How life insurance actually works in Canada

Life insurance is a simple trade: you pay premiums, and if you die while covered, the insurer pays a tax-free lump sum to the beneficiary you named. Everything else is detail — but the details decide whether it's a good deal.

Term vs permanent

Term covers you for a set number of years and pays only if you die during that term; it's cheap because most terms expire unused. Permanent (whole or universal) lasts your whole life and builds a cash value, which is why it costs far more per dollar of coverage. Most families with a temporary need — a mortgage, young kids — are served by term.

How much you need

It isn't a mystery: it's your debts, your income for the years your family needs replacing, your mortgage, and your kids' costs, minus what you already have. Run the Life Insurance Needs tool.

Underwriting

You apply, disclose your health honestly, sometimes take a medical, and the insurer prices you. Buy while you're healthy — coverage only gets harder and costlier with age and diagnoses.

Beneficiaries matter more than people think

A named beneficiary means the money skips your estate, avoids probate, and pays quickly. No beneficiary means the opposite. See beneficiary designations.

The tax-free part

A death benefit to a named beneficiary is generally received tax-free — which is why our calculators don't gross it up.