Life insurance is worth considering if you want to ensure you leave money for your loved ones. It pays out a tax-free, lump-sum amount upon your death. This money can help ensure your family doesn’t face financial hardship after you’ve passed away. 

If you live in Ontario and are shopping for life insurance (or are actively thinking about getting one), this post is just for you. It answers common life insurance questions — including what are the different types of life insurance, how much coverage is sufficient, and how much does life insurance cost — and then some.  

Let's dive in.

What types of life insurance are available in Ontario? 

Life insurance provides financial security to your family by paying a cash benefit in the event of your death. Knowing the different types of life insurance, how they work, and their costs can help you pick the right cover for your situation. 

Broadly speaking, life policies are of two types: term or permanent. Whole life insurance is the most common type of permanent life insurance. 

Most life insurance polices require a medical exam. While most people are able to qualify for medically-underwritten plans, some applicants do get turned down because of their health or other reasons, like a risky job. Simplifies issue life insurance (available in both term and permanent varieties) and guaranteed issue life insurance (a type of whole life insurance) are your two coverage options if you can’t get a traditional plan. 

Term life insurance

Term life insurance provides protection for a pre-determined period, like 10, 20, or 30 years. Once this period is over, coverage ends unless you renew it. Most insurers let you renew coverage without providing proof of insurability. 

Your family receives the sum assured upon your death if your policy is active at that time. Term life plans are less expensive than comparable whole life policies. 

Whole life insurance 

Whole life insurance offers coverage that lasts your lifetime or as long as you want it. Since there’s no expiry date, whole life guarantees a payout after you die, provided you keep up with the premiums. 

Along with permanent cover, whole life insurance plans build cash value over time. The cash value grows at a steady rate on a tax-deferred basis, meaning the question of taxes doesn’t come up until you withdraw funds. You can access cash value at any time during your lifetime. Upon your death, your beneficiary generally receives only the death benefit. 

Simplified issue life insurance 

Simplified issue life insurance plans don’t require a medical exam. Your premium is based on the information you provide and your responses to a few simple health-related questions. 

If you decide that simplified issue is the right type of plan for you, you’ll have two options: simplified issue whole life insurance and simplified issue term life insurance. Generally, simplified issue plans have higher premiums than fully medically-underwritten plans. 

Guaranteed issue life insurance

Guaranteed issue plans involve neither a medical exam nor a health questionnaire. Acceptance is guaranteed, as long as you meet the insurer’s age requirement. This depends on the insurer you are working with, but it’s generally between 50 and 80 years old. 

Guaranteed issue plans cost more than a standard life insurance policy due to the potentially higher risks the insurance carrier is taking on by not checking your health. Also, the death benefit is limited — usually not greater than $25,000 or $50,000. Your policy is designed to last your lifetime and accumulate cash value. 

What are the benefits of life insurance?

Some of the key benefits of life insurance are: 

Income replacement: The policy proceeds compensates for the lost income of the deceased.

End-of-life expenses: The death benefit can cover medical bills and funeral expenses.

Pay off Debts: Life insurance can help pay off deceased debt’s including the mortgage balance.

Tax-free benefits: Life insurance payouts are generally tax-free. 

Additional benefits: Permanent life insurance policies build cash value over time, which can help fund a big purchase, meet a financial emergency, and supplement retirement income. 

How much does life insurance cost in Ontario?

How much you’ll pay for life insurance in Ontario depends on your personal and policy details. Generally speaking, the younger you are, the cheaper the monthly premiums. For example, a 30-year-old, non-smoking applicant may pay between $20 and $30 a month for term life insurance plan with a $500,000 death benefit. 

Apart from age, these factors can impact your life insurance costs: 

• Health: Healthier people pay less for life insurance than someone with a serious health condition or multiple minor health conditions. This is because some with a clean medical record is less likely to die early. 
• Family medical history: Along with your health history, insurers will often want to know if you have at higher risk of developing certain conditions due to genetics. A family medical history of health problems like heart attack, diabetes, or stroke may lead to higher premiums. 
• Lifestyle choices: A health lifestyle can not only help you live longer, but it can also save you money on life insurance. On the other hand, being overweight, smoking, or heavy drinking can push up your insurance costs.  
• Policy type: Term life insurance is considerably cheaper than whole life insurance, as it runs for a specific period and doesn’t include a savings component. 
• Payout amount:  As a general rule, the higher the payout amount you choose, the higher the monthly premiums. So, for the same person a policy with $1 million death benefit will have a higher price than a plan with cover of $500,000, for example. 

Can you get life insurance in Ontario if you have a pre-existing illness?

Having a pre-existing condition doesn’t automatically rule you out from getting life insurance. Unless your condition is severe, you’ll likely have access to same types of life insurance as someone with a clean medical record. But your cost of insurance will be higher. 

Even if can’t qualify for traditional life insurance due to poor health, you still have options. You can apply for simplified issue life insurance, which has more lenient eligibility criteria than standard plans. Guaranteed issue life insurance is another option. It has no health qualifications, so you can’t be turned down if you meet the insurer’s age requirement for it.  

How much life insurance do you need in Ontario?

You need enough life insurance to cover your financial obligations. The death benefit amount should be large enough to allow your family to maintain their standard of living. 

Experts recommend buying a policy with a death benefit that’s 10 to 15 times your annual salary. However, the actual amount will depend on your personal circumstance. For example, if you are the sole breadwinner of your family, which includes young kids, and have a big mortgage, you’ll need more financial protection than someone with an earning spouse and no children. 

If you want to quickly determine how much coverage you need, the following two methods can provide a good estimate. 

Method 1 – Multiply your yearly salary by the number of years you think your loved ones would need financial support. 

Method 2 – Add your mortgage, debts, monthly bills, and other expenses and work out how much money your family would need a year in your absence. Next, multiply this figure by the number of years you think your family would need support. You might want to consider potential future family expenses, such as higher education costs, wedding expenses, and home down payments for your children. 

You can also use our insurance coverage calculator to get a quick, accurate estimate. 

1. You’ll enter a few personal details, including your age and gender
2. You’ll provide a few details about your finances, like your yearly salary, total debt balance, and savings
3. That’s just about it! We’ll give you an estimate tailored to your situation

Once you know the coverage amount you need, we can help you secure the right policy for you at the best possible price. 

Best life insurance companies in Ontario

Life insurance varies in complexity just as much as individuals who buy and use it. That means there isn’t a definitive “best” life insurance provider. Rather, the ideal choice depends on your specific needs and priorities. 

Our team has reviewed over 20 life insurance companies to find the top providers in Ontario, based on affordability, overall benefits, policy types, and customer satisfaction. 

Best for affordable life insurance premiums: BMO

Best no-exam life insurance: Canada Protection Plan 

Best for permanent life insurance: Sun Life

Best for term life insurance: Beneva

Best for families: Empire Life

Best for older adults: iA Financial Group 

Best for smokers: Manulife

Best overall: RBC

Best for personalization: Equitable Life

‍Other types of insurance in Ontario

Life insurance pays a lump sum to your loved ones when you die. The payout can help your family maintain their standard of living in your absence. However, there are several other scenarios in which you and your family may need financial assistance. 

Here are some other types of insurance in Ontario that you may want to look at. 

Disability insurance

It replaces a portion of your income — usually between 60-80% — if you’re unable to work due to an illness or injury. Disability insurance plans are of two types: 

• Short-term disability: These plans cover temporarily disabilities. For the same reason, the payout period — the length of time you receive payments after a successful claim — is usually not longer than 1 or 2 years. 
• Long-term disability: These policies provide protection against long-term and permanent disabilities. The payout period can range anywhere from a few years to up to retirement.

Critical illness insurance

Critical illness insurance pays a lump-sum amount if you develop any of the conditions covered by your policy. You can use the benefit amount as you wish. Once the policy pays out, coverage ends automatically. 

Personal health insurance

A personal health insurance plan helps you cover medical expenses not paid by provincial or employee benefits program if it includes health insurance cover. Covered expenses include hospitalization, medications (prescription and generic), dental and vision care, and paramedical services (like physiotherapy). 

Conclusion

Life insurance can help protect your family financially after you’re gone — and it is more affordable than many people think. Regardless of your insurance needs and budget, there are many affordable life insurance plans in Ontario.

At Dundas Life, we can help match you with the right product and provider for your situation. By understanding your specific needs, we aim to secure the lowest-possible price. Book a call with a licensed insurance advisor today.

FAQs

Is life insurance more expensive in Toronto than in other cities in Ontario?

Yes, life insurance premiums in Toronto tend to be higher compared to other Ontario cities because of the city’s steep cost of living. Folks here tend to need more coverage to adequately protect their family, which in turn pushes the premium rates up. To find affordable life insurance plans, compare quotes from several providers. This is something an independent insurance broker can help you with. 

What are the popular life insurance options in Ontario? 

The two most popular options for life insurance in Ontario are term life insurance and whole life insurance. People like term life insurance partly because of its affordability and partly because it allows them to buy coverage for only as long as they need it. Whole life insurance, on the other hand, is popular as it combines permanent coverage with the cash value feature. 

Why it’s important to do life insurance policy comparisons when shopping for coverage?

Policy details and premium rates vary from life insurance plan to another. Comparing different policies side by side helps you find out which type of policy best fits your financial needs and budget. 

What are some of the limitations of life insurance?

Life insurance should be a part of long-term financial planning of everyone who has dependents. It can help keep your family afloat if you’re no longer around to care for them. However, there are a few considerations you should be aware of. The insurance provider will not pay the death benefit if the insured person commits suicide within two years from the coverage date. The death benefit will also not be paid if the policy is declared null and void because of misrepresentation, material omission, or fraud. Providing accurate and truthful information on your application is crucial to guarantee your loved ones will receive the policy proceeds.