All About Life Insurance in Canada

The financial security of our family and loved ones is the utmost priority of every individual, especially in times when we shall not be around to take care of it anymore. Life insurance is the safety net we prepare for our family’s financial security, after us. 

Investing in Life insurance has various benefits of support for your spouse, children and your parents for any financial crisis they may face. The beneficiary shall receive coverage amount on your death that would help them take care of the day-to-day expenses while they deal with their emotional distress. It acts as a lifetime income coverage and can be used to pay any debts, funeral expenses, children’s education, and help maintain the family’s usual standard of living.  

Cost of buying Life Insurance in Canada

Any Canadian resident can choose to apply for life insurance from various options available depending on the amount of coverage they require for their family. However, the cost of purchasing a life insurance plan or the amount of monthly premiums to be paid depends on various factors like age, gender, health condition, medical history, smoking and other lifestyle habits. 

Types of Life Insurance

There are many options on the type of life insurance plan depending on the coverage you require. The two most commonly chosen life insurance plans amongst the people of Canada are term life insurance and permanent or whole life insurance. In addition to these many people also choose to invest in non-medical life insurance, mortgage insurance and par policies depending on their health conditions or various business requirements. 

What is Term Life Insurance?

Any Canadian resident who wishes to apply for life insurance for a specific period of time can choose term life insurance. The term of this type of life insurance can be decided by you, depending on your requirement; and the coverage shall remain valid only for that specific time period.  

A term life insurance is usually applied for a period of 10 to 100 years. The policy coverage and monthly premiums for a term life insurance are fixed when you purchase the police and are not subject to change until the policy expires. 

  • In case of your death, while the policy is still active, the beneficiary of your policy shall receive the complete coverage amount.
  • In case the term of your life insurance policy expires, you have the option to either renew or end the policy depending on your family’s requirement and financial dependency on you.

Your term life insurance policy can be easily converted into whole life insurance or universal life insurance plan at any time before you age 71. 

What is Whole Life Insurance?

Also known as Permanent Life Insurance, whole life insurance in Canada is a type of life insurance plan that covers your entire life with a fixed premium payment for a lifetime. The premiums of whole life insurance are usually higher than that of a term life insurance plan. However, it is still one of the very commonly chosen life insurance policies as it gives guaranteed lifetime protection at no additional cost on premiums as long as they are paid timely 

The added advantage of having permanent life insurance coverage is that a certain amount of your premium is invested by your insurance and is paid to you in the form of dividends. 

What is Universal Life Insurance?

Universal life insurance is a type of permanent life insurance providing coverage for your entire life while having its own unique features and benefits.  

Your universal life insurance lets you take charge of the investment component to manage the level of risk you wish to take with your investment. You can choose where you wish to invest the money and enjoy returns on these investments.  

Many universal life insurance plans provide you with advantages that are flexible for your premium payments. You can change the amount of death benefit you require after a certain period of purchasing the universal life insurance plan you can choose to increase or decrease the premium amount depending on your coverage requirement. 

What is Non-Medical Insurance?

Non-medical life insurance is an insurance plan that provides you a guaranteed coverage, regardless of your age, health conditions, or lifestyle habits. Unlike other insurance plans, it qualifies you to have insurance coverage without any round of health interrogation or health checks, or any medical examination. 

Due to lack of information on your health condition and higher risk, the cost of a non-medical life insurance is often seen to be much higher than the standard life insurance plans. However, many client still choose a non-medical insurance plan, as they do not qualify for a standard insurance plan due to their existing health conditions and lifestyle habits. 

Any Canadian resident between the age of 30 to 75 can choose a non-medical life insurance and get lifetime coverage as soon as you apply, and your beneficiary shall get the coverage amount after you die.  

What is Mortgage Insurance?

Many Canadians choose to buy property on mortgage either for their home or business. However, in case of death, while the mortgage is yet to be repaid, the entire burden falls on the family members. Thus, mortgage insurance is offered by the mortgage provider for you to ensure that they receive their money back even in your absence with no additional financial burden on your family members.  

The beneficiary of your mortgage insurance is generally the mortgage provider and not your family members. An additional premium amount is included in your monthly mortgage payment for the mortgage insurance. In case there is still an outstanding mortgage payment after your death, the mortgage provider shall receive a lump sum amount as coverage against the balance payment. Also, the coverage of your mortgage insurance decreases with the amount of money you repay against your mortgage every month 

Buying mortgage insurance is not mandatory and you can plan the repayment of your mortgage covered under your standard life insurance plan. 

What are Par Policies in Canada?

Any standard life insurance policy holds benefits only for the beneficiaries after the policyholder dies. A participating (par) life insurance policy holds benefits for a policyholder that they can access while they are still alive, and the policy coverage may still remain intact for their loved ones after the policyholder’s death. 

A par policy is a type of whole insurance that also includes a contract guaranteeing you cash value pay off on your premiums, in the form of annual dividends. These dividends are distributed from the profits of the insurance company the par policy is purchased from. This is a tax-advantaged benefit for a policyholder where you can withdraw the accumulated cash value from your par policy at any point for your personal use. 

The premiums of a participating life insurance policy are generally higher than that of any standard life insurance plan due to the dividend and cash value benefit your par policy offers. 

These benefits are found to be very attractive and a convenient investment option for many Canadians as it provides a guaranteed lifetime insurance coverage with an opportunity to earn returns on their investment from a life insurance plan.

With the changing lifestyle of today’s age, choosing the right life insurance plan that can best protect your family in their most difficult times is very tricky. Thus, consulting an experienced life insurance advisor in Canada can guide you best in making the right decision. Get in touch with Hiren Modi today to get the best possible security plan for your family.