Securing your family’s financial future is one of the most important things you can do as a parent. Getting the right life insurance coverage is a key part of the puzzle for Canadian households. This extensive guide will walk you through everything you need to know about getting family life insurance tailored for Canada.
What is family life insurance ?
Family life insurance refers to policies that provide financial protection for your loved ones in the unfortunate event of your passing. The death benefit payout can help cover debts, funeral costs, daily living expenses, and more so your family avoids financial hardship.
While individual policies for each family member are an option, many Canadian households choose to get “family plans” that bundle coverage into one package. This provides comprehensive protection all in one place.
There are two main approaches used in Canada:
- Individual policies – Separate policies for each spouse, combined with optional child riders. This is used by 65% of families.
- Joint policy – A single policy covers both parents in one. Used by 35% of couples.
The right choice depends on your budget, life stage, and specific protection needs. Later, we’ll analyze the pros and cons of each option.
Who Really Benefits from Family Life Insurance?
Young Families
- Need: Dual incomes to support children’s needs
- Why: Replace income to continue paying for childcare, education, activities if a parent passes away
Single Income Households
- Need: Replace sole breadwinner’s income
- Why: Support family’s lifestyle if sole income source is lost
Mortgage Holders
- Need: Pay off remaining mortgage
- Why: So family can keep their home if a parent passes away
New Parents
- Need: Fund potential childcare costs
- Why: Cover childcare if a parent dies and the other must return to work
Special Needs Children
- Need: Additional financial support for special needs child
- Why: Provide long-term care if a parent providing care passes away
| Family Situation | Need | Why Needed |
|---|---|---|
| Young Families | Dual incomes | Support children |
| Single Income | Sole income | Support family |
| Mortgage Holders | Pay off mortgage | Keep family home |
| New Parents | Childcare costs | Cover childcare |
| Special Needs Kids | Additional support | Provide long-term care |
Types of Family Life Insurance Policies in Canada
There are two main categories of life insurance available in Canada:
Family Term Life Insurance
With term insurance, you pay premiums for a set coverage period, like 10, 20 or 30 years. It’s the most budget-friendly option for Canadian families
| Type | Description |
|---|---|
| Level Term | Death benefit stays the same |
| Decreasing Term | Death benefit decreases over time |
| Return of Premium | Premiums returned if unclaimed |
| Convertible Term | Can convert to permanent insurance |
- Pros – Lowest cost, customizable terms and coverage amount. Used by 71% of buyers.
- Cons – No cash value; coverage expires unless renewed.
We strongly recommend term insurance for most Canadian families because of its affordability and flexibility.
Family Permanent Life Insurance
Permanent life insurance provides lifetime coverage as long as you pay premiums. It’s more expensive but builds cash value that you can borrow against if needed.
| Type | Description |
|---|---|
| Whole Life | Offers guaranteed death benefit and premium |
| Universal Life | Flexible premiums, adjustable coverage |
| Variable Life | Offers investment options |
- Pros – Lifelong coverage, accrues cash value. Used by 29% of buyers.
- Cons – Much higher premiums than term insurance.
Permanent insurance can supplement term policies
Comparing Family Life Insurance Options in Canada
| Factor | Options | Comparison | Our Rating |
|---|---|---|---|
| Types of Life Insurance | – Term Life Insurance – Permanent Life Insurance | Term life is more affordable and provides temporary coverage. Permanent life is more expensive but provides lifetime coverage. | Term Life Insurance – 5/5 Permanent Life Insurance – 3/5 |
| Policy Term Lengths | – 10 year – 20 year – 30 year | Longer terms provide longer coverage but at a higher overall cost. Choose based on your needs and budget. | 10 year – 3/5 20 year – 4/5 30 year – 5/5 |
| Individual vs. Joint Policy | – Individual policies for each spouse – Joint “last-to-die” policy | Individual policies allow customization while joint policies can be cheaper. Individual policies provide more flexibility. | Individual – 5/5 Joint – 3/5 |
| Top Life Insurance Companies | – Manulife – Sunlife – RBC – Canada Life | All top providers but Manulife and Sunlife have the best reputation and customer service based on reviews. | Manulife – 5/5 Sunlife – 5/5 RBC – 4/5 Canada Life – 4/5 |
| Policy Riders and Add-ons | – Critical illness insurance – Disability insurance – Accidental death insurance | Critical illness and disability insurance provide added protection. Accidental death coverage provides extra benefits in case of accident. Worth considering. | Critical Illness – 5/5 Disability Insurance – 5/5 Accidental Death – 4/5 |
| Application Process | – Online – Through advisor – Directly with insurer | Applying online is fastest. Advisors simplify the process. Insurers directly can be time-consuming. | Online – 5/5 Advisor – 4/5 Direct – 3/5 |
Getting Family Life Insurance Coverage in Canada
You have options when structuring life insurance policies to protect your family:
Individual Policies
Each spouse can get their own individual term or permanent life insurance policy. You’re covered whether together or apart.
Pros:
- Fully customizable for each person’s needs
- Separate payouts if each parent passes away
Cons:
- More policies to manage
- Potentially higher total cost
Joint Last-to-Die Policy
Joint coverage insures both spouses together under one policy. The death benefit is only paid when the last spouse passes away.
Pros:
- Only one policy to manage
- Potentially lower cost
Cons:
- No payout until both parents pass
- Very messy if you separate
We recommend individual policies for most Canadian families for the flexibility and separate payouts. Joint policies also have a 7% higher divorce rate according to data.
Getting Life Insurance for Children in Canada
Children’s life insurance is often not necessary in Canada but can provide funds for:
- Funeral costs (average $7000 for a child)
- Estate planning needs
- Special needs children
You can get individual child policies or add child riders to your own policy for $5-15/month typically. However, the cost is often minimal compared to adequately insuring yourself first.
Our recommendation is to focus on getting enough coverage for yourself and your spouse first before adding children’s insurance.
How Much Family Life Insurance is Needed in Canada?
As a general guideline, get enough coverage to replace your income and cover debts:
- Mortgage balance
- Loans, credit cards, other debts
- Daily living costs
Aim for 10-12 times your gross annual income. But calculate the specific amount using our life insurance calculator.
The average purchase in Canada is $250,000 per parent. Review your debts and ongoing costs to find the right amount for your situation.
Tips to Get the Best Rates on Family Life Insurance
The younger and healthier you are, the lower your premiums will be. Here are some other ways to get cheap life insurance for your family:
- Pick longer terms – Get a 20 or 30-year policy instead of just 10 years. You can save 23%.
- Buy when young and healthy
- Bundle policies – Combine parents’ policies with the same company for discounts of up to 15%.
- Maintain good health – Avoid smoking and get into shape to qualify for better rates. Smokers pay 2-3x more.
- Look for group rates – Check for coverage through professional or alumni associations. Get up to 10% off.
Getting life insurance while young locks in the lowest rates possible. Premiums double every 10 years on average. Don’t wait too long!
Applying for Family Life Insurance in Canada
The application process typically involves:
- Completing a detailed application
- Providing full medical history
- Completing a medical exam in most cases
- Waiting for policy approval (takes 2-8 weeks usually)
- Paying your first premium
- Naming your beneficiaries
Always provide accurate information. Undisclosed pre-existing conditions may void your policy later.
Key Takeaways for Canadians
o recap, follow these best practices when getting life insurance for your family:
- Insure the primary breadwinner(s) first
- Get enough coverage to replace 10-12 years of income
- Strongly consider term insurance for lower premiums
- Compare quotes from the top Canadian providers
- Apply when younger and healthier to lock in the lowest rates possible
- Think about individual policies for flexibility
- Clearly designate beneficiaries
Getting the right family life insurance coverage provides invaluable peace of mind. Be sure to adequately protect your loved ones by getting covered today!
