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- An insurance premium is the cost of a life insurance policy that is paid monthly or annually by the policyholder to keep an insurance policy active
- Insurance premiums are determined by a variety of factors, such as the policyholder's age, health, and lifestyle, policy type, term length, and more
- Generally speaking, the earlier in life you purchase an insurance policy, the lower your premiums will be
- Term life insurance premiums are more affordable as compared to whole life insurance as they offer coverage for a specified period of time
A life insurance premium is the amount you pay the insurer to keep the policy active. The payment can be made monthly or annually. If you stop paying your premiums, your life insurance policy enters a grace period before it lapses. If the overdue premium is not paid within this period, the policy may lapse, and your coverage will end. The exact premium you need to pay is calculated on the basis of different factors such as your age, health history, coverage chosen, demographics, and a few other factors.
How are life insurance premiums calculated in Canada?
The cost of life insurance premiums varies greatly from policy to policy, largely because premiums take many different factors into account, such as the insured’s age, health, and lifestyle, as well as policy type (term or whole), length, and size.
Personal factors affecting life insurance premiums
Looking first at how the insured influences policy premiums, the main things that a life insurance company will look at are age, health, gender, and smoking status.
- Age: It is recommended you get life insurance coverage earlier in life because premiums will be at their lowest. A healthy 30-year-old male (non-smoker) can pay as little as $9/month for a 10-year term policy with $100,000 in coverage. At the age of 60, the same coverage would cost $44/month
- Health: Health also factors in. To minimize their risk, life insurance companies can charge higher premiums to those with pre-existing conditions that could become life-threatening. Many life insurance policies require a medical exam for underwriting, which tests for blood pressure, cholesterol, hypertension, and more. There are no medical exam options for life insurance policies, though premiums for this type of coverage are generally higher across the board
- Gender: Gender will also determine how much you pay for a life insurance policy because the life expectancy for women is higher; they tend to pay less in life insurance premiums than men
- Smoking status: Whether you smoke or not will have a big influence on how much you pay for life insurance premiums. Smoking has adverse effects on health and is directly linked to many life-threatening medical conditions, so smokers pay significantly higher premiums. A 30-year-old non-smoker can pay $21.60 for $500,000 in life insurance coverage for a 10-year policy, while a smoker of the same profile ends up paying $42.30, which is double
- Lifestyle habits and occupation: High-risk activities, hazardous occupations, frequent travel, alcohol or drug use, and other lifestyle factors may affect eligibility or premiums. The effect depends on the activity, frequency, and insurer’s underwriting rules.
Policy factors affecting life insurance premiums
Beyond the details of the insured person, policy type and coverage also help to determine how much you pay in premiums.
- Policy type: A term life insurance policy will typically have lower premiums than a permanent life insurance policy, because the latter offers coverage for your entire life. For example, a term life insurance policy with $100,000 in coverage for a 20-year-old non-smoker male can cost as low as $9 per month, while the same coverage for a non-participating whole life insurance policy can cost $70 per month
- Coverage amount: The more coverage you get, the higher your premiums will be. For example, a policy with a $250K death benefit will cost less than a policy with a $1M benefit
- Term length: For term insurance, longer coverage periods can cost more because the insurer is protecting longer. The premium may remain level during the initial term but can increase when the policy renews unless the policyholder converts, replaces, or terminates the coverage
- Premium structure: Permanent policies can have different premium-payment periods and features that affect their cost. For instance, 20-pay whole life insurance will be cheaper than a 10-pay policy. This is because the premiums for 20-pay are spread over a longer duration
- Optional benefits or riders: Optional benefits added to a policy can increase the overall premium. Examples include child coverage, waiver of premium, guaranteed insurability, accidental death benefits, and other policy-specific add-ons
You can use our life insurance calculator to get an idea of how much insurance coverage you might need, and get instant quotes to find out what your premiums would be.
How much is a life insurance premium: Term vs. whole life insurance costs
As mentioned, life insurance premiums in Canada vary widely depending on your age, health, smoking status, coverage amount, policy type, and insurer. For a $100,000 policy, costs can range from about $7 to $44 per month for term life insurance, while whole life insurance can range from about $57 to $382 per month.
Cost of a $100,000 term life insurance policy:
| Age (in years) | Male (non-smoker) | Female (non-smoker) |
| 20 years | $9.45/month | $7.71/month |
| 30 years | $9.45/month | $8.19/month |
| 40 years | $10.53/month | $9.72/month |
| 50 years | $18.00/month | $15.12/month |
| 60 years | $44.10/month | $33.57/month |
*Illustrative term life insurance cost of a 10-year plan with $100,000 in coverage for a male/female non-smoker
Cost of $100,000 whole life insurance policy:
| Age (in years) | Male (Non-participating) | Male (Participating) | Female (Non-participating) | Female (Participating) |
| 20 | $70.74/month | $138.42/month | $57.24/month | $118.89/month |
| 30 | $100.35/month | $177.84/month | $88.74/month | $156.15/month |
| 40 | $141.66/month | $228.96/month | $127.53/month | $207.00/month |
| 50 | $223.83/month | $292.23/month | $181.71/month | $270.81/month |
| 60 | $319.41/month | $382.14/month | $277.92/month | $351.81/month |
*Illustrative monthly premiums for non-smoking males and females of various age ranges seeking a whole life insurance policy with $100,000 in coverage for a 20-pay premium option
Which has cheaper premiums: term life or whole life insurance?
Term life insurance is generally cheaper because it provides coverage for a fixed period, such as 10, 20, or 30 years, while whole life insurance is designed to provide lifetime coverage and can build cash value.
Whole life premiums account for the insurer providing a death benefit for life, along with the policy’s cash value component and, for participating policies, potential dividends. Hence, the premiums for a whole life insurance policy will be comparatively higher.
However, the cheapest option is not automatically the most suitable; choose based on the length of coverage you need, your financial goals, and your budget.
Who pays my life insurance premium?
Whether monthly or annually, life insurance premiums are paid by the policyholder. For individual policies, this usually means that the insured will pay their own premiums.
However, a person may own a policy on someone else. For instance, if you have life insurance coverage through workplace benefits, your employer will pay the policy premiums. If a child has life insurance coverage, the premiums are likely being paid by a parent or grandparent. A policyholder may also pay premiums for their spouse or ex-partner, depending on separation agreements.
Are life insurance premiums refundable?
No, life insurance premiums are generally not refundable once paid. However, you may receive a refund in certain situations, such as cancelling a policy during the free-look period. The free-look period for life insurance policies in Canada is generally 10 days. The amount and eligibility for refunds depend on the policy terms and insurer.
Are life insurance premiums tax deductible?
No, life insurance premiums are generally not tax-deductible in Canada for individual life insurance. The Canada Revenue Agency (CRA) considers these insurance premiums a personal expense, and hence they are not tax-deductible. There are limited exceptions, such as certain business-owned life insurance policies used as collateral for a business loan, where a specific portion may be considered tax-deductible.
Will life insurance premiums increase with time?
Whether or not the life insurance premium will increase with time depends on the policy you have bought. The premiums for a term life insurance policy stay the same during the entire term; however, they can increase when the policy is renewed, depending on the policy’s renewal terms. On the other hand, whole life insurance plans have premiums that remain level if you pay the premiums on time.
What is the difference between a premium, death benefit, and cash value?
The three terms describe different parts of a life insurance policy:
- Premium: The amount you pay monthly, annually, or according to your policy’s payment schedule
- Death benefit: The amount your beneficiaries receive after your death
- Cash value: The accumulated value of certain permanent policies, such as whole life and universal life insurance. Term life insurance does not have cash value
Where do I find quotes for insurance premiums?
You can compare life insurance quotes from multiple Canadian insurers with PolicyAdvisor. Our licensed advisors can help you compare premiums based on your age, health, coverage needs, and policy type, rather than looking at a single insurer’s premium. You can also get personalized life insurance quotes and discuss your options before choosing a policy. Schedule a call now to get started!
Need insurance answers now?
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Frequently asked questions
What happens when I stop paying life insurance premiums?
If you stop paying your life insurance premiums, the policy may eventually lapse, and your coverage can end. Most policies have a grace period to allow you to make a missed payment, while permanent life insurance may have options such as using the policy’s cash value to cover premiums, depending on the contract.
How accurate are life insurance calculators for premiums?
A life insurance calculator can give you a very good idea as to how much you will pay in premiums for a given policy. The more accurately you answer initial questions, the more accurate your quote will be. It is wise to expect some degree of variation, however, because the underwriting process can reveal additional risk factors that can influence premiums.
Can you pay insurance premiums with a credit card?
Yes, you can pay life insurance premiums via a credit card in Canada. But the exact payment and credit card requirements will vary from insurer to insurer.
Can I lower my life insurance premiums?
Yes, you may be able to lower your life insurance premiums. Some of the useful tips to lower the premiums include choosing an appropriate coverage amount and policy term, maintaining good health, avoiding tobacco and nicotine use, avoiding unnecessary riders, and comparing quotes from multiple insurers.
Are life insurance premiums cheaper for non-smokers?
Yes, non-smokers pay lower life insurance premiums than smokers because insurers consider tobacco and nicotine use when assessing mortality risk. The exact difference also depends on factors such as your age, health, coverage amount, policy type, and the insurer’s underwriting rules.
How much is life insurance in Canada per month?
The average cost of life insurance in Canada depends on the policy you choose. For term life insurance, it ranges from $7 to $44 per month for $100,000 coverage. On the other hand, for whole life insurance, it will range from $57 to $382 per month for $100,000 coverage and 20-pay policy.
Why can two people pay different premiums for the same coverage?
Two people can pay different premiums for the same amount of life insurance because insurers assess each applicant’s age, health, smoking status, occupation, lifestyle, policy type, and coverage term differently. Insurers may also use different underwriting guidelines and pricing, so premiums can vary even when the coverage amount is the same.
How often do you pay life insurance premiums?
Life insurance premiums are typically paid monthly or annually, although some insurers may offer other payment frequencies. Your payment schedule depends on the policy and insurer. Paying annually may sometimes result in a lower total cost than making monthly payments, depending on the insurer’s payment terms.
What happens to premiums if I convert term insurance to permanent insurance?
When you convert a term life insurance policy to permanent insurance, your premium will generally increase because permanent insurance provides lifelong coverage and may include a cash value component. The new premium depends on the permanent policy you choose and the insurer’s conversion terms. Depending on the policy, you may be able to convert without providing new medical evidence.
Is a life insurance quote the same as the final premium?
No, a life insurance quote is not the same as the final premium. A life insurance quote is an estimate of your expected premium based on the information provided when you request the quote. The final premium is determined after the insurer completes its underwriting process. Your final premium may therefore be higher, lower, or the same as the initial quote.
The life insurance premium is what you pay to keep your life insurance policy active. Typically, insurance premiums are due on a monthly basis, though most insurance providers have alternative payment plans (typically annual payments). The amount depends on factors such as age, health, smoking status, coverage amount, policy type, term length, and optional riders.
