It can be difficult to sort through the information online when it comes to Life Insurance – and to sort out what information applies to Canada instead of the U.S. Let’s go through a few fundamental aspects of Canadian life insurance.
Term life insurance in Canada is generally ‘renewable and convertible’. You can read the definitions of these in our article here. If you purchase term life insurance in Canada, you should ensure that it is a renewable and convertible policy.
There are only about 15 life insurance companies actively selling life insurance (as opposed to probably 100-200 active in the US market). Premiums for term life insurance between the various companies is generally extremely competitive. While you should definitely shop on price, you’ll find that the premiums for the least 5 expensive companies are all mostly within a few dollars of each other.
Term life insurance in Canada will often have an ‘exchange’ option which allows you to switch your term policy for a longer term policy in the first 5 years of the policy without taking a medical exam. So if you purchase a 10 year term, you could swap it for a term 20 in the first 5 years of the policy. This is useful if you have a rating for a temporary period of time, are planning on quitting smoking, or just want to see if the premiums suit your budget. Most companies in Canada require that you keep the policies at least two years before exchanging, however Wawanesa Life does allow you to do it in the first year.
Whole life insurance and all it’s variants are similiar to American offerings. There’s little to say here that you probably haven’t already read, other than to suggest that if you’re looking for a Canadian whole life policy, you should look first to a fully guaranteed whole life policy.
Universal life is substantially different between Canada and the US. Ignoring the investment portion, there are two basic types of universal life based on the internal insurance costs. You can choose from annual increasing (your insurance costs go up every year) or guaranteed level insurance costs for life. You should almost always NOT use the investment component of a universal life insurance policy and you should almost always NOT choose a universal life insurance policy that has the increasing insurance costs – stick to the guaranteed level insurance costs as this ensures that nothing can go wrong in the distant future – no matter what happens y our insurance costs are guaranteed at a baseline.
Canada used to have Term to 100 life insurance but the 2008-2009 financial crisis mostly killed off this type of insurance. Canadian life insurance companies withdrew their Term to 100 offerings shortly after that time. If you are seeking Term to 100, then your first choice will probably be a universal life insurance policy with guaranteed level insurance costs. With that type of policy, if you don’t put any premiums into the investments (leave the invstments at 0 and just pay the base insurance costs) you effectively have a Term to 100 policy – level premiums for life with no investment component.