What Canadians need to know about life insurance

Life insurance is something many people don’t like to think about, but it can play an important role in protecting your family’s financial future. (File)

Life insurance is something many people don’t like to think about, but it can play an important role in protecting your family’s financial future. Whether you’re just starting your career, raising a family, or planning for retirement, having the right life insurance policy in place can help give you peace of mind.

What is life insurance?

At its simplest, life insurance is a financial safety net. You pay premiums into a plan, and if you pass away while covered, a lump sum is paid from the insurance provider to your beneficiaries, which could be your spouse, partner, children, or other loved ones.

The amount of coverage you might want from a policy will vary on your lifestyle, family and needs, but the benefit can be used in many ways:

Cover day-to-day living expenses or replace lost income

Support dependants, such as children or elderly parents

Pay off debts, like a mortgage or student loans

Cover funeral and end-of-life expenses

Fund trusts, estates, or even charitable donations

Some types of policies also offer additional benefits, such as building savings for retirement or providing financial support if you become ill or disabled.

How does life insurance work?

Life insurance policies are flexible and can be tailored to your needs. There are two main types: term and permanent.

Term life insurance provides coverage for a set period (like 5, 10, 20, 30, or 100 years, or until a certain age like 65). They typically have lower premiums, but when the term ends, the coverage expires. This is often chosen by people who want affordable protection during key years, such as while raising a family or paying off a mortgage. If you want another policy after the initial term, your premiums will likely be higher.

Permanent life insurance provides lifelong coverage. Premiums remain the same even as you age or if your health changes, and some plans accumulate a cash value you can borrow against. Permanent life insurance is often viewed as a long-term strategy for building financial security.

When you purchase a policy, you’ll choose the coverage amount and name your beneficiaries. If the policy pays out, the benefit is tax-free to the recipient.

How much does life insurance cost?

The cost of a policy depends on several factors, including:

Age: The younger you are, the lower your premiums tend to be.

Health: Good overall health means better rates.

Lifestyle: Certain occupations, hobbies, or habits may increase costs.

For most people, getting coverage earlier in life is not only more affordable but also ensures that premiums remain steady over the years.

When is the best time to get life insurance?

The best time to secure life insurance is when you’re young and healthy, even if you don’t yet have dependants. It might sound counterintuitive, but policies are less expensive at this stage, and locking in early can guarantee lower premiums for the long term.

Even if you’re single or child-free, life insurance can still play a valuable role. If you’re single or the only earner in your household and you pass away, life insurance can help as an income replacement for your loved ones. Some permanent plans also offer features such as cash value that you can access as a loan to cover expenses or treatments not covered by OHIP.

Additional types of insurance and coverage

In addition to term and permanent life insurance, there are two key types of insurance to consider to provide peace of mind and support for you and your family.

The first is disability insurance, often called income replacement insurance. In the event of unexpected illness or debilitating accidents, disability insurance is designed to help provide financial coverage for you and your family by generally covering 60-85% of your regular income, up to a maximum amount. This is ideal for people who are self-employed or those who would require financial security if losing one source of income would severely impact your ability to cover expenses.

The other common type of coverage is critical illness insurance. With this policy, you’ll get a one-time lump sum payment if you’re diagnosed with a life-threatening illness. The payment can be used to help cover your recurring expenses like daycare, renovations to make your home more accessible, or for health care support. The specific amount of the benefit varies based on the policy, and is usually paid after being diagnosed with a condition covered by the policy.

How do I get started?

If you’re thinking about life insurance, start by considering two key questions:

What stage of life am I in?

What do I want to achieve with this coverage?

For example, if your main goal is affordable protection during your working years, a term life policy might be the right fit. If you’re looking for lifelong protection and a product that builds value over time, a permanent life policy could be better suited.

Protecting what matters most

Life insurance is ultimately about peace of mind, knowing your family and loved ones will be financially supported if the unexpected happens. No matter your age or stage in life, there’s a policy designed to fit your needs and goals.

CAA Protect offers a range of life insurance options to help you safeguard your family’s financial future. To learn more, you can book an online appointment with a CAA Protect advisor or speak directly with an agent at 1-800-709-5809 to find a policy that’s right for you.