Home Know Your Money All you need to know about family life insurance in Canada

All you need to know about family life insurance in Canada

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It’s common for young spouses in Canada to seek family life insurance. This article will help you understand how it works.

Definition of family life insurance

Family life insurance is a common way of referring to a life insurance package that covers a family. The package isn’t fixed and varies from company to company. When you shop for life insurance, you can ask the provider if they have a bundle of policies for families. Usually, family life insurance includes the following insurance coverage:

Life insurance

Term life insurance

Term life insurance covers a specific period, known as the term. This is a very affordable option for a family with young parents with children. Often, the couple will decide how long it takes until their children can be financially independent. They will buy the policy and name their child as the beneficiary. Should they pass away, the child will receive the death benefit from the policy.

For example, your child is ten years old, and you want to buy term life insurance so that if anything happens to you, your child would have some financial protection until he reaches 18. In this case, you can buy term life insurance that covers eight years, for example.

It’s essential to note that not all companies allow you to choose any term you want. Some companies offer very fixed terms, for example, 10, 15 or 20 years. Others, such as RBC or iA, give clients the freedom to choose any term length they want. On our website, we have many articles that provide reviews about different insurance companies in Canada. If you want to know more about these companies, feel free to scroll through the website to read more.

Whole life participating insurance

This is a type of lifelong insurance that provides policyholders with dividends. The provider will use your premium to make investments, and at the end of the year, you’ll receive dividends.

This is a suitable option for families who want to plan their estate. It’s also ideal for those seeking a safe way of growing their money besides saving accounts such as RRSPs and TFSAs.

It would be best if you bought this when you are young and healthy to have low premiums.

Disability insurance

Both spouses can purchase individual policies for themselves so that if one of them becomes disabled, they still have some income to get by.

Critical illness insurance

This type of insurance is for those who seek protection should they suffer from a critical illness. Most companies offer simplified plans covering three critical illnesses: heart disease, stroke and cancer, and comprehensive plans covering up to 30 critical illnesses. There are companies that sell 10-year level term critical illness insurance.

When buying this insurance, each spouse would receive a lump sum payout should they suffer from a critical illness that prevents them from participating in regular work.

Child term rider (optional)

Child term rider (CTR) is an additional rider that you can purchase in addition to your own policy (either whole life or term life). You can name your child as the policyholder and the beneficiary of the rider. In this way, your child will have their own policy that protects them. CTR is an affordable choice that parents often purchase to cover their children.

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Joint policies

Joint life insurance allows two people to be covered under the same policy. It’s an affordable option for young couples who cannot afford two individual life insurance. However, there are also a lot of limitations to this policy. Read our article about Joint life insurance to see if this is suitable for you.

Factors to consider when buying family life insurance

Duration

For those who purchase whole life insurance, the policy will last as long as they pay for the premiums. However, those who buy term life insurance need to consider the term that they choose. Our advice is to calculate how long you need the protection. Term life insurance is affordable in the short term. However, you are likely to pay for more when you renew your term. 

Also, remember that you have the choice to convert your term life insurance into whole life insurance as long as your insurance is still in effect.

One of our customers, Ms. Claire, took advantage of this to plan her insurance. In 2012, she bought term life insurance for eight years to protect her child until he turned 18. At that time, that was the only choice for her since Ms. Claire could not afford more. However, in the 6th year of the term, she decided to convert her term life insurance into whole life insurance because she wanted more sustainable protection. Fortunately, her financial situation then allowed her to do so.

Coverage amount

It’s also crucial that you choose the right amount of coverage to buy. Some people buy less than they need, so it’s not enough for them to pay for their needs when they receive the payout. The coverage amount of disability insurance, for example, should be able to replace the lost income resulting from your inability to work.

The bottom line

In a nutshell, imagine family life insurance as a package of different policies that cater to the diverse insurance needs of your family. One key to buying family life insurance is to calculate your needs carefully. For family life insurance quotes and more insurance advice, please refer to our trusted partner Insurance Direct Canada. You can also use the Company Reviews button below to read our reviews on the best insurance companies in Canada.

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