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Life Insurance

Compare Life Insurance

Shopping for life insurance in Canada can feel overwhelming. There are dozens of companies offering hundreds of policies, so how do you know which one is right for you?

Currently, 57% of Canadian adults have life insurance coverage, but many Canadians still struggle to find the right policy.

This guide will help you compare life insurance options effectively, so you can make an informed decision that protects your loved ones without breaking the bank.

Compare life insurance policy terms

When you compare life insurance companies, you’ll encounter two main types, which are term and permanent life insurance. It’s important to understand the difference.

• Term Life Insurance: This covers you for a specific period, usually 10, 20, or 30 years. It’s straightforward and affordable. Term insurance is a popular choice for budget-conscious families. If you die during the term, your beneficiaries receive the death benefit. If you outlive the term, the coverage ends.
• Permanent Life Insurance: Permanent life insurance stays with you for life. It costs more but is more popular. It also includes two main types, which are whole life and universal life.

Evaluating premium costs

Your age, health, smoking status, and the coverage amount all affect your premiums. A healthy 30-year-old non-smoker will pay far less than a 50-year-old smoker for the same coverage. Here’s what influences your premiums:

• Age: Younger applicants pay less because they’re less likely to die soon
• Health Status: Pre-existing conditions increase costs
• Lifestyle: Smokers pay 2-3 times more than non-smokers
• Occupation: High-risk jobs like construction or mining increase premiums
• Coverage Amount: More coverage means higher premiums

Don’t just compare life insurance policies based on price alone. A cheaper policy might have fewer benefits or stricter exclusions. Balance cost with the coverage quality and the company’s reputation.

Cash value accumulation

Part of your premium goes toward the death benefit, while another portion goes into a cash value account. This account grows tax-deferred, and you can borrow against it or withdraw funds during your lifetime.

Cash value makes permanent life insurance more expensive than term life, but it offers flexibility. You can use it for emergencies, supplement retirement income, or pay premiums later in life.

How cash value works

• Your money grows based on guaranteed interest rates or market performance
• You can borrow against it at low interest rates
• Withdrawals reduce your death benefit
• Accumulated cash value is not taxed if structured properly

Naming your beneficiaries

Your spouse, children, siblings, parents, or even a charity can be named as a beneficiary. You can also name multiple beneficiaries and split the death benefit among them in percentages.

In Canada, if you name your spouse or dependent children as beneficiaries, the death benefit bypasses probate and goes directly to them tax-free. This saves time and money for your loved ones.

Update your beneficiaries after major life events like marriage, divorce, or having children. An outdated beneficiary designation could mean your ex-spouse receives the money instead of your current family.

Primary vs contingent beneficiaries

• Primary: Your first choice to receive the death benefit
• Contingent: Your backup if the primary beneficiary dies before you

Exploring policy riders

Policy riders are add-ons that customize your coverage. When you compare life insurance policies, riders can significantly increase your protection for a small additional cost. However, not all riders are worth the cost.

Evaluate your specific needs and risks. If you have a family history of heart disease, a critical illness rider might be valuable. If you work a desk job, an accidental death rider might be unnecessary.

Common riders available in Canada

• Critical Illness Rider: This pays a lump sum if you’re diagnosed with cancer, heart attack, or stroke
• Disability Waiver of Premium: This waives premiums if you become disabled and can’t work
• Accidental Death Benefit: This doubles or triples the death benefit if you die in an accident
• Child Term Rider: This covers your children under one policy at a low cost
• Guaranteed Insurability: This lets you buy more coverage later without a medical exam

Navigating the underwriting process

Underwriting is how insurance companies assess your risk and determine your premiums. Some insurers offer “simplified” or “no medical” policies that skip the exam.

These are faster but usually more expensive and offer lower coverage amounts. They’re good options if you have health issues that would otherwise disqualify you.

Be honest on your application. Lying about smoking, health conditions, or dangerous hobbies can lead to claim denials when your family needs the money most.

Here’s what to  expect

• Application: You’ll answer questions about your health, lifestyle, and family medical history
• Medical Exam: Most policies require a basic exam, including blood work, urine test, and blood pressure check
• Medical Records Review: The insurer may request records from your doctor
• Approval Time: Typically 2-6 weeks, though some companies offer instant approval for smaller policies

Policy exclusions

Read your policy carefully. Some exclusions apply only during the first few years, while others last the entire policy term. If you have specific concerns, like a risky hobby, discuss them with your insurance advisor before buying.

Common exclusions in Canadian policies

• Suicide Clause: Most policies won’t pay if you die by suicide within the first two years
• Dangerous Activities: Death during skydiving, rock climbing, or racing might not be covered
• Criminal Activity: Death while committing a crime typically voids coverage
• War or Terrorism: Some policies exclude death in war zones
• Pre-existing Conditions: Conditions you didn’t disclose during underwriting

Checking renewability and convertibility

If you’re young and healthy, convertibility provides peace of mind. You can lock in insurability now while keeping premiums low, then convert later if you need permanent coverage.

Renewability lets you extend your term policy when it expires without taking another medical exam. Your premiums will increase based on your age, but you’re guaranteed coverage. This is valuable if your health deteriorates during the original term.

Convertibility allows you to switch from term to permanent life insurance without a medical exam. This is useful if you initially bought term insurance for affordability but later want lifelong coverage.

Some policies are convertible only in the first 5-10 years, although renewal rates can be significantly higher, and you might be limited to specific permanent policy types.

Company reputation

The top 5 life insurance companies in Canada are Canada Life, Manulife, Sun Life, Industrial Alliance (iA), and Desjardins based on size and financial strength. However, size isn’t everything. Smaller insurers often offer competitive rates and excellent service.

Don’t just compare life insurance quotes—compare the companies behind them. A slightly higher premium with a reputable company is better than saving money with an insurer that fights every claim.

Key factors to research

• Financial Strength Ratings: Check ratings from A.M. Best, Moody’s, or Standard & Poor’s. You want an insurer with an A rating or better.
• Claims Payment History: Research how quickly and fairly the company processes claims
• Customer Reviews: Read experiences from actual policyholders on independent review sites
• Complaint Ratios: Check with the Financial Consumer Agency of Canada for complaint statistics

Making your final decision

Comparing life insurance in Canada requires patience and research. Don’t rush into the first policy you find, but don’t delay protecting your family either.

Start by getting quotes from at least three different companies. Use online comparison tools, but also speak with an independent insurance broker who can access multiple insurers.

When you compare life insurance companies side by side, focus on coverage quality, not just price. Working with an independent insurance agent who deals with multiple insurers can assist in finding the most suitable coverage at a competitive price.

They can explain complex policy details and help you avoid common mistakes.

Other life insurance resources:

• PolicyAdvisor review
• PolicyMe review