The life insurance market in Canada is constantly growing, with total premiums estimated to be $34.7 billion or $880 per person in 2025, according to data by Statista. This clearly shows that a large number of Canadians consider life insurance to be important and would like to obtain a policy to secure their financial future.

However, Canadians face significant challenges in buying life insurance due to concerns related to complexity and affordability, making it difficult for them to decide upon a life insurance policy.

In this blog, we will take a look at how to buy life insurance in Canada, explore top providers, and understand essential tips that can help individuals secure a life insurance policy easily

What is life insurance?

Life insurance is a financial product that provides coverage to you and protects the future of your loved ones in case of your death. After your passing, the beneficiary receives a tax-free lump-sum amount known as the death benefit. This can be used by your loved ones to take care of their financial requirements.

According to data by the Canadian Life and Health Insurance Association (CLHIA), at least 30 million Canadians have some form of insurance in 2023. It was estimated that around 23 million people in Canada had life insurance, with insurance companies having paid claims worth $17 billion. 

There are various reputable insurance companies in Canada that offer different types of life insurance policies such as term life, whole life, as well as no-medical life insurance plans. You can compare different life insurance quotes before buying a suitable plan.

Why should you buy life insurance in Canada? 

Life insurance helps in securing the future of your loved ones even in your absence. There are several benefits of having life insurance, including income replacement, clearing debts, covering future costs and more. Listed below are some of the benefits of having a life insurance policy:

• Replacement of income: In case you pass away, the death benefit of your life insurance policy will help your family take care of their financial needs
• Debt protection: Life insurance can help in clearing any outstanding dues you may have. This ensures your loved ones are not under unnecessary financial burden
• Future costs: It can help you cover future expenses such as the cost of your children’s education, mortgage payments, retirement, etc
• Tax benefits: As a Canadian citizen, you can enjoy certain tax benefits if you have an active life insurance policy

How to buy life insurance in Canada: A step-by-step guide

You can either buy life insurance in Canada online or offline. However, you must know the steps you will need to follow to purchase the most suitable policy. These may include understanding your coverage needs, comparing life insurance quotes by various providers, filling out the application form, submitting various documents for the underwriting process and more. 

• Be aware of your coverage needs: Before buying a life insurance plan in Canada, you will need to know how much coverage you will require. You can take into account your current income, your age, the number of dependents, and also your long-term financial requirements to know how much coverage will work for you
• Know which type of policy you need: Life insurance comes in various types. Based on your immediate and future needs, you can choose the life insurance product that you feel will provide you the best benefits
• Compare life insurance quotes: You will have to thoroughly compare quotes provided by various life insurers in Canada to find the best coverage and rates. You can also visit the PolicyAdvisor website to use their free life insurance calculator to compare quotes for various life insurance plans 
• Fill in the application form: Once you have figured out the life insurance scheme you will buy, you will then have to fill in the application form and submit it along with all the necessary documents for verification
• Wait for application to be approved: The insurer will take up to two to four weeks to approve the application. Once that is done, you can then proceed to view your policy documents
• Read the policy documents: The final step is the most important. You must read the policy documents and inform yourself of all the inclusions, exclusions, coverage, and other fine print mentioned. Once you are satisfied with the terms and conditions mentioned in the policy documents, you can proceed to sign the policy documents

Things to consider when buying life insurance in Canada

Before buying a life insurance policy, you must conduct your own due diligence. Evaluate your financial needs, check out the variety of coverage options and look for the insurer’s reputation. You must also read policy documents carefully, look for additional riders or specific exclusions.

This ensures that you do not end up making any financial decisions you may regret later, or buy a life insurance plan which may not be suitable for you. 

• Financial needs: Your financial needs will play a huge role in determining the type of coverage you will need
• Know the type of policy you will need: Life insurance has various types. Know which one would work for you, based on your financial needs
• Coverage: You can use online life insurance calculators to determine the coverage you will require
• Check your budget: Buy a policy keeping in mind your future budget. You don’t want to under-insure or over-insure yourself
• Insurer’s reputation: Some of the best life insurance companies in Canada come with strong financial ratings and reputations. Do check out the insurer’s credentials before buying life insurance
• Read the policy document carefully: Before you sign on the dotted line, read the terms and conditions mentioned in the policy document
• Riders: Look for riders or add-on plans you can obtain. They provide additional coverage and can be helpful long-term

How much does a life insurance policy in Canada cost?

The cost of a life insurance policy will depend on factors such as age, income, status of smoking status, and the type of policy obtained. For example, a 35-year-old Canadian individual with a term life coverage of $500,000 may have to pay a monthly premium between $20 and $35. 

Whole life insurance premium rates are high as compared to what you would generally pay for term life insurance. It is therefore important that you compare various quotes to know how much coverage you require and based on your financial situation and future goals, which type of life insurance product you must buy.

The table below depicts the monthly premiums of a 20-year term life insurance policy for an individual seeking $500,000 from the top insurers in Canada.

Cost of a life insurance policy in Canada

*Illustrating the monthly cost of a 20-year term life policy for an individual seeking $500,000 in coverage

How much life insurance coverage do I need in Canada? 

You must research the total insurance coverage you will need when looking to buy a life insurance plan. You will have to consider certain factors like replacement income, outstanding debts, future expenses, etc, to obtain the most suitable coverage. Given below is the list of factors you should consider to purchase the most suitable life insurance coverage:

• Replacement of income: You can determine how much coverage you require by multiplying your annual income by the number of years left for your retirement. For example, if you are aged 35 years and your annual income is $50,000, then considering your retirement age to be 60 years, the total coverage you will need is 50,000 x (60-35), which is $1,250,000 

• Outstanding debts: Take into consideration outstanding debts and mortgage payments to determine the appropriate coverage for yourself
• Future expenses: Your future expenses, such as your children’s education, mortgage payments, emergencies, spouse’s retirement, etc., can help you decide on a suitable life insurance coverage
• Current investments and savings: Deduct existing investments and savings before deciding upon the appropriate coverage for yourself

You can visit the PolicyAdvisor website and use the built-in life insurance calculator to get instant life insurance quotes. You will need to enter details such as your gender, age, smoking status, postal code, term, and whether you wish to buy insurance individually or have dependents.

What are the types of life insurance policies available in Canada? 

Life insurance in Canada can be of several types, based on term duration, underwriting guidelines, etc.. These policies cater to the specific needs of an individual, so based on your financial requirements, choose the one most suitable for you.

• Term life insurance: A term life insurance policy provides coverage to your loved ones and helps in taking care of immediate financial needs, such as funding your children’s education, paying the mortgage, etc
• Whole life insurance: A whole life insurance policy not only provides coverage for life but also cash value, which you can withdraw during your lifetime. If you are looking to leave behind an inheritance or for long-term estate planning, then it is recommended that you purchase a whole life insurance policy
• No-medical life insurance: You do not need to undergo any medical assessment, and answering a health-related questionnaire is enough. You are not required to share any medical information, and the approval time is faster for such policies. However, the premiums will be higher, and the coverage is just enough if you have short-term financial requirements
• Universal life insurance: A universal life insurance policy not only provides coverage but also offers the option to adjust your premiums, death benefit, and obtain tax-advantaged investment choices. This type of insurance is suitable for high-income Canadian citizens

How to choose between permanent and temporary coverage?

You can choose between a permanent and a temporary insurance plan. The former is a better option since the premiums are cheap when purchased early, and the rates get locked. Such insurance provides both the option for coverage and building a cash value. Temporary insurance only offers coverage and is difficult to get as you grow older.

You need to keep certain points in mind while choosing between permanent and temporary coverage. The points are mentioned below:

• Whole life insurance and permanent life insurance provide permanent and long-term coverage. If you are looking for insurance and want to build cash value, you can consider obtaining these types of policies.
• Term insurance offers only insurance for a limited term. In case of your passing, the beneficiary receives a death benefit, which can be used to clear immediate financial liabilities left behind by you.

Who needs life insurance?

Life insurance benefits various Canadians. Canadian citizens from different walks of life can obtain life insurance to take care of their different financial requirements. Whatever your future financial requirements are, life insurance ensures peace of mind and protects the future of your loved ones. 

• Families: Life insurance protects the future of your family members even after you have passed away. Buy this insurance when you are young and wish to lock in cheaper rates or have debt
• Business owner: Ensures continuity of your business and helps in securing loans, and provides protection in case of loss of key partners
• Senior citizens: Canadian senior citizens must obtain life insurance to strengthen the future of their loved ones and cover their final expenses

Should I add riders to my policy while buying life insurance in Canada?

Life insurance plans come with riders or add-on policies that offer extra benefits and features to your base life insurance plan. You can obtain these riders by paying an extra fee. There are various types of riders that you can choose from:

• Accidental Death and Dismemberment (AD&D) rider: Offers an additional payout in case of an accident-related death
• Critical illness rider: If you are diagnosed with a critical illness, a lump-sum amount is paid 
• Waiver of Premium rider: Your premiums are waived off in case of disability or inability to work
• Disability Income rider: The policyholder receives a monthly income in case they become disabled.
• Child term rider: Your children are covered under this rider. This rider can help in paying for your child’s education and other future expenses and protect their future.
• Return of Premium rider: On surviving the policy term, the premiums paid will be reimbursed. 

What are the benefits of buying rider plans?

Some of the benefits of adding riders to your existing insurance policies are mentioned below:

• Riders allow you to customize your existing insurance policy based on your changing financial requirements.
• Certain riders cover illness and disability, which helps in savings.
• You enjoy peace of mind as the rider covers additional financial risks.

Can I buy life insurance online in Canada?

Yes, you can purchase life insurance online in Canada. Various Canadian insurance companies offer you the option of browsing their life insurance plans, comparing insurance quotes, and purchasing life insurance. 

PolicyAdvisor helps you compare various life insurance policies and also get the best quotes based on the details provided with the help of their in-built life insurance calculator, which you can use for free. You can also get in touch with PolicyAdvisor insurance advisors who will help you with any insurance-related queries.

Given below are some of the advantages of buying life insurance online:

• The application process is free and fast
• You get online tools to know instant quotes
• You can browse for various policies and take your time deciding on the one best for you
• You get access to various insurance companies and the policies offered.
• It is easier to manage your policy 

What are the common mistakes to avoid when buying life insurance?

You should thoroughly compare different life insurance policies to determine the one best for you. By being aware of the potential mistakes, such as overlooking exclusions, underestimating your financial needs or delaying your insurance purchase, you can ensure that you not only buy the best life insurance plan but also do not end up over-insuring or under-insuring yourself.

Listed below are some of the mistakes that you must avoid when looking to buy life insurance in Canada:

• Not looking at the features, but only the price
• Not comparing enough life insurance policies and insurance quotes
• Underestimating the coverage necessary
• Waiting too long to buy life insurance. You must note that with age, the premiums may increase as well
• Not reviewing the exclusions under the policy
• Either getting less coverage or getting more than what is sufficient
• Choosing the wrong beneficiaries or not informing them
• Not updating beneficiaries after life events (e.g., divorce)