The Essential Benefits Of Life Insurance for Canadians

The Essential Benefits Of Life Insurance for Canadians


Life insurance provides critical financial protection for Canadian families. However, many Canadians don’t fully understand the wide range of benefits offered by life insurance.

This guide will outline the key benefits you need to know about different types of life insurance policies available in Canada. We’ll also provide expert analysis and data to demonstrate how life insurance can financially secure families and individuals.

Major Benefits of Life Insurance

Life insurance policies pay your named beneficiaries a lump-sum payment, known as a death benefit, when you pass away. This tax-free payout can provide the following benefits:

Financial Security for Your Family

The primary benefit of life insurance is replacing income to maintain your family’s standard of living. For example, if the primary breadwinner earning $60,000 per year passes away, the payout can help cover the following:

  • Monthly mortgage payments of $2,000
  • Utilities costing $500 per month
  • Grocery bills of $800 per month
  • Car payments of $450 per month

Without the income replacement, the family would need to find $37,400 annually to cover these living expenses, which could mean selling assets or accruing debt.

Paying Final Expenses

Funeral costs can total $10,000 or more in Canada. The average cost is $6,000 for a full-service funeral. Life insurance proceeds can ease this financial burden for your loved ones.

Related: Final Expense Insurance

Leaving an Inheritance

The payout creates an inheritance for your beneficiaries and can help settle estate taxes. For example, if you leave $500,000 in life insurance proceeds to your son, it can provide him funds to put a down payment on a house or pay off student loans debt-free.

Income Replacement

For families relying on your income, life insurance provides funds to maintain their lifestyle while they adjust financially. If you earned $100,000 annually, a $500,000 payout would replace five years of income for survivors.

Paying Off Debts

Life insurance proceeds can repay debts like mortgages, loans, and credit cards so your family doesn’t inherit unpaid bills. For instance, a $300,000 payout could cover the $250,000 remaining on your home mortgage.

Related: Mortgage Protection Insurance

Peace of Mind

Knowing your family is financially protected provides comfort and allows you to focus on enjoying life. Canadians feel more secure knowing they have life insurance.

Benefits of Term Life Insurance

Term life insurance provides temporary coverage at affordable rates. Here are some key advantages:

Low Cost

Term life premiums are significantly lower than permanent insurance since coverage expires after the term. For example, a 40-year old male could get $500,000 in 20-year term coverage for around $30 per month.

Conversion Options

Many policies allow you to convert to permanent insurance later or renew your coverage. You can lock in insurability while young.

Matches Temporary Needs

Term life works well if you need coverage for a specific period, like paying off a 15-year mortgage. It provides protection just for that timeframe.


You can adjust your death benefit amount and term length to meet changing needs over time. Increase coverage when having kids or lower when the mortgage is paid off.

Pure Insurance Protection

Term life only pays if you die during the coverage term. There is no cash value accumulation. It provides a straightforward death benefit.

Benefits of Permanent Life Insurance

Permanent life insurance, like whole life or universal life, provides lifelong protection as long as you pay the premiums. Benefits include:

Lifelong Coverage

You get permanent coverage without having to requalify or renew. The policy cannot be cancelled as long as premiums are paid. You have certainty your family will receive the payout.

Cash Value Funds

A portion of your premiums goes toward building cash value you can access through withdrawals or policy loans. This acts as a forced savings account.

Stable Premiums

Premiums are set when you first purchase the policy and typically remain level throughout life. Rates for a 30-year-old are locked in despite rising as you age.

Paying Premiums with Dividends

“Participating” whole life policies pay dividends, allowing you to reduce or eliminate premium payments. Dividends can cut lifetime policy costs.

Guaranteed Death Benefit

Your beneficiaries will receive the payout – the insurance company cannot reduce or deny the death benefit. The coverage is guaranteed.

Permanent life insurance premiums are more expensive than term life. A healthy 30-year-old male may pay around $100 per month for $500,000 in whole life coverage.

Alternatives To Life Insurance

Critical Illness Insurance Benefits

Critical illness insurance provides financial support if you suffer a serious illness like cancer, stroke, or heart attack. Benefits include:

Replacing Lost Income

The payout helps cover loss of income while you recover and cannot work. It is estimated that the average Canadian loses over $3,000 in income monthly while disabled.

Paying Medical Bills

Medical treatment, drugs, and therapies can be extremely costly. The average monthly prescription drug cost is around $450 for Canadians over 65. Insurance proceeds help cover these expenses.

Everyday Expenses

The funds allow you to maintain your normal standard of living while recovering. Policy payouts help you continue paying housing costs, groceries, utilities and other expenses.

Lifestyle Stress Relief

Not having to worry about finances reduces stress, so you can focus on your health. Critical illness insurance provides the funds you need, so you don’t have to worry about making ends meet if faced with lost income during recovery. This reduced financial stress allows you to concentrate your energy on getting well.

No Restrictions on Use of Funds

You have complete flexibility on how to use the payout – medical bills, mortgage, debt repayment, etc. The money can be allocated wherever it is needed most. A sample quote shows that a 40-year-old non-smoking male could get $50,000 in critical illness coverage for around $40 per month.

Disability Insurance Benefits

Disability insurance replaces income lost if injury or illness prevents you from working. Key advantages include:

Income Replacement

You continue receiving income while you recover and cannot work. This maintains your standard of living. The average monthly disability payment is around $1,600 tax-free.

Supporting Your Family

Your family can continue relying on your income even if you cannot work. Kids’ activities, groceries and other household costs can be maintained.

Protecting Your Savings

The benefit prevents you from liquidating retirement and investment funds to pay bills. Your nest egg remains untouched.

Paying Bills

Disability coverage ensures you can continue paying housing costs, groceries, utilities and other expenses of around $5,000 monthly for average families.

Focusing on Recovery

Not having to worry about finances allows you to concentrate fully on getting well. You can follow medical orders rather than worry about income. A sample quote shows that disability insurance for a 30-year-old non-smoking male professional may cost $50 – $100 per month.

Policy Riders & Additional Benefits

Riders provide added benefits to enhance your life insurance protection:

Accelerated Death Benefit

Provides part of the death benefit early if diagnosed with a terminal illness. This could total $250,000 of a $500,000 policy.

Waiver of Premium

Waives premium payments if you become disabled, so coverage continues. This avoids policies lapsing due to the inability to pay.

Children’s Insurance

Adds a death benefit for children covered under your policy. This can provide $25,000 for funeral costs if a child passes.

Accidental Death

Provides an additional payout if you die due to an accident. This may pay an extra $50,000 on top of the death benefit.

Guaranteed Insurability

Lets you increase your coverage in the future without medical underwriting. You can add protection as family/debt grows.

Living Benefits

Provides access to your death benefit if diagnosed with a critical, chronic or terminal illness. Pays early while still living.

Why Life Insurance Is Important for Canadians

Life insurance provides essential financial security for Canadian families. The tax-free death benefit helps loved ones through difficult times without facing severe financial hardship.

Permanent life insurance also offers unique options to build savings that can supplement retirement income. Adding riders provides protection for critical illnesses, disabilities, and other situations.

Working with a licensed Canadian advisor makes getting adequate, cost-effective coverage much easier. Be sure to assess your needs, compare quotes from Canadian insurers, and review your policy annually. Taking these steps provides long-lasting benefits and peace of mind.

Getting The Right Life Insurance Coverage

Getting the Right Life Insurance Coverage
Getting the Right Life Insurance Coverage

Follow these tips to maximize the benefits of your life insurance:

Determine Your Needs

Assess your family’s financial situation and protection gaps to establish proper coverage amounts. Calculate debts, income replacement, funeral costs and more.

Speak with an Advisor

An expert can explain policy options and ensure you get adequate, cost-effective coverage. Advisors have access to quotes from 30+ insurers.

Compare Quotes

Shopping among insurers can help you find the best rates for your particular situation. Compare quotes to potentially save hundreds annually.

Look for Value-Added Features

Policies with built-in riders provide enhanced protection at lower cost than purchasing separately. Get a bundle discount on critical illness or disability insurance.

Review Annually

Your needs change over time, so review coverage every year and adjust accordingly. Increase term life insurance amounts as your income and debts rise.

Stay Healthy

Good health leads to lower premiums and better policy options compared to poor health. Premiums can be reduced by up to 50% for low-risk individuals.


Life insurance provides invaluable benefits to protect your family’s financial future. Permanent policies also offer unique options to build tax-deferred savings.

Be sure to consider term life insurance, permanent life insurance, critical illness coverage, and disability insurance as you put together a comprehensive financial plan.

Getting coverage early when premiums are lowest and speaking with an advisor ensures you find policies tailored to your budget and needs. Reviewing your coverage annually as your situation evolves allows you to adjust accordingly.

Visit Insurance Direct Canada today to instantly compare life insurance quotes from over 30 top providers. Get matched with an advisor who will answer your questions and help you explore all policy options. Taking just a few minutes could save you thousands!

Benefits Of Life Insurance FAQs

How can Canadians save money on life insurance premiums?

Strategies include getting healthy, purchasing young, choosing term life, opting for longer terms, buying group coverage, using online quotes, and looking for policies with the return of premium features.

Is a medical exam required for all Canadian life insurance purchases?

No, simplified issue and guaranteed issue policies do not require an exam. However, exam-free insurance typically costs more.

How often should Canadians review life insurance needs?

Review needs annually, whenever life changes like new job, marriage, divorce, birth, paying off debts, or income changes. Adjust coverage accordingly.

How do you determine the best life insurance company in Canada?

Key factors are financial strength ratings, reputation, prices, transparency, customer service ratings, products offered, and years in business.

Are life insurance payouts affected by the cause of death in Canada?

Most policies pay for any cause. But some may exclude deaths from risky activities, suicide in the first 1-2 years, drug abuse, alcoholism, or the commission of a crime.

Rate this post

Leave a reply

Your email address will not be published. Required fields are marked *


© 2003-2024, an Internet brand and property of I.D.C. Insurance Direct Canada Inc. All rights reserved. Last updated March 2022.

All product names, trademarks, and trade names are the property of their respective owners. The Insurance Council (BC, AB, SK, MB), Financial Services Commission (ON), Chambre de la Sécurité Financière (QC), The Superintendent of Insurance (NB, NL, PE, NS) are the provincial and federal authorities that regulate, supervise and enforce standards for life insurance professionals. IDC member websites include: Life Insurance Newspaper, Employee Benefits Newspaper

Request a call back
  • First name*
  • Last name*
  • Mobile number*
  • Email address*
  • Type your message (sorry we don't service auto, home or liability insurance)*
  • Reason*
  • 7
Request Call Back

Log in with your credentials

Forgot your details?