A Guide to Whole Life Insurance in Canada
Understanding your investments and their long-term impact is key for financial peace of mind. If you’re comparing term life insurance to whole life insurance or want to learn more about whole life insurance, here’s what you need to know.
What is whole life insurance?
Whole life insurance is a form of permanent coverage. It’s widely considered an investment, not an expense, because if you live a long life, you can expect to earn more money over time than you put into the plan. That’s because whole life insurance offers two things at once:
It’s a guaranteed life insurance policy for life
As long as you continue to make your payments, your life insurance coverage is guaranteed to pay a death benefit (i.e., a payment made to designated family members, other loved ones, or the charity of your choice after you die) to your beneficiaries (i.e., the persons you choose to receive your life insurance payment in the event of your death).
It comes with an investment component that produces tax-free wealth
A portion of the money you put toward your life insurance coverage is set aside in an investment account, with the potential to grow significantly over your lifetime. That cash can be accessed, tax-free, to pay for things like your kids’ education or it can be allowed to increase and become part of the estate you leave to your loved ones.
Benefits of whole life insurance
Some people like to budget for life insurance on an ongoing monthly basis. Others like the idea of paying more up front and setting a date when payments stop but the coverage remains in place for the rest of their lives. Whole life insurance lets you decide what’s best for you and your budget.
Choose regular whole life coverage and you can make affordable, ongoing payments to the age of 100 and your payments will never increase. After 100, payments stop but your coverage lives on.
Opt for an alternative like 20-Pay Whole Life and pay a higher price for 20 years, knowing there is an end in sight. After 20 years, payments stop but coverage continues.
With both options, you also have the opportunity to earn policyowner dividends1 while your policy’s cash value2* continues to grow, thanks to the power of compound interest.
How does a whole life policy work?
Because a whole life insurance policy is a multi-part financial tool with two or three distinct elements, it’s important to know how each one works and how it can help you achieve your goals.
Part 1. Life insurance coverage
- How does it do?
In the event of your death, life insurance pays a guaranteed tax-free lump sum of money to your beneficiaries, to use any way they see fit. - How does it work?
The amount of life insurance coverage you get is determined up front. Here’s how to calculate how much life insurance you need.
Part 2. The cash value
- How does it do?
A percentage of the premiums you pay for whole life insurance gets set aside in an investment account, where the amount can grow tax-free. - How does it work?
As the value of the cash portion increases, the money can be accessed tax-free, or simply left to accumulate and create wealth2.
Part 3. Dividends (optional)
- What does it do?
In the case of dividend-paying whole life insurance, providers share a portion of their profit with policyholders1. - How does it work?
You can treat dividends, just like cash and use them as you see fit.
What are the different types of whole life insurance policies in Canada?
The four most common types of whole life insurance in Canada have many similarities but each one has been designed to meet slightly different needs. The guidance of a knowledgeable advisor will help you choose the best option for you.
Non-participating whole life insurance
This is the most basic variety of whole life insurance, providing a guaranteed death benefit and a cash portion.
Participating whole life insurance
Policy owners participate in the financial success of their insurance provider, by receiving dividends, hence the name “participating.” If you receive dividends in any given year, you could:
- Withdraw your money through a cash payout
- Use the dividend to reduce or cover the cost of your regular insurance payments
- Buy additional coverage
- Let them accumulate and earn interest
Limited-pay whole life insurance
These policies let you decide how many years you would like to make payments. Once your policy is paid for, there are no more premiums and your coverage is in effect for life. 20-Pay whole life insurance from Serenia Life is a good example of this type of plan and a great option for insuring children. If you’d like to learn more about life insurance for kids, check out our Guide to Life Insurance for Kids in Canada.
How much is whole life insurance in Canada?
Cost is a top concern when you’re shopping for whole life insurance coverage. You never want to overpay, but cheaper isn’t always better. An insurance advisor can help you find the sweet spot where you can meet your financial goals within your budget.
Key factors that affect the cost of whole life insurance
Here are the factors that go into building personalized whole life coverage.
| Factor | How this factor affects the cost of whole life insurance |
|---|---|
| Age | Life insurance is more affordable when you’re young and in good health. |
| Health | Healthy individuals pay less than applicants with pre-existing medical conditions or unhealthy lifestyle practices, like smoking. |
| Sex at birth | Females typically live longer than males so their premiums cost less. |
| Coverage amount | The cost is relative to the amount of coverage you need. The more coverage you need, the more you’re going to pay. |
| Policy type & features | Policies that offer guaranteed payouts, as well as the option of accumulating cash and receiving dividends will always cost more than term life insurance alternatives that provide the same amount of coverage. |
| Extra features | Insurance providers typically offer a variety of optional riders (i.e., coverage that gets added on to an insurance policy to provide additional payouts under specific circumstances) to help you customize your coverage at an additional cost. |
| Payment structure | How you pay can play a role in how much you pay for whole life insurance. For example, paying annually instead of monthly could be more expensive up front but cheaper over time. Monthly lifetime payments for whole life will be more affordable than those for 20-pay whole life – but with the 20-pay option, there’s an end in sight! |
Approximate costs
An advisor can help you estimate your rates more accurately, based on all the factors above. Here’s an example of how age and sex affect the cost of whole life insurance and what you might expect to pay.
| Monthly Cost of $100,000 in Whole Life Insurance for non-smokers | |
|---|---|
| Males, Aged 20-40 |
$93.60 to $186.30 |
| Females, Aged 20-40 |
$85.50 to $172.80 |
| Males, Aged 45-60 |
$223.20 to $406.80 |
| Females, Aged 45-60 |
$204.30 to $370.80 |
| Males, Aged 65-80 |
$508.5.0 to $1,028.70 |
| Females, Aged 65-80 |
$455.40 to $909.00 |
For illustration purposes only, as of December 2024. Based on male and female regular rates on $100,000 initial insurance coverage. All numbers are in Canadian dollars.
Why choose Serenia Life for whole life insurance?
As a member-based organization whose roots go back nearly 100 years, we encourage kindness by sharing a portion of 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 benefits3 that make a positive impact on their lives and the lives of others, such as:
- $1,000 postsecondary scholarships
- $250 funding toward fundraising events
- Free digital wills (value: $189), or money toward drafting/updating a will through a lawyer
- and much more
View a full list of our member benefits.
6 Steps to find the best whole life insurance in Canada
The following six-step path will help you explore all the options for whole life insurance coverage. At any time, you can reach out to a Serenia Life advisor for guidance and support.
1. Getting started: understanding your needs
You can’t make decisions about life insurance until you know how much income you need to replace and how insurance fits into your overall financial plan. A knowledgeable advisor can help you answer three important questions up front.
- How much life insurance coverage do you need based on your age and the amount of income you would need to replace in the event of your death?
- How will having access to the cash portion of your policy change the way you contribute to other parts of your financial plan, such as retirement savings or your emergency fund?
- What additional riders should you purchase now, especially if you are young with no medical conditions?
It’s relatively easy to calculate the amount of life insurance you need. Most people use one of these rules of thumb:
The ‘ten times salary’ rule
Purchasing at least 10 times your annual salary gives your family every advantage and allows them to carry on with confidence. If you can’t afford that much life insurance coverage right away, start with at least six times your annual income and adjust the coverage when you can.
The ‘years to retirement’ rule
If you’re within a decade from retirement, you may not need a full 10 years of coverage but you may want to consider an amount that will allow you to give your kids or grandchildren a financial leg up.
When it comes to the cash portion of your policy, the planning process is more fluid. Setting aside a potentially large amount of cash that can be accessed, tax-free, at any time in your life is going to give you financial alternatives that most people don’t get.
A knowledgeable advisor can help you anticipate your future opportunities and fine-tune your financial plan. This might include the use of insurance riders (i.e., coverage that gets added to an insurance policy to provide additional payouts under specific circumstances).
2. Research insurance provider
Next, it’s time to do some digging on the company that’s providing the policy so you can have confidence they’ll be standing by to help you and your family in your time of need. Here are some of the questions you should be asking about the insurance provider you are trusting with some of your most important financial goals.
What do current customers have to say?
Check online reviews and ratings to gauge customer satisfaction and service quality. Here’s a link to view our customer reviews.
Is the company financially stable?
The Office of the Superintendent of Financial Institutions (OSFI) sets strict limits on how insurance providers manage and invest their money to make sure policy owners are protected. Look for companies that consistently exceed the minimum requirements and have a long-standing track record of reliability. As a Fraternal Benefit Society. At Serenia Life, it’s always been our goal to go well above and beyond the expected. You can find our financial strength on this page.
What is the company’s claim history?
Ask about their claims history. Claims history reflects the percentage of claims that it has paid out to its customers. Serenia Life has a claims history that exceeds 99.9%ii
How do they determine dividends?
Insurance providers use similar formulas to determine the value of dividends but they have discretion to issue more or fewer, as they see fit. Here’s how the leadership team at Serenia Life calculates dividend payments.
3. Compare policies
Once you’ve decided on whole life insurance as your preferred form of coverage, it’s time to dig a little deeper into how your money grows within the investment portion of the policy. In addition to the cash portion that your insurance provider has invested on your behalf, you may also be entitled to receive dividends.
Dividends represent a portion of a company’s profit that it shares with policy owners. The amount of the dividend is determined by the current economy as well as management on a year-by-year basis. For example, if you own a whole life insurance policy with Serenia Life, you’re considered an owner and you get to “participate” in the company’s profit sharing by receiving dividends. The best part is that you can treat your dividends like cash and use them as you see fit.
While dividends are a nice bonus, they are not guaranteed. The only guarantees within a whole life insurance policy are the cash portion of your policy as well as the death benefit (i.e., a payment made to designated family members or other loved ones after you die).
| If you’d like to learn more about how Serenia Life and other insurance providers calculate dividends, we invite you to explore a section of our website devoted to an explanation of the dividend scale interest rate, commonly called the DSIR. As you’ll see, many factors contribute to how dividends are determined and when they get shared. If you’re not up for a highly technical read, we get it. Give us a call and we’ll explain why dividend returns are only part of the whole life insurance story. |
4. Consult with a financial advisor or insurance broker
Whole life insurance is a long-term financial planning tool. Getting the right type and amount of coverage at the right time is the best way to ensure that your needs, and the needs of your children, are met decades from now.
Brokers and advisors know how to assess your needs and personalize your whole life insurance policy so that it works in lockstep with everything else you’re doing to protect your family’s assets, wealth, and legacy.
5. Understand the policy terms
Confidence comes from knowing that you’ve got the right coverage, at the right cost, and that you can stay committed to your plan for as long as it takes. That means:
- You understand the monthly cost of coverage and how it fits into your overall budget.
- You know how to access the money in the cash portion of your policy so that you can plan for expenses down the road.
- You have the right combination of riders and understand how and when you can add them.
At Serenia Life, we call “riders” additional optional benefits – and they must be selected at the time of purchase. So make sure to ask your advisor about them!
6. Ask about flexibility
A lot can happen over a decade or three. As your income and financial responsibilities increase, you may want to expand coverage. For example, a substantial rise in income or the purchase of a family cottage would likely trigger the need for more coverage. Also, find out if you have the option of converting one type of policy to another in the case of a significant change to your financial position.
Is whole life insurance worth it?
Because whole life insurance is a combination of protection and wealth-building opportunities, it’s the ideal solution for many Canadians. To get the greatest value for your money, engage the help of knowledgeable advisors, shop around, and understand what you’re buying as well as how it works.
Let us help
We’re here to answer your questions, personalize your coverage, and stay with you over the years to make any adjustments for all of life’s big events. The experts at Serenia Life will take the time you need to help you make the right decision for today and the future.
Disclaimers
1 Dividends are not guaranteed and are paid based on the overall experience of Serenia Life Financial, considering all the risk factors. Dividends may be subject to taxation. Dividends will vary based on the actual investment returns in the participating account as well as mortality, expenses, taxes, lapses, withdrawals, and other experience of the participating block of policies. They have the potential to increase the value of your policy above the guaranteed amount, depending on the dividend option selected.
Additional Deposit Option allows clients to pay an additional premium to purchase paid-up life insurance on the policy. This optional payment is in addition to the required insurance premium. With Additional Deposit Option, clients can enjoy the potential of accelerated tax-preferred growth within their policy. We will not accept an additional premium if it will cause the policy to lose its tax-exempt status.
2 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.
3 Serenia Life Financial’s member benefits and program are not contractual. They are subject to change and maximum funding limits.