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Life Insurance in Ontario

Life insurance, also known as life assurance, is an agreement made between the policyholder and the insurer. The insurer agrees to pay a lump-sum of money in the event of the policyholder’s death. The payment is made to the insured’s beneficiary. The policyholder must pay a premium, according to the payment terms agreed upon with the insurer. The cost of life insurance depends on many factors, including the type of life insurance policy, the policyholder’s age, health status to name a few.

Life insurance in Ontario is grouped under two categories: temporary life insurance (known as term life insurance) and permanent life insurance (known as whole life insurance and universal life insurance).

Temporary, Term Life Insurance

Typically for people who require coverage for a specific period of time (young families for example), people with budget concerns and business owners looking for coverage in the event of a loss of a key employee. Features of a term life insurance policy include:

  • The cost of the policy and the sum insured is guaranteed for the term of your policy.
  • Premiums are determined by the insurance company based on your general health status.
  • Terms available are typically 5, 10 and 20-years.
  • Multiple people may be insured under the same policy.

Permanent, Whole Life Insurance

This type of life insurance is typically considered by those people who are looking for financial protection for their families in the event of a premature death. It is also treated as an investment, with a portion of the premiums going into an investment account and creates a cash value of the policy. The common features of a whole life insurance policy in Ontario include:

  • Four permanent options are available (10-year, 20-year, 65-year and 100-year terms)
  • The sum insured and the cost of the policy are guaranteed for the term of your policy.
  • Guaranteed cash value of a policy
  • Premiums are determined by the sum insured on your policy and your general health status.
  • Multiple people may be insured under the same policy.

Universal Life Insurance

With this type of life insurance in Ontario, you can obtain financial protection for your loved ones as well as accumulate cash value that is tax-sheltered. Universal life insurance is typically considered by families who are looking for financial security and accumulating additional funds, young couples who can afford to pay a higher premium quicker and people who have higher income levels looking for a tax-benefit. The main features of a universal life insurance policy in Ontario include:

  • Life insurance protection and a tax-sheltered savings account
  • Flexibility allowing you to modify the insurance amount, cost, payment frequency.
  • Wide range of investment options
  • Ability to make withdrawals or take out loans against your cash value.
  • Multiple people may be insured under the same policy.

Why do Ontarians need life insurance?

To protect your children/dependants
The lump sum received (tax-free) in the event of a death, can provide financial protection to replace the deceased’s income to pay any debts, mortgage, education and day-to-day expenses.

Estate protection
The money may also be used to pay off any debts, tax liabilities and other estate costs to remove the burden from loved ones.

Withdrawals and loans
The cash value component of a permanent life insurance policy can be accessed during the term of your life insurance policy. You can leverage your policy to secure a loan or take the money earned from your investment.

Not in Ontario? Looking for Life Insurance in Canada? Read more here.