Canada varies depending on age, health, lifestyle, coverage amount, and the type of policy you choose. Term life insurance tends to be more affordable than permanent life insurance, making it a popular choice for those on a budget. To get an accurate estimate of the cost of life insurance, it is essential to obtain quotes from multiple insurance providers and compare their offerings.

Get Covered in Canada

Get Covered in Canada

Protecting your loved ones with Canada life insurance is a crucial aspect of financial planning that ensures their financial security and well-being. By understanding the benefits and coverage options available, you can make an informed decision about the right life insurance plan for you and your family. Don't hesitate to seek professional advice from an insurance advisor or broker to help you navigate life insurance and choose the best policy for your unique needs.

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