Why you should protect your family with life insurance
For a family, life insurance can help protect your loved ones by providing whomever you choose (also known as a beneficiary) with a one-time, tax-free payment when you die, as long as premiums are paid.
The money can be used to help:
- Cover your funeral costs
- Pay any outstanding debts, including a mortgage, other loans, and credit cards
- Replace lost income
- Fund your child’s post-secondary education
- Transfer wealth to a future generation
Types of life insurance you can use to protect your family
There are 2 basic types of life insurance: term and permanent.
Term life insurance provides:
- Temporary coverage
- Lower cost than permanent life insurance
- Fixed payments
- Option to convert to permanent life insurance
Get a quick price quote on term life insurance.
Permanent life insurance provides guaranteed lifelong coverage, flexible payments and an opportunity to build cash value. There are 2 types of permanent life insurance: participating life insurance and universal life insurance.
For couples, a joint life insurance policy covers both people under the same policy. Parents can also get life insurance for their children.
You can also use life insurance through your workplace benefits as part of your family’s life insurance plan. However, depending on the amount of life insurance available through your workplace benefits, you may need additional life insurance to provide you with the necessary coverage based on your family’s needs.
How much life insurance does your family need?
The amount of life insurance your family requires will depend on what you’re looking to protect.
According to the Canadian Life and Health Insurance Association, the average life insurance protection per household in Canada is $483,000.
Your advisor can help you determine the amount of life insurance that’s right for your situation.
You’ll likely have to update your life insurance coverage to reflect the changes in your life including , additional children, a larger home or vacation property, etc.
Depending on your family’s unique life insurance needs, you may require more than 1 insurance policy and more than 1 type of life insurance.
How much does life insurance cost?
The cost of each family’s life insurance will vary with their needs. However, here’s an example of costs for 1 family.
Julia is a 34-year-old full-time oncologist. Her current income is $240,000 and her student debt is almost $250,000. She’s in a common-law relationship, has 1 child and plans to have more children in the future. With her partner, she rents an apartment for $3,000 a month.
If Julia died unexpectedly, her financial priorities would be to help ensure her:
- Student loan is paid off
- Child’s education is funded
- Family can afford to maintain their normal lifestyle
Julia’s advisor recommends a layered term insurance strategy with a total coverage of $2,250,000 consisting of:
Canada Life My Term™ for 5 years with a coverage of $250,000 to address her student loan debt. Canada Life My Term for 18 years with coverage of $250,000 to address her children’s education savings. Canada Life My Term for 26 years with a coverage of $1,725,000 to replace the loss of her income. Canada Life universal life insurance with level cost type for $25,000.
The above example is for illustrative purposes only. Situations will vary according to specific circumstances.
Assumptions for this scenario: Female, 34, non-smoker, standard risk. Term 5 policy is Canada Life My Term with $250,000 benefit. Term 18 policy is Canada Life My Term with $250,000 benefit. Term 26 policy is Canada Life My Term with $1,725,000 benefit. Universal Life policy is Canada Life Universal Life with $25,000 benefit, Coverage Plus payout option, Cost type is Level, Value Maximizer is AI 85 with Automatic increases and optimal decreases. . Source: Canada Life Illustrations (March 2024).
Other types of insurance your family might consider
There are other types of insurance that can also help protect your family’s financial security:
Critical illness insurance
Critical illness insurance can give you a tax-free payment if you’re diagnosed with a serious, covered condition such cancer, heart attack or stroke.
Disability insurance
Disability insurance can give you a tax-free monthly payment to help replace your income and cover your expenses if an illness or injury keeps you from working.
Health and dental insurance
Freedom to Choose™ health and dental insurance can help you tackle medical costs not covered by your government health plan – at a price that works for you and your family.