When considering how to buy life insurance in Canada, it’s crucial to approach the decision with thorough research and careful planning. This extensive guide will outline the essential steps for selecting the right policy, calculating your coverage needs, comparing providers, navigating the application process, and maintaining your plan. Follow these best practices to ensure you secure the ideal life insurance solution.
Why Should You Buy Life Insurance in Canada?
Life insurance is critical for protecting dependents in case of your untimely passing. Here are some key reasons Canadians need coverage:
- It can help pay ongoing living expenses, final bills, outstanding debts, college savings, and beneficiaries’ retirement needs.
- It provides security and options for loved ones during an already challenging time after losing your income.
- It avoids drastic financial hardship and lifestyle cuts for family members relying on you.
In short, adequate life insurance delivers invaluable peace of mind, knowing your family will be financially supported if you’re no longer there.
What Types of Life Insurance in Canada Are Available?
There are two primary types of life insurance—term and permanent. They work differently regarding durations of coverage, premium costs, cash value components, and flexibility.
Term Life Insurance
Term life insurance covers a set period or “term”, ranging from 10 to 30 years. It only pays if you die within the specified term.
Term insurance features lower premiums but no cash value. It’s well suited for temporary needs like covering a mortgage.
Permanent Life Insurance
Permanent life insurance covers you for life as long as you pay premiums. It builds cash value that you can access while living.
Permanent insurance features lifelong protection and cash value but more expensive premiums. It’s better for lifelong coverage or leaving inheritances.
Consider your budget, timeline, goals, and risks to decide between term or permanent coverage.
Here is a comparison of the key characteristics between term and permanent life insurance:
Type | Premium Cost | Length of Coverage | Cash Value | Flexibility |
Term Life | Lower | Fixed term (e.g. 10-30 years) | None | Can convert to permanent later |
Permanent Life | Higher | Lifelong | Accumulates over time | Access cash value via loans/withdrawals |
How Much Life Insurance Do You Need?
Determining the right amount of coverage is critical so your family has enough support without overpaying for unnecessary premiums.
To estimate your needs, add your income replacement costs, outstanding debts, final expenses, education funding needs, and emergency funds. This provides a starting point to discuss with an advisor who can help customize the amount.
It’s also wise to re-evaluate your needs every 5-10 years as income, debts, and family circumstances evolve. Your required coverage likely decreases over time.
How To Buy Life Insurance in Canada
Now that you know the type and amount of life insurance best for you, it’s time to buy a policy. Here are the main options for purchasing coverage:
Direct From Life Insurance Companies
The most direct option is to go directly through insurance companies, either online, over the phone, or in person at a branch. You can get quotes and apply through their website or sales representatives. Some of Canada’s largest insurers include Manulife, Sun Life, RBC Insurance, and Canada Life.
Pros
- Simple and convenient
- Competitive Pricing
- Work directly with the insurer
Cons
- Limited to one company’s products
- Inconsistent customer service
- Complex products are hard to grasp alone
Through Independent Life Insurance Brokers
Brokers have access to policies from an extensive network of insurance companies. They help compare quotes across insurers to find you the best fit.
Pros
- Access many insurer products
- Broker expertise guiding you
- Get quotes from multiple companies
Cons
- Commission motivated sales
- Rely on the broker’s product knowledge
- More hands-off service after purchase
Via Life Insurance Advisors
Advisors are licensed professionals who provide financial planning and advice around life insurance tailored to your needs. They help simplify the buying process and provide ongoing policy management.
Pros
- Personal guidance from a pro
- Help matching coverage to needs
- Ongoing policy maintenance
- Objective advice across insurers
Cons
- Pay advisor fees upfront
- Rely on advisor competency
Through Workplace Plans
Some employers provide access to group life insurance plans funded wholly or partly by employees. Rates are bundled across the workforce.
Pros
- Potentially lower rates
- Application process simplified
- Premiums deducted from pay
Cons
- Limited plan selection
- Coverage is lost if you change jobs
- Group coverage limits
Via Online Marketplaces
Platforms like Ratehub, LowestRates, and Kanetix let you compare quotes from insurers via one online form. This offers convenience at a mass scale.
Pros
- Easily compare quotes
- Applied to multiple insurers simultaneously
Cons
- Impersonal digital experience
- Weak guidance on products
- Pay intermediary platform fees
Critical Factors to Compare Between Life Insurance Policies
Once you’ve received some preliminary life insurance quotes, take time to thoroughly evaluate and compare them across the following key factors:
Types of Coverage Offered
- Term, permanent, whole life, universal life, etc. Match what you need.
Length of Coverage
- Ensure the term meets your needs or provides lifelong coverage.
Premium Costs
- Weigh premiums vs. your budget and cost of living. The cheapest isn’t always the best.
Death Benefit Amount
- Adequately replaces income and covers financial obligations.
Cash Value & Investment Returns
- Project cash value growth for permanent policies. Ask about crediting rates.
Policy Riders & Features
- Assess if you need extra benefits like waiver of premium, critical illness, or disability riders.
Insurance Company Financial Strength
- Choose an established insurer with solid credit and financial ratings.
Customer Service Reputation
- Read reviews and complaints data across providers. Prioritize responsive insurers.
Finding the optimal balance across these factors will lead you to the right high-value life insurance policy for your specific needs. Don’t just default to the cheapest premium or make a quick decision.
What Does the Life Insurance in Canada Application Process Involve?
Here are the key steps to secure coverage after choosing a policy:
- Completing detailed application forms
- Potentially undergoing a medical exam for underwriting
- Interviewing with an insurance underwriter
- Getting rated and approved based on your risk
- Picking beneficiaries for the death benefit
- Activating your policy by paying the first premium
Be prepared to answer health and lifestyle questions. Provide accurate medical history to avoid issues later.
How Do You Maintain Your Life Insurance After Purchasing?
Best practices for ongoing policy maintenance include:
- Setting up automatic premium payments to avoid lapses
- Regularly reviewing your coverage needs as life circumstances change
- Promptly notifying the insurer of any changes like address or beneficiaries
- Checking renewal premiums for rate increases and shopping accordingly
- Contacting the insurer before considering cancelling a policy
Proper maintenance has provided your policy with financial solid protection for decades.
Why is Life Insurance in Canada Important for Young Families?
Life insurance is especially critical for young families who are relying on your income to cover the mortgage, daily expenses, child costs, and other financial obligations. It protects against derailing your family’s financial life in the case of an unexpected passing.
Some key reasons life insurance is so valuable when you’re young with dependents are:
- Your income is crucial for supporting a family but would be lost if you passed away prematurely. Life insurance replaces this income.
- You likely have significant debts like mortgages and student loans outstanding that would still need repaying by your family after you’re gone.
- Your children depend on you for housing, food, education, childcare, and all their needs. These costs continue even without your paycheck.
- Your spouse may need to take time off work or hire help after losing you. Life insurance proceeds help compensate for lost dual incomes.
- Funeral final expenses, estate taxes, and medical bills can also burden families. Life insurance covers these costs.
The bottom line is that life insurance allows your family to financially survive and maintain their lifestyle if they lose you and your income.
How Can You Get Life Insurance in Canada With Pre-Existing Health Conditions?
Getting life insurance may be more challenging if you have pre-existing medical conditions, but it is still possible in most cases. Here are some tips:
- Disclose your full medical history upfront so insurers can factor it into pricing accurately. Being transparent prevents issues later.
- Be prepared to go through additional underwriting questioning about your health history and prognosis.
- You may pay higher premiums depending on the severity of your condition and the likelihood of impacting your lifespan.
- Seek no medical exam “simplified issue” policies that use minimal health screening.
- Compare quotes across multiple insurers, as some specialize in higher-risk applicants. An independent broker can help with this.
- Look into guaranteed issue life insurance, which doesn’t require medical underwriting.
- Accept a lower benefit amount or shorter term length if these make policies more affordable. Some coverage is better than none.
- Making positive lifestyle improvements like losing weight, reducing alcohol use, or quitting smoking may also help secure more favourable rates.
With preparation and a willingness to search and compromise, there are still options to get covered, even with health conditions. Don’t give up if declined by one or two insurers initially.
How Often Should You Review and Adjust Your Life Insurance Policy?
It’s important to periodically review your life insurance policy to ensure you have the right amount and type of coverage as your needs evolve. Here are some best practices:
- Review your full coverage every five years or after significant life events like marriage, new children, retirement, etc.
- Compare your current benefit amount to your income, debts, and family responsibilities. Adjust if needed.
- As you age, consider reducing coverage and switching savings to retirement accounts once dependents are independent.
- If health declines, you likely can’t increase coverage later, so keep a buffer in case needs arise.
- Ask about policy options to reduce premiums over time, such as lower guaranteed insurability amounts.
- Discuss converting term policies to permanent insurance before term renewal if you now want lifetime coverage.
- Review beneficiaries and update as needed due to deaths, marriages, births, divorces, etc.
- Confirm the insurer and contact info are current in case your family ever needs to file a claim.
FAQs about How to Buy Life Insurance in Canada
How to buy life insurance in Canada?
You can buy life insurance directly from insurance companies, through independent brokers, or with an insurance advisor's help. You can also get coverage via employer group plans or online insurance marketplaces.
What types of life insurance can I buy in Canada?
The main options are term life insurance or permanent life insurance. Term life covers a set period, while permanent offers lifetime coverage. Within permanent, there is whole life, universal life, and variable life.
Where can I get quotes for life insurance in Canada?
You can get life insurance quotes directly from insurer websites, comparison sites like RateHub and LowestRates, or independent brokers and advisors who have access to quotes from multiple companies.
When should I buy life insurance in Canada?
Buying life insurance when you are young and healthy is best, as premiums will be lower. Buying early allows more years for cash value to accumulate tax-deferred if you choose permanent insurance.
Do I need a medical exam to get life insurance in Canada?
Most life insurance policies require a medical exam, blood work, and doctor's records as part of the underwriting process. However, some simplified issue policies are available with minimal or no medical screening.
How often should I review my life insurance policy in Canada?
Review your life insurance needs at least every five years or with significant life events. Adjust coverage or policy types accordingly as your income, debts, dependents, and goals evolve.
What steps should I take to buy life insurance in Canada?
Calculate your needs, compare quotes on policy types and prices, complete applications and medical underwriting, get rated and approved, pay the first premium, name beneficiaries, and maintain payments.
Conclusion
While it takes effort upfront, proper coverage provides invaluable peace of mind. Connect with a licensed advisor for guidance tailored to your family’s specific needs and budget. They can simplify the buying process and help you protect what matters most.