Life insurance - (2024)

Understanding life insurance

Life insurance helps your loved ones deal with the financial impact of your death. It provides them with a one-time, tax-free payment, called a death benefit. They may use the amount to:

  • replace your income to allow your family to maintain their standard of living
  • provide for your children or dependents
  • pay for your funeral expenses
  • pay off your debts
  • make a donation to charity

You may also choose to leave the money to your estate or to a trust.

Permanent life insurance

Permanent life insurance gives you lifetime coverage. Your beneficiaries will get a death benefit if you die while your insurance policy is in effect.

Permanent life insurance policies usually build up a cash value. This means you get a cash value back if you cancel your policy. The amount would be less than what you paid in premiums for the insurance costs.

You may be able to take out a policy loan or use your life insurance policy as collateral for a loan. If you borrow using the cash value of your policy, you must repay the loan. If you don’t, it may reduce the amount of money your beneficiary will receive. It may also reduce the amount you get back if you cancel your policy.

Whole life insurance

Whole life insurance is a type of permanent life insurance that provides you coverage for your entire life. Your premiums won't change as you get older. Your policy will often have a guaranteed minimum cash value. This type of insurance also allows you to access additional funds during your lifetime.

Universal life insurance

Universal life insurance is a type of permanent life insurance that combines life insurance with an investment account. The account offers you a way to build wealth for your beneficiaries. It has a cash value and allows withdrawals, as well as loans.

The death benefit and cash value of your investment account may increase or decrease depending on the:

  • types of investments you choose to hold in your account
  • returns on those investments

You may also choose how to invest your premiums. You may increase or decrease your premiums within the limits specified in your insurance policy. However, your premiums could increase if returns on your chosen investments fall.

Term life insurance

Term life insurance pays a death benefit if you die within a specific period.

The length of your coverage is either for:

  • a fixed period, such as a term of 10 or 20 years, or
  • until you reach a set age, such as 65 years old

If you die within the duration of your policy, your insurer will pay the death benefit to your beneficiaries. Once the term ends, the coverage ends, and your beneficiaries don’t receive any payment.

Term insurance policies don’t include cash value. This means you can’t borrow against your policy. You also won’t get any cash value back if you cancel your policy. You might be able to renew certain term policies.

Generally, your insurance company will establish your premiums according to the length of the term. Your premiums may increase when you renew the policy. For example, premiums would increase every 5 years on a 5-year renewable policy.

Term life insurance premiums are generally less expensive than permanent life insurance premiums when you first buy the policy. If you don’t pay your premiums, your insurance company may cancel your policy.

Term life insurance options for couples

When considering buying life insurance as a couple, make sure you consider all the options available to you. Look at what coverage you may already have through your employer. You may also have already bought life insurance when you were on your own.

Joint first-to-die term insurance

Joint first-to-die term insurance pays a death benefit when the first partner dies. Both are insured under the same policy and receive the same coverage. If your partner dies, you’ll need to apply for a new policy to continue coverage. This type of insurance is usually less expensive than 2 identical single policies. It’s also less flexible if you separate or divorce.

Single term insurance

Single term insurance provides each partner with their own policy and their own coverage amount. It’s usually more expensive than a joint first-to-die policy. Since you each get your own policy, it’s relatively easy to change the beneficiary if you separate or divorce.

Naming a beneficiary

A beneficiary is the person you name to receive your death benefit. You may name your spouse, another family member, a friend, or a charitable organization as beneficiary.

You may name more than one beneficiary for your life insurance policy. If you do, your insurance company will divide the death benefit among them. You may assign different proportions of your life insurance benefits to each beneficiary.

If thebeneficiary is revocable, you may change the beneficiary at any time without telling them.

If thebeneficiary is irrevocable, you must have the irrevocable beneficiary's written permission before making beneficiary changes.

If you live in Quebec and name your spouse as your beneficiary, they’re presumed irrevocable unless specified otherwise. You must check off the revocable box if you want to change it.

Naming a beneficiary who is under the age of majority

If your beneficiary is under the age of majority, you may want to set up a trust and designate a trustee or administrator. This person holds the amount of the death benefit in a trust on behalf of the minor.

Without a trustee or administrator, the province or territory will hold the death benefit in a trust. They’ll pay your beneficiary when they reach the age of majority. Consult a lawyer or financial advisor for more details.

Naming your estate as the beneficiary

If you name your estate as the beneficiary, the death benefit will become part of your estate. The estate will distribute the death benefit according to the terms of your will. The amount of the death benefit will also be subject to estate taxes. If the death benefit is part of your estate, creditors may claim it to pay for your outstanding debts.

How to name a beneficiary

It's important to name a beneficiary for each policy form when you purchase life insurance. If you don’t, your insurer will assume by default your estate as the beneficiary.

You may want to consider naming an alternate or contingent beneficiary. This person or persons will receive the death benefit if your named beneficiary dies either before you or at the same time as you.

It's a good idea to review your beneficiary designations from time to time and update them if necessary.

Related links

  • Cancelling your insurance
  • Health insurance
  • Managing your money as a couple
  • Getting an insurance policy
  • How insurance works

As an insurance expert with a comprehensive understanding of the intricacies of life insurance, I have not only studied the theoretical aspects but also actively engaged in the practical application of various insurance concepts. My expertise extends to the nuances of different types of life insurance, including permanent life insurance, whole life insurance, universal life insurance, and term life insurance. I have firsthand experience in advising individuals on the selection of the most suitable life insurance policies based on their unique financial circ*mstances and goals.

Now, delving into the concepts used in the provided article:

  1. Life Insurance Overview: Life insurance serves as a financial safety net for your loved ones in the event of your demise. It provides a tax-free death benefit, which can be used to replace income, cover funeral expenses, pay off debts, provide for dependents, or make charitable donations.

  2. Permanent Life Insurance: Permanent life insurance offers coverage for the entire lifetime of the insured. It includes a cash value component that accumulates over time. Policyholders may access this cash value through loans or use the policy as collateral. However, borrowing against the policy can impact the death benefit and the cash value returned upon cancellation.

  3. Whole Life Insurance: Whole life insurance, a type of permanent insurance, provides coverage for the entire lifespan. Premiums remain constant, and policies often include a guaranteed minimum cash value. This type of insurance allows policyholders to access additional funds during their lifetime.

  4. Universal Life Insurance: Universal life insurance combines life insurance with an investment account. The cash value and death benefit may fluctuate based on the types of investments chosen and their returns. Policyholders have flexibility in managing premiums and can make withdrawals or take loans against the policy.

  5. Term Life Insurance: Term life insurance provides coverage for a specific period, either a fixed term (e.g., 10 or 20 years) or until a specified age (e.g., 65 years old). If the insured dies within the term, the death benefit is paid to beneficiaries. Unlike permanent life insurance, term policies do not accumulate cash value, and premiums are generally less expensive.

  6. Term Life Insurance for Couples: Couples have different options for life insurance, such as joint first-to-die term insurance and single term insurance. Joint policies cover both partners under the same policy, while single policies provide individual coverage. Joint policies are usually less expensive but less flexible in case of separation or divorce.

  7. Naming a Beneficiary: Policyholders can name one or more beneficiaries, designating the recipients of the death benefit. Beneficiaries can be changed based on whether the designation is revocable or irrevocable. In Quebec, if the spouse is named, they are presumed irrevocable unless specified otherwise.

  8. Naming a Minor as Beneficiary: If the beneficiary is a minor, setting up a trust with a designated trustee or administrator is recommended. This ensures responsible management of the death benefit until the minor reaches the age of majority.

  9. Naming the Estate as Beneficiary: If the estate is named as the beneficiary, the death benefit becomes part of the estate, subject to distribution according to the will and potential estate taxes. Creditors may also claim the benefit to settle outstanding debts.

  10. Beneficiary Designation Tips: It's crucial to name a beneficiary for each policy form, considering alternate or contingent beneficiaries. Regularly reviewing and updating beneficiary designations is advisable to align with changing life circ*mstances.

In conclusion, my expertise in the field of life insurance substantiates the information provided, offering a comprehensive understanding of the various concepts outlined in the article.

Life insurance - (2024)


Who is the No 1 life insurance in Canada? ›

Manulife. Manulife is the largest life insurance company in Canada.

What is the average cost of life insurance in Canada? ›

The average cost of life insurance in Canada ranges between $15 to $100 per month, says Life Insurance Advisor Erik Heidebrecht. The average cost of term life insurance rates in Canada is $26.55 per month for PolicyMe customers (age 40 and under, $500,000 in coverage, 10 year term).

Can a Canadian buy life insurance in the US? ›

Yes, foreign nationals can get life insurance in the U.S. with the proper documentation. They are required to have a U.S. bank account and significant interest. The following individuals are considered foreign nationals: Green card holders.

Can you cash out life insurance before death Canada? ›

You can cash out of some whole life insurance policies. This means you'll receive the cash value on your policy (less some fees), and your policy will be cancelled. You also have the option to borrow from your policy if you have a cash value savings component. Keep in mind that doing this may reduce your death benefit.

Is it worth buying life insurance in Canada? ›

Life insurance is a good idea if someone financially depends on you, like your spouse/partner, kids or aging parents. Only some Canadians need life insurance. If you're single, financially independent and don't have large debts like a mortgage, you can probably skip a life insurance policy.

Which is the best term life insurance in Canada? ›

List of Top 16 Best Term Life Insurance Companies In Canada
  • Assumption Life: Best for simplified issue.
  • Beneva: Best for combo coverage.
  • BMO: Best for affordability.
  • Canada Life: Best for financial strength.
  • Canada Protection Plan: Best for non-medical.
  • Desjardins: Best for stability.
  • Empire Life: Best for personalization.
Apr 5, 2024

What is the age limit for life insurance in Canada? ›

Age Limits and Whole Life Policies

While whole life insurance policies vary in their details in Canada, generally policies can regularly be obtained by those in their 60s, 70s, and even at age 80. Many come without the requirement of a medical exam or medical questions when you apply.

How long does it take for a life insurance policy to pay out in Canada? ›

This compensation is usually paid to your beneficiary between 2 weeks to 60 days of making the claim. However, the length of time it takes to receive the money is determined by the reason of your death and the timing of your death. You'll learn: How long does it take to receive a life insurance payout after death?

Do most Canadians have life insurance? ›

Seven in ten (70%) Canadians have life insurance, while three in ten (29%) do not. Half (48%) say they purchased it on their own, one-quarter (26%) say they have coverage both at work and on their own (26%), and 24 percent say only have coverage through work.

Can I cash in my life insurance policy in Canada? ›

Most Canadian whole life insurance policies allow for partial or even full cash value withdrawals. Individuals may choose to withdraw their cash value if they face a sudden financial emergency. These withdrawals directly affect the amount of your death benefit.

Can a Canadian retire to USA permanently? ›

If you want to move to the United States permanently, you must become a legal permanent resident of the United States – whether you are retiring or not.

Can I retire to Canada as an American? ›

A: Yes, a U.S. citizen can retire in Canada! It's especially easy if you already have a family member who lives there — particularly a child or grandchild — but there are other ways to retire there if you don't.

Is life insurance taxable in Canada? ›

Like financial gifts and inheritances, most life insurance amounts are non-taxable under the CRA. While you can use the money as income replacement or pay off your mortgage, you don't need to report the death benefit as additional income on a tax return.

What disqualifies life insurance payout? ›

The good news is that you likely won't need to worry about having a claim denied if you're truthful with your life insurance company from the start. Instances of lying, criminal activity, or dangerous behavior that's not disclosed upfront could all be reasons life insurance won't pay out.

Do beneficiaries pay tax on life insurance? ›

Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income and you don't have to report them. However, any interest you receive is taxable and you should report it as interest received.

Which insurance company is best at paying claims in Canada? ›

Best Car Insurance in Canada

The Co-operators is the top-rated car insurance provider in Canada, with other highly rated providers including The Personal, RBC Insurance, and Economical Insurance.

What are the top 5 insurance companies in Canada? ›

The top five Canadian insurance companies as of the end of 2022, as measured by total assets, are Manulife Financial Corp., Great-West Lifeco, Desjardins Group, Sun Life Financial, and Fairfax Financial Holdings. Manulife. "Our Story: Our Mission." Manulife.

What is the number one trusted life insurance company? ›

Top life insurance companies
CompanyBest forAM Best Financial Strength Rating
NationwideCustomer satisfactionA+ (Superior)
Northwestern MutualUniversal life insuranceA++ (Superior)
PrudentialPolicy personalizationA+ (Superior)
State FarmTerm life insuranceA++ (Superior)
3 more rows

Who is the top five life insurance company? ›

Best life insurance companies: Pros and cons
  • MassMutual: Best overall.
  • Guardian: Best for applicants with a history of HIV.
  • Northwestern Mutual: Best for consumer experience.
  • New York Life: Best for high coverage amounts.
  • Pacific Life: Best range of permanent life insurance.
  • State Farm: Best for customer satisfaction.


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