Here are five key elements to help you understand life insurance better so that you can make informed decisions for your situation.
Main types of life insurance
The purpose of life insurance is to give your loved ones a non-taxable amount when you die. There are two types of life insurance: term and permanent.
Term insurance
As its name suggests, term insurance is for a specific term, suited to people with temporary insurance needs. For example, when you take on a mortgage or other large debt, or when you have children who depend on your earnings, term insurance is what you need, because that financial burden will disappear after a certain period of time.
It is the most affordable type of insurance, allowing you to insure yourself for the length of time and the amount that you choose. If you die during the term of the insurance policy, your beneficiaries will receive the amount you insured yourself for.
This type of coverage also gives you flexibility: depending on your changing needs, you may decide to renew it when the selected term ends. You may also cancel it, change the coverage amount or convert it to permanent insurance.
Permanent insurance
Permanent insurance can be divided into two categories: whole life and universal life.
Permanent whole life insurance
When referring to permanent insurance, whole life is often meant. This type of coverage is a great choice for people who want to pay their funeral expenses and taxes upon death, or would like to leave an inheritance. In all these cases, people want to be insured until their death; that’s why this type of coverage is called permanent.
Even though term insurance has lower premiums, permanent life insurance is a more economical choice if you want coverage for your entire lifetime. Instead of renewing your term life insurance several times over the course of your lifetime, which will make your premium increase each time you renew (more details on this below in the What determines the price of life insurance section), taking out a permanent insurance policy locks in a fixed premium for your entire lifetime, with no increase even if your health deteriorates.
This type of coverage may also have a cash value, which is an amount equal to a portion of the premiums you have paid and will be returned to you if you no longer need the coverage.
Permanent universal life insurance
Universal life has the same features as whole life, but can also be used as an investment tool. This type of coverage may meet the needs of those who have maxed out their RRSPs and TFSAs and want to invest additional amounts tax-free.
In many cases, term insurance is not only the simpler but the most appropriate choice to cover greater financial need more affordably. For some, the best formula lies in a combination of the two types.
Term, or length, of life insurance coverage
As we’ve just seen, the length of coverage depends on the type of insurance you choose. If you choose permanent life insurance, it will remain in effect for your entire lifetime.
In the case of term life insurance, you choose the length of time that coverage will remain in effect. The rule of thumb is to estimate the duration of your financial obligations and take out coverage for a similar amount of time. For example, if you have 23 years left on your mortgage, you might take out coverage for a 25-year term.
What determines the price of life insurance
Several factors influence the cost of illness insurance:
- Your gender: life insurance is cheaper for women because they have a longer life expectancy than men.
- Your age: the younger you are, the less likely you are to die. Insurance is therefore more affordable for young people.
- Amount of insurance: the higher the amount you choose, the higher your insurance premium.
- Type of insurance chosen: the premium for permanent life insurance will be higher than the premium for term insurance.
- Length of coverage, for term life: the longer your coverage period, the higher the price.
- Tobacco or marijuana use: smokers may pay twice as much for the same insurance coverage as non-smokers.
- Health and family history: your health and family medical history can influence the cost of your life insurance.
For example, here are two comparison tables with male and female profiles:
Profiles: Men
For single coverage
IA Financial Group
Empire Life
Person #1
Age 35, non-smoker , in a conjugal relationship with a woman, age 32, non-smoker and 2 children – $450,000 10-year term life
$25.65 / month
$22.01 / month
$21.92 / month
Person #2
Age 26, single, non-smoker – $100,000 10-year term life
$11.25 / month
$13.59 / month
$9.18 / month
Person #3
Age 56, smoker, divorced, 3 children – $50,000 10-year term life
$60.75 / month
$74.30 / month
$55.13 / month
Profiles: Men
For single coverage
Person #1
Age 35, non-smoker, in a conjugal relationship with a woman, age 32, non-smoker and 2 children – $450,000 10-year term life
IA Financial Group
$25.65 / month
$22.01 / month
Empire Life
$21.92 / month
Person #2
Age 26, single, non-smoker – $100,000 10-year term life
IA Financial Group
$11.25 / month
$13.59 / month
Empire Life
$9.18 / month
Person #3
Age 56, smoker, divorced, 3 children – $50,000 10-year term life
IA Financial Group
$60.75 / month
$74.30 / month
Empire Life
$55.13 / month
*Price for single coverage
IA Financial Group
Empire Life
Person #1
Age 33, living common-law with a man, age 36, smoker, 2 children – $450,000 10-year term life
$34.16 / month
$30.92 / month
$30.02 / month
Person #2
Age 45, single mother of 2 children, non-smoker – $50,000 10-year term life
$13.32 / month
$10.04 / month
$12.02 / month
Person #3
Age 22, single, non-smoker – $100,000 10-year term life
$9.00 / month
$11.25 / month
$6.84 / month
Person #1
Age 33, living common-law with a man, age 36, smoker, 2 children – $450,000 10-year term life
IA Financial Group
$34.16 / month
$30.92 / month
Empire Life
$30.02 / month
Person #2
Age 45, single mother of 2 children, non-smoker – $50,000 10-year term life
IA Financial Group
$13.32 / month
$10.04 / month
Empire Life
$12.02 / month
Person #3
Age 22, single, non-smoker – $100,000 10-year term life
IA Financial Group
$9.00 / month
$11.25 / month
Empire Life
$6.84 / month
*Price for single coverage
Needs met by life insurance
Life insurance can meet several needs:
- Protect your family from your financial obligations if you die
- Optimize your legacy
- Pay your funeral expenses
- Pay off your personal debts
- Pay taxes on death for illiquid assets
If you think you are more in need of insurance against critical illness or accidental injury, then critical illness or disability insurance would be better for you. Check out our tips about these types of insurance here.
Still have questions about the life insurance offered by Matcha Insurance? Our financial security advisors are available to answer any questions you may have and to reassure you.
Contact us now by calling 1 844 532-3228 or Book an Appointment.
When life insurance is paid out
When an insured person dies, the insured’s estate must contact the insurer to notify them of the death. Supporting documents must be sent, such as proof of the insured’s death and proof that the person claiming the insured amount is the beneficiary. After receiving these documents, the insurer has 30 days to pay the amount of insurance.
If an insured person disappears, for example in a plane crash or a shipwreck, a court must officially declare that the insured has died in order for the insurer to pay the amount of insurance. If an insured’s death cannot be confirmed, seven years must elapse before death can be officially declared. However, the premium must continue to be paid from the date of presumed death until the court’s declaration in order for the beneficiaries to be entitled to payment.
Make an informed choice and compare!
Insurers may each offer you a different price for the same life insurance coverage, so it’s in your best interest to compare quotes. Matcha Insurance offers an online life insurance premium comparison tool to make your life easier! Compare now.
