cheapest life insurance canada

The Cheapest Life Insurance in Canada

What Is the Cheapest Life Insurance in Canada?

Generally speaking, there are two main types of life insurance. Permanent life insurance and term life insurance.

Permanent life insurance provides coverage for your entire life. The monthly contribution is higher as compared to a term life insurance policy but it does come with added benefits such as the opportunity to build equity (cash value growth), earn dividends, and of course, lifetime coverage.

Term life insurance, on the other hand, is simple and straightforward. As long as you pay the monthly contribution for the specified term of the policy, you’re covered for the term, with the option to renew for another term each time the policy term comes to an end.

Three Primary Elements of Term Life Insurance 

1. Term 

The term is the predetermined amount of time the policy will remain active for. It is a set period, usually 10, 20, 30 years or up to age 65, and 40 years.

2. Premium

The premium is the contribution you make to keep your policy in force. Usually, you have to contribute either on a monthly or an annual basis. The amount of your contribution stays the same for the whole term of the insurance policy. 

3. Death Benefit

A pre-determined amount of money that the insurance company is obligated to pay the life insured’s beneficiaries in case he or she passes away during the term of the policy.

Generally speaking, term life insurance is the simplest form of life insurance you can get.  You’re simply paying for the insurance coverage with no bells and whistles involved. Should something happens to you during the term of the policy, the insurance company pays out the death benefit to your beneficiaries.

The fact that you are only contributing towards the life insurance coverage with no additional benefits is one of the primary reasons why term life insurance policies are cheaper than permanent life insurance policies.

The Cheapest Term Life Insurance

Now that we’ve distinguished the major difference between term life and permanent life insurance policies, and since you’re most-likely gearing toward implementing the cheapest life insurance in Canada, let’s zero in on term life insurance. 

As mentioned above, term life insurance policies have different variations, mostly they differ on the length of time the life insured is cover. In saying that, the cheapest life insurance in Canada is a term life insurance policy with the shortest term possible, and the shortest term life insurance is a 10-year term life insurance policy.

But before you rush into implementing a 10-year term life policy, stop and consider the following. A 10-year term life insurance can easily end up being the most expensive life insurance.

Why? Let’s find out below!

Pitfalls of Term Life Insurance

cheapest term life insurance canada

As you may be aware by now, term life insurance policies are sold on a term length basis, which means that every time your term contract expires your policy basically ends and you no longer have coverage.

The good news is, most term life insurance contracts available in  Canada today are renewable. This means that you can renew your life insurance contract at the end of the policy term without having to qualify for coverage again, so, yes, you don’t have to go through a stringent medical underwriting again as you did at the start of your policy.

Bad news is that term life policies tend to be more expensive at renewal with premiums costing at least 3 times more than the initial amount since the premium amount of the renewed policy will be based on your attained age at renewal.

If budget is a concern and you’re looking to implement a term life insurance policy, it’s in your best interest to make sure that what you’re implementing is a renewable, (ideally convertible), term life insurance policy, as this gives you extra security in knowing that you can renew or convert the policy should you still need coverage at the end of the term or convert a portion of it when you realize that you need lifetime coverage.

Most term life insurance policies sold in Canada are both renewable and convertible but you have to watch out as there are still a few companies that offer non-renewable and non-convertible term life policies.

If your term life policy is not renewable and your health deteriorates over time, you may no longer qualify for a new policy at the end of your term.

That of course doesn’t mean that you can no longer apply for coverage, fact of the matter is, you can, however, you’re looking at a more expensive option with no-medical life insurance and at an older age.

Since you’re out here, looking for the cheapest life insurance that you can implement, you’re most likely looking at implementing a 10-year term life insurance, as this is the cheapest one that you can get, at least in the first 10-years.

However, If you’re only looking to cover a 10-year obligation such as a long term loan, a 10-year business joint venture, or whatever financial obligation that goes away in a 10-year period, then 10-year life insurance may make sense but if you’re looking to secure a longer-term financial obligation such as a mortgage loan, income, or your young children’s post-secondary education, a 10-year term policy may cost you more due to increased premiums at renewal than when you simply implement a longer-term life policy like a 20-year or a 30-year term life insurance, depending on the length of time you need the insurance protection.

In short, a 10-term life insurance policy is the cheapest life insurance if you only mean to keep the policy for 10-years, and not renew it. In some instances, there are people who are looking to implement life insurance to protect their income, yet wants to do it at the least cost possible, if you’re in your 30’s, that means you will need the income protection for between 20 to 30 years. Shooting for longer-term life insurance isn’t that materially expensive as compared to a 10-year term, in fact, they’re actually cheaper in the long run if you factor in the premium costs at renewal.

Also, note that term life insurance policies only provide coverage up to a maximum age of 85, so even if you’re able to afford the expensive premiums at old age, you will still end up without life insurance coverage at old age if you live passed 85.

Understanding 20-year Term Life Insurance

20-year term life insurance is the second cheapest life insurance in Canada. It’s also the most commonly issued life insurance policy, probably because its rates are acceptable at first glance, so it’s a no-brainer to most people.

In essence, the 20-year term life insurance is similar to a 10-year term life policy. You pay a certain amount of premium either on a monthly or annual basis, for a pre-determined amount of life insurance coverage

It is a level term policy that allows you to lock the price of your premiums for a set time. In this case 20 years.

But for how long should you get term life insurance?

Ideally, you should have life insurance coverage as long as you have the financial obligation. As most financial obligations are temporary, meaning, that they will go away eventually, they can be covered with a term life insurance.

In most instances, a 20-year life insurance coverage is sufficient to cover the most common of temporary financial obligations but sometimes, you may need a longer-term life insurance contract. One thing you should avoid with a term life insurance policy is contract renewal which as established above, will end up costing you more.

More and more, insurance companies are putting out longer-term life insurance contracts to address this need, you can implement a 25-year term life insurance to cover a mortgage obligation or you can get an income replacement life insurance that covers you up to age 65.

So, really, buying cheap life insurance doesn’t have to lock you in with a 10 or 20-year term life insurance policies though both are available from all major insurance carriers.

If you need a 20-year coverage but you implement a 10-year term policy, expect that your premiums will increase in the 11th year. In this case, you’re better off implementing a straight-forward, 20-year insurance coverage.

Pros and Cons of Term Life Insurance

Now that we examined term life insurance in detail it’s time to sum everything up and outline the main advantages and disadvantages of term life insurance. This will help you decide whether purchasing a term life insurance is a good decision for you or you should explore other options like whole life or universal life insurance.

Pros of Term Life Insurance

  • Low premiums during the first term, especially when you’re young
  • Simple and easy to understand
  • Large death payouts for beneficiaries for a low cost
  • Good for covering temporary expenses that will disappear over time (for example, mortgage loan protection, income replacement)
  • You can convert it to permanent life insurance

Cons of Term Life Insurance

  • No cash value build up inside the policy
  • Can’t get the premiums back
  • Only lasts for a certain period of time
  • It becomes more expensive when there’s a need to renew for another term
  • Your health can deteriorate during the term and you may not qualify for another policy

Who Should Get a Term Life Insurance

The different types of life insurance are made to serve different purposes. As mentioned above, term life insurance is designed to protect a client’s temporary financial obligations. Permanent life insurance, on the other hand, is designed to provide permanent financial protection to the life insured’s loved ones.

As a financial consumer, choosing between term life and permanent life can be quite confusing, and if you’re just looking to pay the least premium possible, you’ll choose the cheapest life insurance available, which as mentioned above, is a 10-year term policy. 

To add insult to the injury, if you talk to a certain group of insurance agents, the advice is that you should only buy term, while another group only recommends permanent life insurance. If you’d ask me, a balanced approach is ideal as it lets you benefit from both.

What do I mean by that?

I’ve mentioned that each type of life insurance serves a certain purpose, and there are generally two types of financial obligations. 

  1. Permanent
  2. Temporary

Why not get a term life insurance to cover all your temporary financial obligations, then get permanent insurance to cover your permanent obligations. Mind you, this can be done with one policy.

This way, you have all courts covered! You have both permanent and term life policies while keeping your premium costs affordable. In most instances, premium contributions can be designed for a 20-year period, after which, your permanent life policy is already paid off. If you’re interested in this kind of policy. You can click here to book an appointment with us

Below are a few examples of when it makes sense

  • You’re a newcomer to Canada
  • Your budget simply doesn’t allow you to implement a permanent policy
  • You believe that buying term life will allow you to invest more (buy term invest the difference)
  • You want to implement the highest coverage you can qualify for
  • You only aim to cover temporary financial obligations like a car loan, a mortgage, or children’s post-secondary educational expenses.
  • You’re financially obligated to your parents and you want to make sure that they are taken care of, in case they outlive you.
  • You’re the primary earner in your family and want the death benefit to replace your income.

What Happens If You Outlive Your Term Life Insurance?

outlive term life insurance

Outliving your term life insurance is a valid concern as it actually happens most of the time. The fact is, we never run out of people who are in their 70s who approach us for help because they can no longer afford the increased premiums should they renew their policies. Outliving your term life insurance puts you at risk of losing coverage. 

In most instances, it’s rare for insurance companies to pay claims on term life insurances, especially for 10-year and 20-year contracts.

Only a small percentage of people who have term life insurance pass-away while the policy is in force so the insurer doesn’t have to pay so many death benefits. This is the reason why term life insurance policies are so cheap, especially if it’s only 10 years.


In order to avoid this, we always suggest making your long term need part of life insurance planning. This way, you address both your short term and long term needs, thereby avoiding a scenario where you run out of coverage after your term policy ends.

Structuring a permanent life insurance policy with a term life rider, may cost a bit more when comparing your monthly contributions but keep in mind that with permanent life insurance, you’re building equity simply by making premium contributions.

Permanent insurance is comparable to buying a house where you actually own your policy at the end of your contribution period and should you decide to dispose of it later in life, you get to cash out your equity. With a pure term life insurance, you’re basically renting your coverage, it stops when you stop or miss your contribution, and you don’t get to build cash values from within the policy as you’re simply paying for coverage.

If your budget doesn’t allow you to implement a structured policy, you can always start with a term policy but do get a longer-term policy of at least 20 years. By going with 10-year term insurance, you may end up paying the most premiums if kept long term.

We can help you explore an affordable life insurance plan that covers your short term and long term financial obligations. Click here to book your appointment.

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