A Guide to Family Life Insurance in Canada
Life insurance can protect your family from lost income, help to guard your assets, and provide financial support for your family when they need it most. Learn how different types of insurance can be combined to ensure long-term financial support for your loved ones.
What is family insurance?
Family life insurance isn’t a product you buy from an insurance provider. Rather, it’s a way of thinking about the kind of coverage you need, how much you should spend, and when you should adjust for things like a change in income, the birth of a child or grandchild, or starting your own business.
A multi-generational approach to life insurance for families allows you to set your children and grandchildren up for success in ways they could never do on their own. That’s because decisions you make early on about financial protection and wealth building almost always benefit them in the long term.
When you work with an advisor, the planning process becomes easier. They will do the heavy lifting, calculate what you need, and help you assemble all the pieces of your financial plan. As time goes by, they’ll help you make adjustments.
What type of family life insurance plans are available in Canada?
The great thing about a family life insurance plan is that it can be personalized to meet your needs, can include a wide variety of policy types, and is built to work within your budget as part of an overall financial plan.
Here are four of the most common types of insurance a planner might recommend in one combination or another, depending on your circumstances, to provide complete family protection.
Term life insurance
Term life insurance is an affordable option for most people while they’re working and relying on employment income. It can be purchased in lengths of time, called the term. For example, Serenia Life offers Term 10, Term 20, and Term 30 policies.
The idea behind term life insurance is simple. You estimate your earning potential between now and retirement, and figure out how much insurance coverage you’d need to replace some or all of it. At some point, you may no longer need coverage because you’ve retired or you feel your loved ones will have enough money and other assets to support themselves in the event of your death.
Here’s a simplified way to determine how much life insurance you need.
Permanent life insurance
Permanent life insurance never expires once you have paid all the monthly or annual premiums (i.e., the amount you pay for an insurance policy). Some families prefer this option for two reasons:
- The death benefit is guaranteed. Knowing that your family will get a tax-free, lump-sum payment in the event of your death, you may feel more comfortable spending money while you’re alive – since you won’t have to worry about whether you’ll leave enough behind.
- You build wealth in the cash portion of your policy. A portion of the premiums you pay for permanent coverage, which includes whole life insurance, is invested for you and becomes part of your net worth. This money can be left to increase over time, or can be used along the way to pay for things like education expenses for your children.
If you’re considering whole life insurance as part of your long-term plan, or as a way to give your children or grandchildren an early leg up in life, talk to a Serenia Life advisor about solutions such as 20-Pay Whole Life. It offers a guaranteed death benefit, premiums that will never increase, and coverage for life when the policy is paid up in 20 years.
Critical illness insurance
Canadians enjoy access to basic health care through their provincial and territorial insurance plans. While the healthcare system picks up many of the costs of care, anyone who has been diagnosed with a serious illness will tell you that out-of-pocket expenses can add up fast from the time treatment begins to the end of your recovery period.
Critical illness insurance was created to help people manage unexpected costs without having to sell their assets or dip into savings. The one-time, tax-free payment you receive can be used any way you want. Here are just a few of the expenses you could incur in the event of a serious critical illness, such as a heart attack or stroke.
- Lost income due to missed work
- Medication and extended medical treatment not covered by your health insurance plan
- Travel expenses to and from treatment
- Overnight accommodation for special care
- Modifications to your home
- Physical or emotional therapy
- Home care
If you don’t spend the entire amount of your payout, you can add what’s left to your long-term savings or just take a vacation, knowing you have the financial means to recover at your own pace.
Disability insurance
Disabilities do not have to be major to keep you out of work and unable to earn a living. Without some way to replace your income, you will have to use your own money to keep up with expenses and that could set back your financial plan by years or decades if you were to lose all the growth potential of compound interest.
If your disability was serious, and you couldn’t work between now and retirement, you’d be giving up substantial income. Disability insurance is designed to step in with replacement income for as long as you need it. For example, in the event of disability, you could receive about 65 per cent of your current income until you can return to work, or until you reach the age of retirement.
Do I need life insurance for my family?
The short answer is YES. The longer answer is that you should have a family insurance plan that balances everyone’s needs – one that can adapt when things change. This is why it’s a good idea to create your plan with the help of an advisor. Be sure to set a date to renew it every two to five years or whenever there’s a significant life event such as a change in jobs, an increase in income or debt, or the birth of a child.
Here’s an overview of how a family might approach life insurance planning as a multi-generational team, to make sure everyone’s needs are anticipated and financial risk is minimized.
| Who | Considerations |
|---|---|
| You and your partner |
Whether you’re a one- or two-income family, you likely rely on your total income to keep things running smoothly on the financial front. Even if one of you is the principal bread winner, you can’t discount your partner’s contribution to your family’s financial health. As parents, the death of one partner will likely trigger new expenses, such as increased childcare costs. And if you both contribute to paying off the mortgage, it may prove challenging to continue making these payments on a single salary. An advisor can help you determine the right amount of coverage for both spouses that provides income replacement to meet your needs. |
| Single Parent |
The same need to replace income makes life insurance essential for single moms or dads who rely on one income to provide most everything their children need. Find out why moms absolutely, positively need life insurance and why you may need life insurance following a divorce. |
| Your children |
Life insurance for children doesn’t mean you expect anything bad to happen to them. It’s more about planting seeds that could grow into financial opportunities much later in life. For example, by purchasing something as simple and affordable as a whole life insurance policy for kids, or life insurance for a newborn baby, means guaranteed coverage later in life, regardless of any medical diagnoses. Plus, the cash value* portion of this type of policy can turn into a lifetime wealth-building tool. If you’d prefer an option where there’s an end in sight when it comes to your monthly payments, consider purchasing a guaranteed 20-Pay Whole Life policy. After the premiums are paid up in 20 years, your child remains covered for life. And they can dip into the cash value¹ if and when they need to. |
| Your grandchildren |
Grandparents are often in the enviable position of being able to divert some of their retirement income towards insurance payments that either take the pressure off their grown children, or go straight toward long-term wealth builders like permanent life insurance coverage. See how grandparents are taking advantage of simple insurance strategies to oversee the transition of intergenerational wealth. |
Using life insurance to protect your family during life’s most important milestones
| Milestone | Reason to Consider Life Insurance | Policy Type(s) |
|---|---|---|
| New Marriage or Common-Law Partnership | In a dual-income household, it’s important to provide your partner with financial resources to help cover the mortgage and maintain their standard of living in the event of your unexpected death. |
Whole Life Insurance or |
| Buying a New Home | Buying a new home is exciting. Mortgage payments? Not so much. Making sure you or your spouse can pay off the outstanding balance while leaving any remaining funds to your loved ones can help financial well-being during an emotionally challenging time. |
Term 20 or 30 Life Insurance |
| Having a Baby | Giving your child the best start to life is any parent’s goal. Purchasing life insurance while they are young guarantees coverage throughout their lifetime, despite any health conditions as they age. Plus, payments stop after 20 years – but coverage lasts for life. Babies under 1 can receive a $100 baby bonus through our Bundles of Joy benefit. |
20-Pay Whole Life |
| Refinancing a Mortgage | Refinancing a mortgage may terminate your mortgage life insurance through the bank.3 Having a term life insurance policy gives you the flexibility to change lending providers and take that coverage with you. |
Term 20 or 30 Life Insurance |
| Paying for a Child’s Education | Participating whole life policies can grow over time, allowing you to access the cash value later in life.4 Serenia Life members pursuing a college diploma or university degree can also apply for a $1,000 post-secondary scholarship through our member benefits. |
20-Pay Whole Life |
| Estate Planning | Help replace lost income, offset taxes, pay for funeral costs, or leave money to charity. Serenia Life members gain access to a free online will and power of attorney through Willful®. |
Term Life Insurance or |
| Wealth Transfer to Grandchildren | Purchasing life insurance for a grandchild helps you move money out of your investment portfolio and pass it along, tax free, to the next generation.5 Your grandchildren will have access to the cash value later in life, to help pay for a new car, a wedding, or even a down payment on a home! |
20-Pay Whole Life |
Where can I buy a policy?
Term and permanent life insurance policies are widely available through financial institutions and insurance providers. You can do it yourself online, deal directly with a provider, or engage an insurance broker who will shop around for you and typically get you the best overall combination of coverage.
So, is life insurance worth it?
Life insurance remains one of the most common ways to lower financial risk in your life. It replaces income, buys you time to recover from illness or injury, and can provide generations of tax-free wealth-building opportunities. But you may not be convinced you need it … yet. The only way to know for sure is to have an independent insurance advisor run the numbers to ensure you’re getting what you need at a price you can afford.
Why choose Serenia Life for family life insurance?
As a member-based organization whose roots go back nearly 100 years, we encourage kindness by sharing our profits through community outreach, fundraising, and unique member benefits that help Canadians support their family, their community, and the causes they care about. The more we grow, the more we can give.
We provide members with access to a growing collection of member benefits that make a positive impact on their lives and the lives of others.
Benefits, such as:
- $1,000 post-secondary scholarships2
- $250 seed funding towards fundraising events
- Free digital wills (value: $189), or money towards drafting/updating a will through a lawyer
- and much more!
- View a full list of our member benefits.
Together we continue to make a difference.
Let us help
Life insurance is an important part of a financial plan that can protect your entire family and provide opportunities to create lifetime wealth. To get the best long-term value for your money, talk to an advisor about all the ways you can incorporate insurance planning into the things you already do to care for your loved ones.
Disclaimers
1 Cash values are accessible via a withdrawal, policy loan, or surrender. These may be subject to taxation and a tax slip may be issued. Accessing the policy’s cash value will reduce the available cash surrender value and death benefit.
2 Serenia Life Financial’s member benefits and program are not contractual. They are subject to change and maximum funding limits.
3 Refinancing or making changes to your mortgage may or may not result in a loss of coverage. It depends on who you are refinancing the mortgage with. It is best to check with your lender for details.
4 Cash values are accessible via a withdrawal, policy loan or surrender. These may be subject to taxation and a tax slip may be issued. Accessing the cash value of the policy will reduce the available cash surrender value and death benefit.
5 According to the rules in subsection 148(8) of the Income Tax Act, the transfer of ownership can be tax free to a child or grandchild as long as there was no consideration paid on the transfer. The proceeds of the disposition for the transfer are deemed equal to the policy’s adjusted costs basis (ACB), resulting in no income tax payable by the policy owner when the transfer is made.