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What to Ask before Buying Life Insurance in Canada

Life insurance is an extremely important part of financial planning, but not many people want to talk about it. To make this topic more accessible, InsurEye is laying out the statistical facts and other useful pieces of information to inform Canadians about life insurance. After discussions with consumers, we have identified the main questions and concerns of Canadians:

• What amount of life insurance should I choose?
• How much insurance protection do I need if I have children?
• What are the best life insurance companies?
• What kind of life insurance policy do I need?

Question 1: How Much Life Insurance Should I Choose?

If you get Life Insurance in Canada, you want make sure that all essential financial aspects are covered so they do not become a burden for your family. These aspects can include:

• Income substitution for your family
• Taking care of your children’s education (e.g. university or college costs)
• Paying down assets (e.g. mortgage on your house, car loan)
• Dealing with outstanding financial debt (e.g. lines of credit, credit card debt)
• Other costs (e.g. funeral)

Life Insurance Coverage Consumers choose in CanadaSo, how much life insurance coverage do Canadians choose? This data originates from our InsurEye Price Comparison tool, free for all Canadians to compare their own insurance costs with those of other people in similar peer groups.

Our data shows that most Canadians choose life insurance under $500k.  We recommend speaking with a knowledgeable insurance broker or insurance representative before making this big decision. There might be other potential financial responsibilities that you have not calculated. If you have children, the costs can be much higher than you think – just take a look at the next section.

A separate word on Mortgage Life Insurance Protection: In most cases having separate mortgage insurance is not recommended. Having enough life and disability insurance can encompass a mortgage, avoiding policies overlaps.

If you are looking for insurance to cover your funeral expenses only, the coverage you need, would be lower – approximately $10-30k. A funeral insurance quote will help you to understand the exact costs for this type of insurance.

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Question 2: I Have Children – How Much Life Insurance Do I Need?

If you have kids, there are several areas that you need to calculate into your financial planning (see research published in the Money Sense online journal – link at the end of the article):

• Food
• Clothes
• Health Care (e.g. dental services, braces)
• Personal Care (everything from diapers to deodorant)
• School and recreation (school supplies, sports, activities etc.)
• Transportation (E.g. public transit or minivan)
• Housing (E.g. larger house with more bedrooms, furniture, additional utilities etc.)
• Child Care (e.g. nanny, daycare, babysitters)

According to MoneySense in 2002, overall costs of raising a child to the age of 18 add up to $243,660. You should consider that this number does not include any post-secondary education costs. If you consider the inflation numbers of Statistic Canada, overall costs of raising a child to the age of 18 in 2020 would add up to $276,228. This means $1,212 per month over the course of 19 years. Having several children will obviously increase this amount correspondingly. For example, if you do not consider some item re-use such as clothing items, toys, etc., raising three kids to the age of 18 would cost you around $830,000 ($828, 684 to be precise). Have you calculated these numbers into your life insurance protection?

Question 3: What Are the Best Life Insurance Companies?

This analysis is based on the data from our own independent insurance review platform. We do not promote any insurance companies, but collect and analyze what other Canadians share about their insurance providers helping to understand what are the best Life Insurance companies in Canada. All companies are evaluated based on reviews across two dimensions: Customer Service and Value for Money.

Rating update from April, 2020 (in descending rating order for companies with 10+ review)

BMO Insurance: 2.7 out of 5 stars (14 insurance reviews for BMO Insurance)
Primerica: 2.6 out of 5 stars (22 insurance reviews for Primerica)
London Life: 2.5 out of 5 stars (36 insurance reviews for London Life)
Equitable Life of Canada: 1.7 out of 5 stars (21 insurance reviews for Equitable Life of Canada )
RBC Insurance: 1.6 out of 5 stars (28 insurance reviews for RBC Insurance)
Canada Life: 1.6 out of 5 stars (24 insurance reviews for Canada Life)
Manulife: 1.6 out of 5 stars (200 insurance reviews for Manulife)
Sun Life: 1.6 out of 5 stars (226 insurance reviews for Sun Life)
Empire Life: 1.4 out of 5 stars (10 insurance reviews for Empire Life)
Blue Cross: 1.4 out of 5 stars (20 insurance reviews for Blue Cross)
Great-West life: 1.3 out of 5 stars (189 insurance reviews for Great-West Life)
Industrial Alliance: 1.2 out of 5 stars (37 insurance reviews for Industrial Alliance)
CUMIS Insurance: 1.2 out of 5 stars (16 insurance reviews for for CUMIS Insurance)
Desjardins Life Insurance: 1.0 out of 5 stars (24 insurance reviews for Desjardins Life Insurance)
SSQ Insurance: 1.0 out of 5 stars (13 insurance reviews for SSQ Insurance)

• See the full list of insurance reviews for other companies

We strongly encourage consumers to check the most recent version of our Independent Consumer Reviews, find out which companies appear to be best for them and share their own experiences! Remember, if auto or home insurance protect your assets, life insurance protects your family!

Question 4:  What Type of Life Insurance Do I Need?


Life Insurance Policies by Type in CanadaThere are several types of life insurance in Canada – here is brief overview of different insurance types:

  • Term Life: Life protection that will expire at the end of a set term (e.g. after 5, 10, 20 years) and which does not accumulate any value. A Term Life Insurance policy is a pure insurance product: simple and easy to understand.
  • Universal Life: It is a combination of life insurance and an investment component. A portion of your premiums go into your account, increasing your net worth. You can choose how the investment component is invested. A Universal Life Insurance Policy typically comes at a higher cost than a Term Policy.
  • Whole Life: One of the most complex life insurance products. Like Universal Life, a Whole Life Insurance policy also has both insurance and investment components.  However, they typically offer less flexibility (e.g. the insurer decides how the investment component is invested). This product is also more expensive than Term Life insurance.

While each type of life insurance has its pros and its cons, we believe, the best choice for most people is very often Term Life insurance. It’s the simplest product to understand, it’s the cheapest protection you will get, and it fully fulfills its purpose – to protect.

One of the fans of simple Term life insurance is Suze Orman, one of the leading personal finance gurus in the U.S.A. This video about Suze’s perspective on life insurance is fully applicable to Canada.

According to InsurEye analysis, Term Life is the most popular life insurance protection type in Canada. Nearly 45% of InsurEye users, who have Life insurance, report that they have purchased Term Life insurance.

Please speak with a qualified insurance broker or advisor before making any important decisions associated with such an important topic. An insurance broker can also help with other types of insurance policies such as dental insurance policy, disability insurance coverage, or burial insurance protection (also called funeral insurance plans). Please note, that this article is provided for educational purposes only.