How to Buy Life Insurance in Canada – 5 Simple Steps & Where to Buy It

Protecting your loved ones with life insurance is one of the smartest money moves you can make if you have people that rely on you financially.

Unfortunately, the life insurance buying process can sometimes be complicated and you may have to deal with several parties – from when you start shopping for the right policy for yourself till when you sign a contract.

This post covers how and where to buy life insurance in Canada in 5 easy-to-follow steps. In addition, you’ll learn about the best places or platforms for buying life insurance in Canada.

If you’re ready, let’s start…

Steps to Buy life Insurance in Canada

Below, we’ve summarized how to buy life insurance in Canada into 5 simple steps you can follow

1. Determine if you need life insurance

The first decision you’ll need to make when buying life insurance is whether you need it or not.

To keep it simple – you should buy life insurance if your loved ones would be left financially vulnerable if you’re no longer in the picture.

So it does not matter how old you are or your marital status.

In general, you may need life insurance if you have a young or growing family, have debt obligations like mortgage, don’t have a big nest egg and so on.

On the other hand, a young adult with no dependents or an adult with large savings and investments may not need life insurance.

With young adults, they may have no dependents to look out. But they may decide to get a policy with a small amount to cover burial expenses, take care of pets or even leave money to charity.

If you’re not sure whether you need a life insurance or not, you can use this life insurance needs calculator from PolicyMe. It’ll let you know if you need one or not and recommend an amount in a few minutes.

Learn more: 7 Reasons Why You Need Life Insurance To Protect Your Loved Ones

2. Choose a life insurance type

Once you’ve determined you need life insurance, the next step you need to take to buy life insurance in Canada is to decide on the type of life insurance that is right for you.

There are 2 broad types of life insurance:

  • Term Life Insurance
  • Permanent Life Insurance

Term Life Insurance policies provide their protection to the insured over the set period of time that is agreed in the policy. This could be 5, 10, 15, 20 or 30 years.

They’ll only pay the death benefit if the policyholder becomes deceased during that period – i.e. the policy becomes worthless afterwards.

Because of this limited time coverage, they are more affordable, but they are the best type of life insurance coverage for most people.

Permanent Life Insurance policies are more permanent in nature as the name suggest. They’ll pay out a death benefit to the beneficiaries as long as the insured continues to make premium payments.

In other words, the insurance payouts are guaranteed and most of them also incorporate savings or investments into the policies that lets you build cash value over time.

So as expected you’ll have to pay substantially more for this benefit – as much as 10-20 times the premiums of a comparable term life insurance policy in some instance.

This is why a term life insurance is the right type for most people. It protects your family when they are most vulnerable, and you’ve not had the opportunity to build enough savings.

But permanent life insurance policies have their place. If you’ve maxed out your RRSP and TFSA or planning for your estate, they may be right for you.

If you’re unsure, speak with your financial advisor to access your needs and recommend the right life insurance policy for you.

Learn more: Guide to Life Insurance in Canada

3. Figure out how much life insurance you need

Now that you know the type of life insurance policies available to you and have decided on one, the next step to buy life insurance in Canada is to calculate how much coverage you need.

Some experts recommend that you take your annual income after tax and multiply it by a factor (e.g. 7 – 10), to get a quick estimate of how much life insurance you need.

The idea is this – you want your loved ones to have access to your income for a few more years if you’re out of the picture. So the factor represents how many years you want them to be protected for.

The challenge with the approach is that it is too simplistic and ignores individual circumstances like debt obligations and savings/investments.

A better approach is to itemize your present financial obligations like living expenses, mortgages, credit card loans etc, and future commitments like children’ education.

Add them up and deduct your existing savings, investments and existing life insurance coverage, if applicable, to get an estimate for how much life insurance to buy.

This is a more tasking approach but it provides a more accurate estimate of your life insurance needs. Luckily, there are several life insurance calculators online like this simple and quick life insurance calculator to help you get started.

Simply provide some information about your finances and family obligations, and it’ll provide a recommended amount in a few minutes.

4. Get quotes and compare life insurance policies

The next step in the life insurance buying process is to get life insurance quotes and compare them.

In general, you can get life insurance quotes in one of 2 ways:

  • Directly from a life insurance company: E.g. from one of the big players like Manulife and Sunlife or an online provider like PolicyMe.
  • Through an online life insurance broker like PolicyAdvisor or Bounc3.

Going through a life insurance broker has several advantages. It saves you time and effort and gives you the opportunity to compare the quotes of several life insurance companies at once.

PolicyAdvisor, for example, works with 20+ of the largest insurance companies in Canada. So you’ll be getting life insurance quotes from several providers from a single source.

Note that the quotes you get from PolicyAdvisor is the same one you would get from the life insurance companies if you went directly to them.

At the moment though, PolicyAdvisor does not provide quotes from PolicyMe, an online life insurance company with affordable quotes compared to the big players.

According to PolicyMe, their quotes are 10-20% cheaper than the ones from other life insurance companies. This is possible because they’ve streamlined and cut out the inefficiencies in the life insurance buying process and it’s 100% online.

So you should also get a quote from PolicyMe and compare to the ones you get from PolicyAdvisor before making a decision.

Tip: When comparing life insurance quotes, make sure you’re comparing apples to apples. i.e. same life insurance type, coverage amount and so on.

What affects Life Insurance Quotes?

Here are some of the things that affects your life insurance quote:

  • Age: the younger you are, the lower your risk of death and that translates to lower insurance premiums (all other things being equal)
  • Gender: Males pay a higher premium compared to females
  • Medical History: Having certain medical conditions will increase your life insurance quotes
  • Lifestyle: If you work a dangerous job or have a hobby that’s deemed to be dangerous, you can expect to pay higher premiums
  • Coverage amount: The higher the coverage amount, the higher your life insurance quotes

Other factors that are considered for insurance underwriting may include driving record, foreign travel, height & weight etc.

5. Choose a policy and apply

The final step in how to buy life insurance is to choose a policy from one of the ones you’ve compared and apply.

The application process may take weeks with some life insurance companies. Usually, it starts online then you’ll receive a call to go through your medical history (typically takes 30+ minutes).

Finally, a medical exam will be scheduled to take your blood and urine sample.

With an online life insurance company life PolicyMe, all the application happens online, and most people are approved immediately with no need for a medical exam.

If everything goes well with no red flags, your life insurance coverage starts, and you can start making the periodic (usually monthly) premium payments.

And that completes the process of buying life insurance in Canada to start protecting your loved ones financially.


Where to buy Life Insurance in Canada

Canada has some of the largest insurance companies in the world, so you have several options when it comes to where to buy life insurance in Canada or which life insurance provider to choose.

When you’re ready to get quotes and buy a life insurance policy, here are some of the best platforms to get and compare life insurance quotes.

PolicyMe

Best for: Fast, online and affordable life insurance

PolicyMe is an online life insurance company that makes it possible for Canadians to buy term life insurance policies quickly, affordably and 100% online.

The key features of PolicyMe include:

  • Instant decision for most applicants
  • Quick application process (20 minutes)
  • 30 days grace period for missed premium payments
  • Cancel without fees and penalties anytime            

PolicyMe operates in all provinces and territories except for Quebec and Newfoundland & Labrador.

Learn more about its offerings in this PolicyMe Review.

PolicyAdvisor

Best for: More Choice – choose from 20+ best insurance companies in Canada

PolicyAdvisor is an online insurance brokerage that makes buying insurance policies simple and quick in Canada.

If you’re looking for a quick way to compare insurance rates online, then PolicyAdvisor is your best option. They support life insurance (term and whole life), mortgage insurance, disability insurance and more.

Unfortunately, PolicyAdvisor is only licensed to sell life insurance in Alberta, Manitoba and Ontario.

Related: PolicyMe vs PolicyAdvisor

Bounc3 

Best for: Insurance for Self-employed Canadians

Like PolicyAdvisor, Bounc3 is an online insurance broker. It currently supports Life Insurance, critical illness insurance, disability insurance and Health Savings Accounts (HSA).

What sets Bounc3 apart from the other insurance brokers is that it’s focused on helping self-employed and business owners in Canada.

They publish articles that help self-employed Canadians demystify the financial products they need to protect themselves, their business and loved ones. And have advisors that can provide specific and personalized advice.

Learn more about its offerings in this Bounc3 Review.

Tips for buying life insurance wisely

To ensure you’re getting the right life insurance coverage for your needs and also save on the premiums, here are some life insurance buying tips:

  • Get a life insurance needs assessment to answer some of the important questions about life insurance such as do you need life insurance, what type of life insurance should you get, how much coverage do you need etc.
  • Shop around and compare quotes before you commit. Use an online broker with access to a good selection of the best life insurance companies
  • Make sure you’re comparing like with like when deciding which life insurance is best for you. Consider the type, coverage amount and options.
  • Term life insurance policies are cheaper and are the best option for most families. But permanent life insurance policies have their uses too.
  • If you’re not sure of which one to pick, speak with an independent life insurance advisor to get an unbiased recommendation.
  • Even if you have group life insurance from your employer, it’s a good idea to get extra protection with a personal policy. This is because in most instances, the group policy isn’t sufficient for your needs and won’t carry over if you leave the job.

Simon is a CPA by day and a Personal Finance Blogger by night. With over a decade experience in financial services, he's passionate about personal finance, investing and helping people take control of their financial life.

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