Types of life insurance in Canada, explained
- Term life covers a set number of years and is the cheapest way to cover a specific need.
- Permanent life lasts your whole life and costs much more, usually for estate or lifelong-dependent needs.
- Simplified-issue and group plans trade lower coverage limits for faster approval or no cost to you.
The short answer
There are two broad families of life insurance in Canada: term, which covers you for a set number of years, and permanent, which covers you for life and costs a lot more. Within those, a few variations exist, group coverage through an employer, universal life, and simplified-issue plans that skip the medical exam. Most people with a mortgage or young kids are best served by term. The other types solve narrower problems.
Term life insurance
Covers you for a fixed period, commonly 10, 20 or 30 years. If you die during the term, your beneficiary gets the death benefit. If the term ends and you're still alive, the coverage simply expires unless you renew or convert it. It's the cheapest way to buy a large amount of coverage, which is why it fits time-limited needs like a mortgage or the years before kids are financially independent. Read more about term life →
Permanent life insurance
Covers you for your entire life, as long as premiums are paid, and includes a cash value component that can grow over time and sometimes be borrowed against. It costs substantially more than term for the same death benefit. Two common variations:
- Whole life: fixed premiums, guaranteed cash value growth, the more predictable of the two.
- Universal life: more flexible premiums and coverage, cash value often tied to investment options, which adds upside potential and downside risk.
Permanent life insurance tends to fit estate planning, business succession, or lifelong-dependent situations, like a child with a disability, more than everyday income replacement. Read more about permanent life →
Group life insurance
Offered through an employer or association, usually as a multiple of your salary, often 1 to 2 times. It's typically cheap or free to you, and easy to get without health questions, but it ends when you leave the job and the coverage amount is usually too small on its own to replace years of income. Most people with dependents use it as a supplement, not a replacement, for a personal policy.
Simplified-issue life insurance
Uses a short health questionnaire instead of a medical exam. Approval is faster, often within days, but coverage is capped, often up to $500,000 per insurer. It fits people who want quick coverage, have a health condition that could complicate a fully underwritten application, or, in our case, clients whose sports or activities would otherwise trigger an exclusion on a standard policy. See how stacking several simplified-issue plans works →
Side by side
| Type | Duration | Relative cost | Medical exam | Best fit |
|---|---|---|---|---|
| Term | 10-30 years | Lowest | Often yes | Mortgage, income replacement, young families |
| Whole life | Lifetime | High | Often yes | Estate planning, guaranteed cash value |
| Universal life | Lifetime | High, variable | Often yes | Investment-savvy buyers, flexible needs |
| Group (employer) | While employed | Low or free | No | Baseline coverage, not a full solution |
| Simplified issue | Varies | Moderate | No | Fast approval, health or activity concerns |
No-medical and simplified-issue plans
It's worth separating "no medical exam" from "no questions at all." Simplified-issue plans still ask health and lifestyle questions, they just skip the exam and blood work, which speeds up approval but caps how much coverage a single insurer will offer. This matters most for people who'd otherwise struggle with a fully underwritten application, whether from a health condition or an activity like climbing that a standard insurer might exclude or surcharge. For most healthy applicants without those complications, a fully underwritten term policy is usually the cheaper route to a larger amount of coverage.
Choosing between them
The right type usually comes down to two questions: how long do you need the coverage, and how much cash value, if any, do you want built into the policy. If the answer is "just cover a mortgage or income gap for a set number of years," term almost always wins on cost. If the answer involves estate planning, a lifelong dependent, or a business succession need, permanent coverage starts to make more sense, and it's worth talking through with an advisor rather than guessing.
What to do next
If you've landed on term as the right fit, life insurance 101 walks through how the buying process actually works. If you want to see real pricing for your age, get a quote in a few minutes.
FAQ
What's the difference between whole life and universal life?
Both are permanent life insurance with a savings-like cash value component. Whole life has fixed premiums and guaranteed growth on the cash value. Universal life is more flexible and often tied to investments, which means it can also perform worse than expected.
Which type of life insurance is most common in Canada?
Term life insurance is the most commonly purchased type for people under 50, mainly because it's the most affordable way to cover a mortgage or income-replacement need for a set number of years.
Philip Setter has been a licensed life insurance advisor since 2014 and founded Affinity Life in 2020. He's a climber, ice climber and ski tourer based in Calgary.