Common Life Insurance Questions (With Clear Answers)
Life insurance sounds complicated. You hear the term thrown around, but when it comes time to actually think about it—maybe you’re getting married, having a baby, buying a house, or watching your parents age—suddenly you realise you don’t know where to start.
Most Canadians know life insurance exists. But the details? That’s where things get confusing.
You’ll come across two main types when you start looking: term and permanent life insurance. Term covers you for a set period, like 10 or 20 years. Permanent lasts your whole life and usually costs more. But here’s what many people don’t realise—life insurance does more than just replace your income if something happens to you. It can cover funeral costs, help with estate taxes, and take care of debts you leave behind.
Whether you live in Victoria British Columbia, Calgary Alberta, Halifax Nova Scotia, or anywhere in between, understanding these basics helps you figure out what actually makes sense for your situation.
The life insurance application process worries a lot of people too. Some policies require medical exams, others don’t. You might even get approved instantly for certain types. This means pretty much anyone can get some form of life insurance, regardless of age or health.
We’ve put together straightforward answers to the questions Canadians ask most about life insurance. No jargon, no complicated explanations—just clear information to help you make sense of your options.
What is life insurance and how does it work?
You know life insurance exists, but how does it actually work? It’s a fair question. Most Canadians have heard about it, but when it comes to understanding what happens when you buy a policy, things get murky fast.
Definition of life insurance in Canada
A life insurance policy is an agreement between you, the policyholder, and the insurance company. The deal is straightforward: you pay regular premiums, and if you pass away, your insurance provider pays a tax-free death benefit to whoever you’ve named as your beneficiaries.
That money can do more than just replace your income, though. Life insurance can help cover estate taxes if the death benefit goes to your estate. Some permanent policies even let you build savings alongside your protection. You can even name a charity as your beneficiary if you want to leave a legacy.
Do you actually need life insurance? If you have debts or people who depend on you financially, the answer is probably yes. The tax-free payment your beneficiaries receive can cover:
Lost income that your family was counting on
Mortgage payments, loans, and credit card debts
Childcare and education costs for your kids
Funeral expenses and estate administration costs
How life insurance policies function
The mechanics are pretty consistent no matter what type of policy you choose. You pay premiums—either monthly or yearly—to keep your coverage active. How much you pay depends on your age, gender, health history, family medical history, what you do for work, and lifestyle choices like smoking.
When you set up your policy, you’ll name beneficiaries. These can be family members, friends, business partners, trusts, or charities. If you have young children, keep in mind that in some provinces, kids under 18 can’t directly control insurance payouts, so you’ll need to name a trustee to manage the money until they’re adults.
Here’s something important: when you pass away, the insurance company doesn’t automatically send out cheques. Your beneficiaries need to file a claim with the insurer, usually providing a death certificate and filling out paperwork. Once everything checks out, the insurer pays the death benefit, typically within 30 days. Your beneficiaries can choose how they want to receive the money:
Lump sum—the full amount all at once
Specific income provision—payments on a schedule you’ve set up
Lifetime income—monthly payments for life
Interest income option—just the interest while leaving the principal untouched
Common misconceptions about life insurance
A lot of myths floating around prevent people from getting the coverage they actually need.
“I don’t need life insurance because I don’t have children” Not true. Even without kids, you might have co-signed loans or a mortgage that could burden someone else if you’re not around to pay them. Plus, life insurance lets you leave money to causes you care about.
“Life insurance costs too much” Many Canadians think coverage will break the bank, but it can be quite affordable, especially when you’re young and healthy. Most term policies lock in your premium rate, so you’ll know exactly what you’re paying.
“My workplace coverage is enough” Employer policies are a nice benefit, but they usually only cover one or two times your annual salary. Worse, if you leave your job, you lose the coverage. A personal policy stays with you no matter what.
“Getting life insurance is complicated and always requires a medical exam” Not anymore. Many younger applicants seeking reasonable coverage amounts can skip the medical exam entirely. Some policies even offer instant approval based on health questions alone.
Understanding what’s actually true about life insurance helps you make better decisions about protecting yourself and the people who matter to you.
What types of life insurance are available in Canada?
Life insurance comes in several varieties, and each serves different purposes. If you’re trying to decide which type makes sense for you, understanding the basic differences helps you narrow down your options quickly.
Term life insurance explained
Term life insurance covers you for a specific period—10, 15, 20 years, or until you reach a certain age like 65. When the term ends, so does your coverage, unless you choose to renew.
You’ll find two main types:
Traditional term life insurance is the standard option. You choose how many years you want coverage, and this tends to be the most affordable type available.
Annual renewable term (ART) lasts just one year at a time. You’ll need to renew it annually, and while it starts cheap, the premiums increase each year as you get older.
Here’s how it works: You pay monthly or yearly premiums for your chosen term. If you pass away during that time, your beneficiaries receive a tax-free payment.
Term life insurance makes sense if you need affordable coverage for a specific period. Maybe you want protection until your mortgage is paid off, your children finish university, or you reach retirement. If you’re on a tight budget, term insurance gives you the most coverage for your money.
The downside? Once the term ends, you’re no longer covered. And if you want to renew, the premiums will be much higher based on your current age and health.
Permanent and whole life insurance overview
Permanent life insurance never expires as long as you keep paying the premiums. Your beneficiaries will definitely receive a payout at some point, which is why these policies cost more than term insurance.
You’ll come across several types:
Whole life insurance provides guaranteed coverage with cash value that builds over time. Some policies pay dividends, others don’t.
Universal life insurance lets you control how the cash portion gets invested, giving you more flexibility but also more responsibility.
Term-to-100 covers you for life but without the cash value component, making it cheaper than traditional whole life.
Final expense insurance focuses specifically on covering funeral costs and end-of-life expenses.
Most permanent policies include a savings component where part of your premium grows tax-deferred. You can access this cash value through loans or withdrawals while you’re still alive, which provides financial flexibility for emergencies or retirement income.
Permanent insurance typically serves long-term needs like estate planning, providing for dependents with special needs, or ensuring funeral expenses are covered.
The benefits include lifetime protection, cash value growth, and stable premiums. The drawbacks? Higher costs, more complexity, and potentially lower investment returns compared to other financial products.
Non-medical life insurance options
Don’t want to deal with medical exams? You’re not alone. Many Canadians prefer the convenience of non-medical options, especially those with health concerns or busy schedules.
Three main types exist:
Simplified issue insurance requires you to answer health questions but skips the medical exam. You can often get approved within days, and coverage amounts tend to be reasonable for most people’s needs.
Guaranteed issue insurance accepts virtually everyone who applies, regardless of health. There’s typically a waiting period before full benefits kick in, but if you have serious health issues, this might be your only option.
Accelerated underwriting uses technology to evaluate your application quickly, sometimes providing approval within hours. It’s ideal if you’re young and healthy but want coverage fast.
These options prove especially valuable for people with health conditions, older applicants, or anyone who simply wants to avoid medical testing.
Whether you choose term, permanent, or non-medical insurance depends on your specific situation. Do you need temporary coverage while raising children? Term might be your best bet. Want lifetime protection with cash value? Consider permanent options. Health concerns making traditional insurance difficult? Non-medical policies provide accessible alternatives.
How much life insurance coverage do I need?
Figuring out how much life insurance you need isn’t guesswork. You can calculate a reasonable amount by looking at your specific situation and what your family would actually need if something happened to you.
Factors influencing coverage needs
When calculating how much insurance coverage you need, add up all your debts, including your mortgage payments and other expenses. Several key factors determine what makes sense for your situation:
Income replacement – Most experts suggest coverage equal to 5-7 times your annual income. This gives your beneficiaries 5-7 years of financial support.
Existing debt obligations – Outstanding mortgages, student loans, car payments, and credit cards should all factor into your calculations.
Family structure – The number of dependents significantly impacts what you need, with each child potentially requiring 15-20 years of support.
Net worth – Your existing savings, investments, and assets may reduce your insurance requirements.
Where you live – Residents of British Columbia and Ontario often need 15-20% more coverage than those in other provinces due to higher living expenses.
Regional differences matter more than you might think. Families in Alberta typically need approximately 21.3% more coverage than they currently have, whilst Ontario residents face a larger coverage gap of about 30.5%. The Canadian Life and Health Insurance Association reports that the average protection per household nationwide is roughly CAD 615,865, but your needs will be different.
Your life stage also influences how much you need. New parents with young children typically need maximum coverage, whereas empty nesters whose children have achieved financial independence often require significantly less.
The D.I.M.E. Method
Most calculators use the DIME method, which considers four essential components:
Debts (including credit cards, student loans, and personal loans)
Income replacement (annual income multiplied by desired years of replacement)
Mortgage balance remaining
Education costs for children
You’ll enter information about your current salary, outstanding debts, mortgage balance, education goals for children, and existing coverage. The calculator then generates a recommended coverage amount.
Your coverage requirements change throughout life. Advisers recommend reviewing your needs every few years and after any major life event—such as marriage, having children, purchasing property, or receiving a substantial income increase.
Examples from Coast to Coast
Coverage needs vary significantly across Canadian cities, primarily due to different costs of living and housing expenses.
Toronto residents often need more substantial coverage to account for mortgage obligations. Real estate prices rank amongst the highest nationally here. Residents often need to increase standard calculations by 10-15% to adequately address the higher cost of living. A young professional with a family in Toronto might need higher coverage amounts than someone with similar circumstances in a smaller community.
Calgary presents unique considerations. A family in Alberta typically requires approximately 21.3% more coverage than the provincial average currently holds. Since housing costs remain lower than in Toronto or Vancouver, Calgary residents might allocate more coverage toward income replacement rather than mortgage protection.
Halifax shows a different scenario altogether. Life insurance rates depend significantly on individual risk factors and the specific policy type chosen. Nova Scotia has the lowest average life insurance protection amount nationally. Halifax residents can still find affordable term insurance options that provide substantial coverage.
Working with a broker such as Maple Bay, who understands local economic conditions, proves valuable. These professionals can compare various policies available throughout Canada, presenting options that suit both immediate and long-term needs. Whether you live in Edmonton, Winnipeg, or Ottawa, consulting with an insurance advisor helps determine appropriate coverage based on your circumstances.
Do I need a medical exam to get life insurance?
The thought of a medical exam puts many people off getting life insurance. You’re not alone if the idea of blood tests and health questions makes you want to avoid the whole thing.
Here’s the good news: you don’t always need a medical exam to get life insurance.
When you’ll need a medical exam
Whether you need an exam depends on a few things. Your age matters—if you’re over 40, you’re more likely to need one. The amount of coverage you want also plays a role. Want over a million-dollar policy? You’ll probably need to see a doctor.
If you’re younger and looking for moderate coverage, you might skip the exam entirely.
When you do need an exam, here’s what to expect:
Height, weight, blood pressure, and pulse check
Blood and urine samples
Possibly an EKG (heart test)
Questions about your health history
The insurance company wants to know if there are any health issues that might affect how long you’re expected to live. Blood tests check for diabetes, liver problems, and kidney function. Urine tests look for nicotine, medications, and other health indicators.
Sometimes they’ll also ask to see your medical records or check a database called the Medical Information Bureau to see if you’ve applied for insurance before.
Your options without a medical exam
Don’t want to deal with exams? You have choices.
Simplified issue life insurance skips the exam but you’ll still answer health questions. These cover things like your current health, family history, medications, and whether you smoke. Many people get approved right away based on their answers.
Guaranteed acceptance life insurance is the easiest option. Almost everyone gets approved regardless of health, and there are no health questions or exams. The catch? You’ll pay more, get less coverage, and there’s usually a waiting period before full benefits kick in.
Accelerated underwriting uses technology instead of exams. The insurance company checks your prescription history, driving record, and credit to make a quick decision—sometimes within hours.
These no-exam options work well if you:
Don’t like medical tests
Have health conditions that might complicate traditional applications
Are over 50
Work in a high-risk job
Want coverage immediately
How insurance companies decide
The whole process of evaluating your application is called underwriting. Think of it as the insurance company’s way of figuring out how risky you are to insure.
They’ll look at your age, health, family medical history, job, finances, and lifestyle choices like smoking or drinking. For traditional policies, they might ask for medical exams, lab tests, or reports from your doctor.
Some companies now use technology to speed this up for low-risk people. They can check databases and make decisions faster than ever.
For bigger policies, they’ll also look at your income and finances to make sure the coverage amount makes sense for your situation.
All this information gets compared against their databases to see if you’ve been denied coverage before or if there are any red flags.
At the end, they put you into a category that determines your premium. Healthy people with low risk get the best rates. Others pay more based on their risk level.
Whether you go with traditional underwriting or a no-exam option, understanding this process helps you know what to expect when you apply for coverage.
What should I know before buying a policy?
You’ve figured out you need life insurance. You’ve even narrowed down the type and amount. But before you sign anything, there are questions you should ask that could save you headaches later.
Questions to ask about life insurance
Don’t assume all policies work the same way. What exactly does your policy cover, and more importantly, what doesn’t it cover? Some policies exclude certain activities or pre-existing conditions. You want to know about these upfront, not when your family needs to file a claim.
Will your premiums stay the same? Most term policies lock in your rate for the entire term, but it’s worth confirming. Nobody likes surprise premium increases.
Here are other questions that matter:
What happens if you miss a payment? How long do you have to catch up?
Can you renew or convert your policy later without a medical exam?
What will your beneficiaries need to provide when they file a claim?
Are there any additional features included, like living benefits if you become critically ill?
The financial strength of your insurance company matters too. Companies with strong ratings from agencies like A.M. Best or Moody’s are more likely to be around when your family needs them. This is especially important if you’re buying permanent coverage that could last decades.
Understanding policy terms and renewals
Term life insurance comes with renewal options, but the details matter. Most Canadian policies let you renew until age 75 or 85 without a medical exam. That’s good news if your health changes over time.
But here’s what catches people off guard: renewal premiums are based on your age when you renew, not when you first bought the policy. Your rates could double or even triple at renewal. If you’re 35 when you buy a 20-year term, your renewal rate at 55 will reflect your current age and health risk.
Many policies also let you convert term coverage to permanent insurance without a medical exam. This can be valuable if you develop health problems later and want lifelong coverage.
For permanent policies, understand how the cash value works. Can you borrow against it? Are there fees for withdrawals? These details affect the policy’s value during your lifetime.
Tips for choosing a provider
Company reputation matters as much as price. Check how the insurer handles claims and customer service. Look up complaints with provincial regulators. Ask friends and family about their experiences.
Good customer service means multiple ways to reach them—phone, online, in person when you need it. You want efficient claims processing and clear policy management options.
Some insurers specialize in certain markets. One company might focus on young professionals, another on seniors. Finding an insurer that understands your situation often leads to better rates and service.
Consider working with an independent broker such as Maple Bay, rather than going directly to one company. Brokers can compare options from multiple insurers, which often leads to better coverage at lower prices. They work for you, not the insurance company.
At Maple Bay, we understand that choosing life insurance can feel overwhelming. That’s why we take time to explain your options and help you find coverage that actually fits your needs and budget.
Quick Summary
Life insurance doesn’t have to be overwhelming once you understand the basics. You’ve got term and permanent options, medical and non-medical paths, and coverage amounts that depend on your specific situation.
The key is matching your needs to the right policy type. Term works well if you need affordable coverage for a specific period—like until your mortgage is paid off or your kids are independent. Permanent makes sense if you want lifelong protection or need the cash value component.
Don’t let the medical exam worry stop you from getting coverage. Plenty of options exist without exams, and even if you need one, it’s straightforward.
How much coverage you need depends on your debts, income, and where you live. Someone in Toronto needs different amounts than someone in Halifax because costs vary significantly across Canada.
Most importantly, you don’t need perfect health or a huge budget to get some protection. Even basic coverage is better than leaving your family with nothing.
The best insurance coverage is one that fits your individual needs and budget. At Maple Bay, we understand that every situation is different. We are insurance brokers, which means we aren’t here to push any particular insurance product. Instead, we’ll help you find the right coverage from multiple providers.
Contact us today, or fill out our quick “request a quote” form, for free life insurance quotes that match your specific circumstances.