Disclaimer: Bank-owned life insurance (BOLI, for short) can mean a life insurance policy that banks buy to insure the lives of their high-earning employees or board members. In this article, we will focus on "bank-owned life insurance's" other meaning: personal life insurance that Canadians can buy via a bank.
Life insurance in Canada can be purchased via a bank, an insurance company, a broker or online "insurtech" companies, like PolicyMe.
You may feel comfortable buying bank-owned life insurance if you do your personal or business banking with one of the top banks such as BMO, RBC or TD.
Banks may try to upsell you on life insurance when you buy another product such as a mortgage.
Be sure to compare prices between all providers to make sure you're getting the right policy for you.
How to buy bank owned life insurance in Canada
In Canada, there are three ways to buy an insurance policy from a bank:
Directly from the insurance division of a bank
Through a local independent insurance broker
Through an online independent insurance broker
If you work with an independent insurance broker, you’ll receive options and quotes from multiple insurance providers.
This will let you see how the rates for a particular bank compare to rates from other banks and even rates from a dedicated insurance company. Even if you go with an insurtech company, like PolicyMe, you should still do your research.
How much will bank-owned life insurance cost you? Here are sample rates for term life insurance coverage from major insurers.
Like most Canadians, you probably have a bank you use for your personal and/or business banking.
Buying life insurance through a bank has its advantages and disadvantages, which we'll run through below.
Pros of buying life insurance through a bank:
Convenience: If you already have a banking relationship with a Canadian bank, buying life insurance through them can be convenient. Your financial transactions are all done in one place, and the bank can help you with the paperwork and the application process.
Competitive rates: Banks can have relationships with insurance companies, which can give them access to competitive rates on life insurance.
Guaranteed insurability: Some banks offer guaranteed insurability, which means you could get coverage without doing a medical exam or answering health questions. That said, products designed for this purpose, such as through Canada Protection Plan, can be a better bet.
Incentives: Some banks offer incentives for buying life insurance through them, such as discounts on other banking products or services. Definitely make sure the incentives are worth it, though, and that the policy they offer actually meets your needs.
In-person experience: If your bank has brick-and-mortar locations, you can visit with an advisor in person.
Cons of buying life insurance through a bank:
While there are some potential benefits to buying life insurance through a bank, there are also some drawbacks to consider:
Limited options: Banks usually have a limited selection of life insurance policies available, and these policies may not align with your specific needs or circumstances. Meaning: they may not offer the term lengths or coverage you need, or you may need a guaranteed issue product, which they don't have.
Pressure to buy: Some banks may pressure you to buy life insurance if you don't need it, to buy a policy that isn't right for you or that is more expensive than you need. This is because many insurance agents work on commission.
Higher premiums: Although banks may have access to competitive rates on life insurance policies, they may also charge higher premiums.
Less personalized service: An independent insurance agent or financial advisor may be able to dedicate more time and energy into choosing the right policy for you, from the right company.
Buying life insurance through a bank may not always be the best option for everyone. Make sure you compare policies from multiple providers to find the one that best suits your needs and budget.
Advantages of choosing PolicyMe
PolicyMe is a Canadian insurtech company that offers affordable term life insurance, with a no-brainer online application process.
Here's why you might want to consider PolicyMe over a big bank:
More affordable: Premiums are 5 to 10 per cent cheaper than other insurance solutions.
Fast and simple: Apply online in 20 minutes or less (on average, for eligible applicants). We use technology to streamline the underwriting (risk-assessment) process so you get the same quality assessment, just faster.
Backed by giants: PolicyMe is backed by insurance giant Canadian Premier, plus we're federally regulated.
Honest advice: Our non-commissioned advisors will give you personalized advice via phone, seven days a week, without the upsell or pushiness.
Responsive: For email, we usually respond within one business day (versus about three days for a big bank). For phone calls, a licensed advisor is often available immediately.
How to find the best life insurance through a bank
Want to make sure you’re getting the best life insurance through a bank? Here’s what to consider when sizing up different financial institutions in Canada:
Financial health: Just like when you buy a policy from an insurance company, you want to be sure that your bank will still be around to pay out your death benefit if something happens to you. For the most part, most of the major banks in Canada are in solid financial shape, even by global standards. So you can sleep a bit easier knowing that it’s extremely unlikely that the bank you choose will go under during your policy term.
Options for coverage: Different banks offer different options for insurance coverage. To find the best fit for you and your family, take a look at your needs and the types of policies that different banks offer.You might also look into insurance bundling, like if the provider also offers critical illness insurance.
Underwriting process: Do you need coverage today or can you wait for a potentially longer underwriting process? When you apply for life insurance, your provider will ask questions about your medical history and lifestyle to determine how risky you are to insure and how much they should charge you for coverage. Some insurance providers have more complex underwriting processes or take longer to complete them. So if you want coverage faster, look for a bank that’s known for speedy application processing.
Application and document delivery: Looking for other ways to speed up the approval process? Choose a bank that lets you submit applications and receive policy documents electronically. This way, you won’t be at the mercy of snail mail or scheduling time to go into the bank.
Price: Think a lower price means that a bank is trying to do something shady? It doesn’t. If one bank gives you a lower quote for the same type of coverage, it usually just means that it’s pricing the policy more aggressively to “win the sale”. So if two banks are offering you the same kind of coverage, it’s safe to pick the cheaper one.