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Key Takeaways:
Life insurance is worth it in Canada for those with:
As a rule of thumb, term life insurance is generally worthwhile for the average Canadian's financial needs. To start, here's how much more affordable term would be versus whole life insurance.
If you're not sure you need life insurance, think about this: can your loved ones take care of themselves if you're gone? To help you out, start with the image below:
Life insurance might be worth it for you if you answered "yes" to most questions.
It’s a good idea to get life insurance if someone relies on you financially. More specifically, here's a look at who should consider coverage:
Your dependents could be left struggling financially if you pass, but life insurance coverage can help ease that.
Some of the expenses your loved ones might experience include:
Costs can quickly add up to $450,000 just like that! That is why we always recommend to take a look at policies if you have any obligations.
Still not sure if you need it? These are example questions you should ask yourself when considering life insurance:
Life insurance is about providing peace of mind. It's a way to ensure that your loved ones are taken care of financially, no matter what happens. Whether it's covering daily living expenses, paying off debts, or securing your children's future, life insurance is a key part of a solid financial plan.
You probably don’t need life insurance if there is no one that will shoulder your financial responsibilities if you pass away.
But consider this: you may have enough to cover immediate obligations, but what about things like your spouse's retirement or the kids' education?
If your income was lost, could your family maintain the existing savings schedule? If you don't think they'll be able to cover all future expenses, then life insurance would be worth it.
While it is true that most people advice that life insurance may not be worth it for individuals without financial dependents or significant assets, it is important to consider the potential future needs of your loved ones.
The best age to get life insurance is when you first have a dependent. "New" dependents are usually the catalyst behind most life insurance purchases.
That can be a spouse, kids or any other family member that relies on you. And the age at which you buy your policy can also have significant benefits. The younger and healthier you are, the cheaper your life insurance will be.
Just how much more worthwhile is it to lock in your rate sooner? Here's a comparison of the cost of life insurance by age:
The age at which you don't need life insurance depends on your financial situation and the needs of your loved ones.
Remember: the point of life insurance is to protect your dependents from financial burden if you were to pass prematurely.
You may no longer need coverage if you've reached an age where:
For most, this happens sometime around the time that we retire. The average age of retirement was 64 years old in 2022, says Statistics Canada.
This is a good milestone to help you plan for the end of your life insurance needs.
Life insurance is generally worth it for many Canadians, but specific types of policies are more suitable than others, depending on your situation. We'll be looking at:
Term life insurance is worth it for most average Canadian families that need life insurance to cover financial obligations and dependents.
“It provides cost-effective, temporary coverage over an insured's younger years," says the CLHIA.
Permanent life insurance can be a worthwhile option for Canadians with extremely high income. But it's likely not worth it for the average family. Here's what you need to know if you're asking yourself if a permanent life insurance policy is worth it for you:
Group life insurance is usually a good supplement to a term policy, but it's often not enough to cover all of a family's financial needs. Here's a breakdown of group policies:
Here are some examples of real-life Canadians wondering, "is life insurance worth it?". Life insurance advisor Stephanie Roux shares her recommendations:
Life insurance is a smart investment for Canadians with people that rely on them financially in the sense that it's a wise purchase. It's usually not a good idea to use life insurance as an investment vehicle for cash value, as it isn't the most efficient way to invest (versus things like the stock market or an RRSP).
Here's a look at whole life insurance as an investment account compared to other types of investments:
But there are scenarios where a whole life insurance policy might be a worthwhile investment vehicle, but for the average Canadian family, this isn't the case.
The main reason you would use life insurance as an investment tool would be for tax benefits. But if your TFSA and RRSP accounts aren't maxed out, you're better off putting your money there.
Life insurance helps to financially protect your family when you pass, and it's a good idea for many people.
But there are other ways to support your family. Let's take a look at some options:
Life insurance is worth it because it provides a financial safety net for your loved ones if something happens to you. In Canada, many families rely on one or two incomes to cover their daily expenses, mortgage payments, and future plans like their kids' education. If you were to pass away unexpectedly, life insurance ensures that your family can maintain their standard of living and meet these financial commitments without added stress.
The main reason for having life insurance is peace of mind. Knowing that your family won't be burdened with financial hardships during an already difficult time can be a huge relief. Whether it’s covering everyday expenses, paying off the mortgage, or funding your children's education, life insurance offers a way to protect your family's future. It's about ensuring that, even in your absence, your loved ones can continue to live comfortably and achieve their dreams without financial worries.
Life insurance is a good idea if someone financially depends on you, like your spouse/partner, kids or aging parents. Only some Canadians need life insurance. If you're single, financially independent and don't have large debts like a mortgage, you can probably skip a life insurance policy.
But if your financial situation has changed recently, it may be time to reevaluate your need for a policy.
<div class="blog__authorseparator"></div>The main disadvantage of life insurance is the cost, especially if you’re older or have health issues. Premiums can be pricey, and it’s an ongoing expense that you’ll need to budget for. While younger and healthier applicants can secure lower rates, it can feel like a financial burden over time. Some people also find the process of getting life insurance, including medical exams and detailed questionnaires, intrusive and time-consuming. But remember, the peace of mind knowing your loved ones are financially protected often outweighs these drawbacks.
Another downside is that life insurance policies can be complex, with various types and terms that might be confusing. It’s crucial to understand what you’re signing up for. For instance, term life insurance is more affordable but only covers you for a specific period, whereas permanent life insurance costs more but lasts a lifetime. If you cancel your policy, you typically don’t get your money back, which can feel like wasted cash. Always read the fine print and consider talking to a non-commissioned advisor who can help you navigate these complexities without any sales pressure.
<div class="blog__authorseparator"></div>Deciding between saving and having life insurance isn't an either-or situation—both play vital roles in financial planning. Savings are great for immediate needs, emergencies, and short-term goals. However, life insurance offers a unique safety net for your loved ones if you pass away unexpectedly. In Canada, life insurance can provide a tax-free payout to your beneficiaries, ensuring they can cover expenses like mortgage payments, children's education, and day-to-day living costs without financial stress.
Life insurance is especially crucial if you have dependents or significant debts. While saving is essential, building enough to replace years of income or cover substantial debts can take a long time. A life insurance policy bridges that gap, offering peace of mind that your family's financial future is secure. Plus, policies in Canada are customizable to fit your needs and budget, making it easier than ever to get coverage that complements your savings strategy.
Deciding how long you need life insurance coverage depends on your unique situation. Generally, you want coverage for as long as someone relies on your income. Think about major financial obligations: your mortgage, your kids’ education, and any other debts. If you have young children, you might need a longer term—until they’re financially independent. If your mortgage is your main concern, matching the policy term to your mortgage length can be smart. For most Canadians, a term of 20 to 30 years usually covers the bases.
Consider your age and financial goals too. If you’re starting a family or buying a home, longer coverage can offer peace of mind. If you’re closer to retirement with fewer financial responsibilities, a shorter term might suffice. The key is to match your coverage length with your financial obligations. It's about protecting your loved ones when they need it most, without overpaying for unnecessary coverage. Remember, it’s always a good idea to review your policy as your life changes.
Your life insurance policy's worth will depend on the type of life insurance you have. Permanent and universal life insurance tends to have a cash value component, which will change over time.
If this question is in the context of selling your life insurance policy to someone else, take note that you are only able to sell your policy in Quebec and Saskatchewan.
No, life insurance is not a scam. It’s a valuable service that fills a real need in Canadian society by offering peace of mind and financial security for those left behind when a loved one dies. But not all life insurance policies will be worth it for everyone, and making payments toward a policy doesn’t always have an upside.
In the event that you do need life insurance, your loved ones will be thankful you made the investment. The key to maximizing the benefit of life insurance is to find the policy, rate, and coverage that makes the most sense for you and your family, and doing your due diligence to ensure that you work with a reputable life insurance company.
Life insurance is important because it looks after your family's financial future in the event that you're not around. Imagine if you were gone and couldn't provide for them anymore – life insurance steps in to help. When you purchase life insurance, it makes sure your loved ones can still afford things they need, like housing, final expenses, time off work and childcare, even if you're not there to support them.
Having life insurance gives you peace of mind, knowing that your family has financial protection to take care of themselves if something happens to you. It's like having a safety net for your loved ones so they don't have to worry about money during tough times.
Life insurance is a good idea for some, but not everyone needs it. You should think about purchasing life insurance if you have a family that depends on your income, like kids or a spouse. If something happened to you, life insurance would help make sure they can still pay for important things.
But if no one relies on you for financial support, paying premiums toward a life insurance policy might not be necessary. Remember, the goal is to protect those who depend on you, so if that doesn't apply, you might not need it.
If you are interested, get an insurance quote through PolicyMe for some of the best rates in Canada.
Sources:
Canadian Life and Health Insurance Association. Canadian Life and Health Insurance Association - Canadian Life and Health Insurance Facts. https://www.clhia.ca/facts
Canadian Life and Health Insurance Association Inc. https://www.clhia.ca/
Government of Canada, Statistics Canada. Retirement age by class of worker, annual. https://www150.statcan.gc.ca/t1/tbl1/en
/tv.action?pid=1410006001
Payment Delinquencies Increase, Credit Card Demand and Balances are Rising. Equifax.com. https://assets.equifax.com/assets
/life insurance canada/english/consumer-trends-q3-report-en.pdf
Statista. Average value of new mortgage loans Canada Q4 2023, by metropolitan area. https://www.statista.com/statistics/1202954
/average-value-of-mortgage-loans-life insurance canada-by-metropolitan-area/
Walker, A. Funeral Costs in Canada: Questions and Answers. https://eirene.ca/blog/funeral-costs-questions-and-answers
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