Life insurance Canada: Calculator, Seniors, Monthly costs, How many years

Life insurance Canada

Planning And Creating A Retirement That You Want

What is the definition of Canadian Life Insurance?

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Life insurance is a contract between the insurance policyholder and the company. If you pass away during the term of the contract, the insurance company promises to pay the death benefit in terms of tax free money to those you designate as beneficiaries.

There are many types of life insurance. Some of them have been discussed in other articles on our website!

Have you ever found yourself worrying about the actual impact on your loved ones if you were to pass away? Regardless of the stage of life, you are in, there are essential items to contend with when we pass away, especially in Canada. You really need to know how to properly insure your life. Picking the right life insurance policy and making a plan to tackle everything you leave behind when you go.

A wise man named Robert Shiels wrote an excellent book for Canadians called “You Don't Have To Die to Win.” Bob would say, “everyone should die for one week and see the real problems they leave behind. If this were the case, no one would die without life insurance.” Bob himself passed away at the age of 87 but lived a passionate life. He had cash value policies growing well over $200,000 a year in cash value when he was in his 80s. This was the power of creating a system of compounding cash values using life insurance that he built over his lifetime. He referred to it as building your “future operating line of credit”, that you could use to accomplish all of your lifes financial objectives.

How can you do this? The secret lies in the way they structure their insurance policies. You can even use it while being alive and become your own banker. All it takes is a little bit of training and education, and of course, an excellent coach to help you on the way. Thankfully, our team is here to help.

Life insurance Canada calculator

Every life insurance company has its own proprietary way of calculating the rates for a given amount of death benefit based on the following factors:

Age (it is important to note that companies round up when you are 6 months closer to your next birthday).
Smoking status
Gender
Other health conditions and medications you may be taking
Upcoming Travel plans or regular travel to countries that have a travel advisory for safety reasons
Drug use such as marijuana, cocaine, ecstasy, LSD, barbiturates, etc. (Current usage or past usage, typically in the last 5 years or so)
Alcohol consumption or history with alcohol abuse
Mental Health such as depression or past attempts at suicide etc
Family history (typically parents and siblings) any indicators of hereditary conditions are considered.
Financial Underwriting does the income assets, and liabilities support the amount of coverage applied for. Is it reasonable under the circumstances etc?

But are these factors enough to decide your life insurance plan? You could spend all day calculating and getting quotes but still land on the wrong insurance plan that you eventually regret down the line. You could be running online quotes that actually are entirely irrelevant to your situation. What if you aren't being asked all the questions that the insurance company needs to really give you an accurate response.

The true measure of life insurance runs deeper than the parameters mentioned earlier. You need to consult a knowledgeable, trustworthy insurance advisor who considers the price of different insurance plans and considers your objectives, current resources, family, or business dynamic. Proper planning, although it takes time, proves to be immensely rewarding in the end. Your family and your business will thank you for it. There is a saying that if something is worth doing, it's worth doing well.

Life insurance Canada for seniors

Disappointed by the “buying term and investing the difference” (BTID) mentality, seniors realize this method didn't leave them with proper resources to tackle their final tax bill and take care of their family; seniors are looking for other life coverage options. Many found that when the cost of the term insurance skyrocketed up at the 10- or 20-year renewal, they had not accumulated the nest egg they expected due to market turbulence and other economic factors. Now they are not self-insured, but instead, they are zero insured, and they have placed all of their eggs into a government-sponsored plan such as an RRSP. Their entire asset base is subject to a huge tax bill the day they die, as everything they own is considered sold on that day.

There are better plans out there. The infinite banking concept, for instance. It uses Participating Dividend Paying Whole life insurance to build a rock-solid asset. Many companies consider issuing coverage up to age 75; others may even consider it with proper underwriting to age 80. You get less coverage than a 50-year-old for the same dollar of premium, but this can tackle important issues for many Canadian seniors. Most importantly, the costs of dealing with our final expenses can quickly add up. In Canada, this often exceeds $20,000, plus there are all the hidden costs to a family who have to take time away from work and other things to help settle the final estate.

Here are some advantages to adding a life insurance policy to your financial plan as a senior:

It covers your debts, like mortgage, rent, credit card bills, and unpaid loans so that they don't pass on to your family members, or at least most of them.
Life insurance policies help you pay for your own funeral instead of laying the burden of it all onto your grieving family.
You get to contribute to the younger generation's lives by paying for their school tuition or providing a gift that creates a real legacy for you with those you love so dearly.
You can donate to charity so that your core values live on and get a significant tax credit to offset your final tax bill with CRA.
Most importantly, it provides much-needed capital quickly to help deal with the immediate things that come up in the first 3 months of someone passing away.

Who needs life insurance the most?

Is there anyone (family members, employees, etc.) financially dependent on you? If yes, you need life insurance. In fact, you likely need critical illness, disability, and life insurance! The following is a list of people who need life insurance the most:

Parents with young children
Spouses who provide most of the income, the primary breadwinner
Older adults without savings
Business owners need life insurance, especially if in a partnership or if the business would crash if the business owner were to pass suddenly. Employees and their families rely on a business and the death of the business owner can make a massive impact to so many people.
Spouses who have been out of the workforce for a long time

Parents with Young Children
For many adults, a new baby's birth means a “plus one” in their responsibilities in life. Young children require a lot of money while growing up. One must pay for their tuition, daycare, sports, and recreation fees. If you have a high school kid at home and a mortgage, you should always be considering what you want to have happen the day you are gone? How do you want to leave things? You can get life coverage for pennies on the dollar that will actually be there when you are gone and make a world of difference.

Spouses who Provide Most of the Income
Suppose you're the spouse who looks after all the money in the bank and covers expenses for home, auto loans, grocery, and utility bills. In that case, your spouse is vulnerable to having to deal with money after you pass before them. It's essential to pick an appropriate insurance plan for them.

Business Owners need to think about their organization and employees should they die. More importantly, consider the business in which you have vested so much of your time and life energy…will your business survive if you are no longer there? Can it? If not, what would need to happen to hire or help your spouse/ partner sell it to exit the business at the top? Life insurance can help fill this gap, and it has done so for thousands of companies in the past. Keyman policies and Buy-sell funding arrangements are very vital tools used in business today. Plus, Life insurance and the capital dividend account can create some of the best tax-saving potentials that are possible in Canada today. Keep your business at the very top by opting for an insurance policy called “key person insurance.”

How much does life insurance cost per month in Canada?

It comes down to the question: How much does life insurance in Canada actually cost? Indeed, you don't want to be wasting heaps of money every month. For that reason, many Canadians are flocking to an old staple financial savings tool called dividend-paying whole life insurance. When you get to pick your plan size and flexible deposits, the insurance doesn't cost anything if you fund it correctly. The policy owner receives every single dollar back available to use inside of the cash value. This can happen in as little as 5-6 years for some and typically between 6 and 10 years when structured correctly. At that stage, policies set up in that fashion are growing more significantly than what is contributed each year. For example, if you deposited $10,000 in premiums and the policy grew by $12,000, then the insurance contract actually paid you while you were alive. When designed for maximum cash growth once this milestone is achieved, it happens on an increasing basis every year for the rest of a person's life until they eventually pass on. At which time the tax-free death benefit is received.

Buying life insurance at the risk of compromising your and your family's financial life is simply not an option. But get this, life insurance in Canada is not as expensive as you might believe. As an adult in your twenties and thirties, your monthly life insurance premiums for basic simple term insurance (10- or 20-year term plans are the most common) are approximately $25-50 per month. As a rule of thumb, the younger you are, the lesser you would pay for the same equivalent coverage amount as an older person.

The reason behind it is that you are far less likely to die within ten years at the age of, say, 25. The monthly premiums increase with older age. For instance, at 45 years old, you have to put aside approximately $80 monthly for this purpose just to keep coverage of $500,000 for 20 years. Beware…term insurance is like renting. You never own anything, and eventually, the landlord will jack the rent on you. If you are 20 years old, that means you are 20 years closer to actual death. The insurance company has to charge more to make sure they can guarantee your payout for the next 20-year period after your renewal.

Here is a sample for reference for a Term plan with level premiums for 20 years or Term 20 as it's commonly known. This is based on sample estimates from 3 major life carriers in Canada as of 2021. Females tend to live longer and have lower premium costs than men, so the numbers will be slightly lower than shown here.

Male Non-Smoker Standard 20-year Term Premium Sample
Age 25 – $30 – $35 / month
Age 35 – $35 – $40 / month
Age 45 – $80 – $95 / month
Age 55 – $240 – $260 / month

How many years of life insurance do I need?

It is generally considered an excellent plan to have coverage until the day you die. Seriously… we all know we are going to die; it's one of 2 guarantees in life. The other is taxes.

Coincidentally when you die, there is almost always a large tax bill that must be paid, and would you believe it CRA has no sense of humour about that at all. They won't wait, and they will only take Canadian currency. Therefore, why not make sure you are set up to provide both a tax-free death benefit and live your own insurance. Do this by building stable, consistent long-term cash values that you can access while you are alive. Make sure to tune into our resources and training to see exactly how this can work for you. Remember, life insurance is a tool you can use to solve problems that will definitely be left behind every time someone passes. This saves your family the desperate hunt for the capital required to deal with a loved one's final affairs. Life Insurance Canada is available in many forms for residents to take advantage of. Get started on your plan today!

Canadian Life insurance Experts

At Ascendant Financial we have expert financial advisors and coaches that can help you understand all your options with Life Insurance in Canada. Register for our training so that you can book a time with your own advisor