Life Insurance for Couples in Canada: A Comprehensive Guide

Purchasing life insurance for couples in Canada is an essential financial consideration that needs to be thoroughly explored.

With the proper coverage, life insurance can provide peace of mind by offering financial security and support to your loved ones in the event of unexpected loss.

However, with so many different policy options, it can take time to determine the right approach for your unique situation and needs.

This comprehensive guide examines key factors couples should evaluate when exploring life insurance in Canada.

It provides an in-depth look at different policy types, how much coverage you may need, guidance on applying for a policy, tips for obtaining the best rates, and how to reassess your insurance needs over the long term.

Read on for expert insights to make an informed decision when choosing life insurance coverage as a couple at Life Insurance Newspaper in Canada.

Why Life Insurance Matters for Couples

There are a few key reasons why life insurance is critical for couples to consider:

• Replace lost income: If one spouse passes away unexpectedly, life insurance proceeds can help replace their income so the surviving spouse can maintain their standard of living. This income replacement is even more crucial if children are in the household.
• Pay final expenses: The payout from a life insurance policy can cover end-of-life medical bills, funeral costs, and other debts that would otherwise fall to a grieving spouse. The average funeral in Canada costs $6,000-$12,000.
• Pay off joint debts: From mortgages to car loans to credit cards, life insurance can help ensure shared debts do not become overwhelming for the surviving partner.
• Fund children’s future: For couples with kids, life insurance can fund future education costs, help adult children with expenses like weddings or a home down payment, and ensure minors are cared for.
• Peace of mind: Knowing your loved ones will be financially secure, even after you’re gone, provides significant comfort and peace of mind.

Life insurance plays a vital role in protecting both partners and their assets. Yet a 2020 LIMRA study found 60% of Canadian households have no life insurance coverage. This gap in protection makes it crucial for couples to explore policy options.

Term vs Permanent Life Insurance

The two main varieties of life insurance policies in Canada are term life insurance and permanent life insurance. Understanding the key differences is essential for identifying the right type for your situation as a couple.

Term Life Insurance

• Covers a set period, such as 10, 15, 20, or 30 years
• Offers pure death benefit protection only – no cash value accumulation
• Typically, the most affordable life insurance option
• Best suited for meeting temporary needs like replacing income until kids are grown
• Can be renewed until around age 85, albeit at increased premiums

Permanent Life Insurance

• Provides lifelong coverage as long as premiums are paid
• Accumulates cash value that grows tax-deferred
• There are three main types: whole life, universal life, and variable life
• It is guaranteed that premiums, death benefits, and cash values will be provided.
• It is more expensive but builds long-term cash value that can be borrowed against
• Useful for permanent needs like leaving an inheritance

When choosing between these two options, term life is significantly less expensive, making it a viable option for many couples to cover temporary needs. Permanent life costs more but is better suited for lifelong protection or leaving an inheritance. Some couples opt for a combination of both policy types.

Determining Coverage Needs

When applying for life insurance, one of the most important considerations is determining how much coverage you and your partner need. Some guidelines and steps to go through:

• Income replacement: Aim to replace 5-10 years’ income for the surviving spouse. For example, those earning $100,000 annually get $500,000 to $1,000,000 in coverage.
• Final expenses: Factor in at least $15,000-$20,000 for anticipated end-of-life costs.
• Debt coverage: Add up mortgage debt, credit cards, car loans, student loans, etc. Choose a policy that covers at least the total debts.
• Children’s needs: Estimate future costs like college tuition, wedding costs, down payment assistance, childcare if a parent passes, and expenses until age 18.
• Standard of living: Determine the amount needed to maintain the current lifestyle and anticipate future needs.
• Shared expenses: Account for expenses that may increase for the surviving spouse, like utilities and healthcare.
• Inflation: Consider that future costs will rise and increase coverage amounts by 2-3% annually.

Ideally, each partner should have life insurance equal to 10-15 times their annual income. However, coverage ranging from 5 to 20 times annual income is expected.

Purchasing Individual or Joint Policies

Once you’ve determined the ideal amount of coverage, the couples’ next decision is whether to purchase individual policies or a joint/first-to-die policy. Here are the main differences:

Individual Policies

• Each spouse has a separate policy.
• Premiums are based on each person’s age, health, and other risk factors.
• The claim payout goes to the beneficiaries of whichever spouse dies first.
• It is more customizable to each partner’s needs and desires.
• It can be renewed or converted individually after the term expires.

Joint First-to-Die Policy

• One policy insuring both spouses, with a payout after the first death.
• Typically, there are lower premiums compared to two individual policies.
• There needs to be more flexibility in terms of coverage for each spouse.
• The claim is paid to the surviving partner, who can use it for expenses.
• It may require purchasing a new individual policy for the surviving spouse.

There are pros and cons to each setup. Individual policies provide more customization but are more expensive. Joint policies are more straightforward and cheaper but need to be more flexible. Consider both spouses’ insurance needs and budget when deciding.

Finding Affordable Rates

Life insurance can be a significant expense, so it pays to take steps to find the most affordable rates. Here are some tips:

• Purchase earlier in life – Premiums are lowest when young and healthy. Rates start rising significantly in your 40s and 50s.
• Compare quotes – Rates can vary dramatically between insurance companies, so shop around. Get quotes from at least five providers.
• Consider group policies – Many employers offer group rates that are typically cheaper than individual policies.
• Look for discounts – Discounts may be offered for healthy lifestyles, home insurance bundles, group affiliations, and auto-pay options.
• Buy term – Term life insurance generally offers the lowest premiums, making it the budget-friendly option.
• Get a medical exam – An exam proving good health can qualify you for cheaper premiums.
• Avoid policies with return-of-premium – This optional add-on increases premiums significantly.

Being proactive by purchasing early and shopping around makes obtaining affordable life insurance possible for most couples.

When To Apply

Securing life insurance is generally best done at the following points:

• When starting a family – Having kids is a significant reason couples need life insurance. Apply as soon as possible to lock in reasonable rates when planning a pregnancy.
• Upon getting married – Formalizing your relationship changes your financial obligations to each other. Apply within the first 6-12 months of getting married.
• At first home purchase – Taking on a mortgage creates a debt that insurance proceeds can help pay off. Apply as you’re preparing to buy your home.
• With a new job – Income changes impact how much insurance you need. Apply whenever starting a new job or getting promotions.
• Before retirement – Retiring cuts off access to employer group plans. Apply 1-2 years before locking in rates as a retiree.
• When health changes – Apply before new medical conditions can negatively impact eligibility and rates.

Apply for life insurance is ideal when you experience major life events that increase your loved ones’ financial dependence. This ensures proper coverage is in place when it’s needed most.

Reviewing Your Coverage Over Time

While life insurance policies can last for decades, it’s essential for couples to periodically review their coverage and make adjustments as needed.

Every 3-5 years, re-evaluate your life insurance policies to see if they still adequately meet your needs given life changes like:

• New children – Birth or adoption of kids may increase needed death benefits.
• ** Mortgage changes** – Paying off your home loan may reduce needed coverage.
• Income changes – Significantly higher or lower incomes may change the required amounts.
• Divorce – Separating may require getting individual policies after having a joint policy.
• Career moves – One spouse retiring or starting a business can impact ideal coverage.
• Health changes – Developing medical conditions could make preferred rates unavailable.
• Kids growing up – Once they are financially independent, decrease coverage.
• Policy expiration – Renewing term policies often involves increased premiums.

Adjusting coverage keeps insurance aligned with evolving needs and life-stage priorities. An advisor can help review details and recommend changes.

Frequently Asked Questions

Deciding on life insurance can undoubtedly raise many questions for couples. Here are answers to some of the most common queries:

How much does life insurance cost?

For a healthy 30-year-old, sample annual rates for $500,000 in coverage are:

• 10-year term policy – $150-$300 per year
• 20-year term policy – $200-$400 per year
• Whole life policy – $1,000-$2,000 per year

Premiums increase with age and health conditions. Location and gender are also factors. Expect joint policies to have lower premiums than two individual policies.

Should each spouse get their policy?

In most cases, individual policies provide the most flexibility and customization. However, some couples prefer a joint policy’s simplicity and lower cost. Consider specific needs and finances when deciding.

What information do you need to apply?

Insurers will request identifying information, family medical history, lifestyle factors, and a recent medical exam. Financial details like income, assets, and debts are also required.

Can we get life insurance if one spouse has health issues?

Insurance is still possible, but the unhealthy spouse will likely pay higher premiums. Certain conditions, like cancer, may require a waiting period before coverage approval.

What if we decide we don’t want the policy anymore?

Term life insurance only requires paying premiums for the selected term length. You can stop paying premiums with permanent policies, but coverage will lapse. Some policies allow conversion to reduced paid-up coverage.

How long does it take to get approved?

Approval for fully underwritten policies can take 4-8 weeks. Simplified issue policies are faster at 1-2 weeks. Having a medical exam expedites underwriting.

Take the Next Step

I hope this guide has provided ample details and considerations for exploring life insurance as a couple. The key takeaways are determining an appropriate death benefit amount based on joint liabilities and income replacement needs, deciding on individual vs. joint first-to-die life insurance policies, shopping around for affordable rates, and reassessing over time.

If you still have questions or want personalized guidance, LifeBuzz’s licensed advisors are here to help provide Canadian couples with expert support. We simplify comparing quotes amongst top insurers and finding the right coverage at the best price. Contact us today to discuss your specific situation and insurance goals.