Life insurance is one of the most important investments that you will ever make. It is the best way to ensure that your loved ones will be taken care of if something happens to you.
If you have a spouse or children, it will be extremely difficult for them to get by financially if you were no longer around.
This could be to pay off the mortgage, for example, or other debts, or just to help cover household bills and living expenses.
You can also get life insurance with critical illness cover added on so that it pays out if you’re diagnosed with a specified critical illness during the policy term.
Insurance companies offer different definitions of what they’ll pay out for, so make sure you understand exactly what’s included before you buy.
But, how much is life insurance in Canada? It’s not an easy question to answer.
Life insurance is unlike other types of insurance, in that the cost is based on several factors, including your age, gender, lifestyle and health history.
What is Life Insurance?
Simply put, life insurance is a contract between you, the policy-holder, and an insurance company.
In exchange for paying premiums (a monthly fee), the insurance company promises to pay a sum of money to one or more beneficiaries when the policy-holder passes away.
The purpose of life insurance is to provide funds to help your loved ones survive financially if you pass away.
For example, if you have young children or a spouse that relies on you emotionally or financially, life insurance can be used to replace your income so they can maintain their standard of living without having to worry about money issues.
Life insurance also allows you to plan for other scenarios, like leaving money behind for your children’s education or even helping cover outstanding debts.
What is the Cost of Life Insurance in Canada
The average cost of term life insurance in Canada ranges from $7 to $65 per month (or $84 to $771 per year).
The average cost of whole life insurance in Canada ranges from $50 to $172 per month (or $600 to $2060 per year).
The average cost of universal life insurance in Canada ranges from $70 to $214 per month (or $840 to $2559 per year).
The cost of life insurance in Canada is based on many factors such as your medical history, family medical history, nicotine use, your current health and weight, age and sex.
The cost of life insurance for high-risk individuals is based on the same criteria but with a higher premium. This can be very pricey.
Habits and Lifestyle
When you apply for a life insurance policy, you’ll be asked about your lifestyle and habits.
It’s important to be honest about these things because if your insurer finds out you haven’t been honest, it could cancel or void your policy.
Smoking is one of the biggest factors that can affect your life insurance premiums.
If you smoke or have smoked in the last year or two, you could end up paying more for your life insurance policy than a non-smoker.
Other habits that could affect your premium include whether you like a drink.
The more alcohol you regularly consume, the higher premium you’ll pay – as well as whether you drive for work or whether you do any job where there is a risk of injury.
If you take part in any dangerous activities in your spare time such as scuba diving, parachuting or sky-diving then it’s likely that this will increase the cost of your life insurance.
The reason is that insurers consider these activities high risk and therefore the likelihood of having an accident is greater than someone who doesn’t.
Even if you have taken up a less dangerous hobby such as horse riding, this could still affect your premiums.
In some cases, insurers do not ask whether you ride or not, but they may ask whether or not you own or keep a horse.
If you answer yes to this question then you could see your premiums go up.
Age and Gender
Life insurance rates are based on statistics, and men tend to pay more for life insurance compared to women of similar age and health status because men have shorter life expectancies compared to women.
The average life expectancy for men is 75 years old while it’s 80 years old for women.
Women tend to live longer so it’s more likely that their families will benefit from the policy for longer periods.
In general, the younger you are when you purchase life insurance, the lower the premium will be.
This is because the younger you are, the less likely you are to pass away in the near future.
Life insurance providers may charge you based on age bands (for example, 20-29 years old, 30-39 years old).
This can make sense given that statistically speaking, the older someone gets, the less likely they are to live another year.
The Type of Policy you Buy
One of the biggest factors that affect the cost of a life insurance policy is the type of policy you buy.
Term life insurance policies provide coverage for a set number of years or terms.
These policies are relatively inexpensive and provide a lot of coverage for the money.
Term policies are usually renewable after the initial term has expired, but they become more expensive with each renewal.
Whole life insurance policies provide coverage for your entire life.
In addition to providing a death benefit, whole life policies also accumulate a cash value that can be borrowed against or used to pay premiums.
Because of the cash value component, whole life policies are more expensive than term.
Universal life insurance policies offer flexibility in how much you pay and how often you pay premiums within certain limits.
These policies also have cash value accumulation components that make them more expensive than term.
Health Status and Medical History
Health status and medical history are the most important factors in determining your life insurance rates.
In fact, they are often the only factors that matter. If you have a serious health issue like cancer or heart disease, it is highly unlikely that any insurer will give you a good rate.
People who have a long history of poor health, use tobacco products or live an otherwise unhealthy lifestyle will pay a much higher rate for life insurance than those who are healthy.
The same goes for age; as we grow older, life insurance becomes more expensive because our risk of death increases with age.
Most insurers also consider your family’s medical history when determining your rate.
While they cannot discriminate based on genetic information, they can take into account what illnesses run in your family (e.g., heart disease, cancer, etc.).
Occupation and Avocation
Certain occupations — those that involve an elevated risk of death — will result in higher rates of life insurance coverage.
Those include firefighters, police officers, roofers, construction workers, mine workers and others whose jobs could result in death or injury.
If your job isn’t considered risky but involves some level of danger, you’ll still be paying more than a person who is doing a less risky job.
For instance, someone who works in a factory where they are exposed to heavy machinery will pay more than a person who works in a factory where they aren’t exposed to heavy machinery.
The same is true for avocations — activities outside of work that also involve an elevated risk of injury or death.
These include skydiving, race car driving and other high-risk sports.
If you’re engaged in these activities regularly, expect to pay higher premiums for your life insurance policy.
Typically, premiums increase with age due to a significantly higher risk of death as we get older.
For example, a 30-year old male in good health will pay roughly $13 per month while a 40-year old male would pay closer to $18 per month with the same amount of coverage.
The difference is even greater between 30-year olds and 50-year olds; while a 30-year old pays approximately $19 per month, a 50-year old would pay approximately $45 per month with the same amount of coverage.
Depending on the amount and type of coverage, you’ll pay different premiums. So how much should you expect to pay for life insurance in Canada? Here are some examples:
$100,000 Term 10 Annual Premiums for a Male Non-Smoker:
Age 30: $148 a year
Age 40: $183 a year
Age 50: $329 a year
Age 60: $771 a year
Age 69: $2060 a year
$100,000 Term 20 Annual Premiums for a Male Smoker:
Age 30: $172 a year
Age 40: $252 a year
Age 50: $544 a year
Age 60: $1480 a year
Age 69: $2559 a year