Couples Guide to Life Insurance in Canada

Learn how to secure you and your partner’s financial future today!

16 Minute read

Originally published: December 7, 2022

Updated: January 18, 2024

Couples Guide to Life Insurance in Canada

Couples Guide to Life Insurance in Canada

Learn how to secure you and your partner’s financial future today!

16 Minute read

Originally published: December 7, 2022

Updated: January 18, 2024

Couples Guide to Life Insurance in Canada

Life insurance is an essential aspect of financial planning for couples, as it is the most common way to protect your family’s financial future in the event of an unexpected death. Whether you’re just starting your life together, expanding your family, or planning for retirement, understanding the nuances of life insurance in Canada is crucial. This is why we’ve put together this complete guide to help you and your partner secure your financial future together.

Life Insurance for Couples Overview

In Canada, there are many provider and policy options available when it comes to life insurance for couples. One option available is joint life insurance policies which covers both individuals in one policy. Another popular option is purchasing separate policies for each individual. Depending on the type of policy and how much life insurance is needed, couples can obtain life insurance for their own protection or to provide for their families in the event that they pass away. Couples may also purchase life insurance policies with a spousal rider, which offers additional protection for the surviving spouse. Overall, there are tons of life insurance options that couples could purchase which are best for their situation. 

Is Life Insurance for Couples Worth It?

Yes, life insurance is definitely worth it for couples in Canada! Life insurance can help provide financial security to both partners in the event of an unexpected death, providing them with the financial resources they need to maintain their lifestyle and take care of their family. In general, life insurance is worth it for families of all sizes as it provides financial protection for you and your loved ones. It can help provide for your family’s financial needs, pay off debts, and help  fund funeral expenses. There are many types of life insurance available options in Canada, so it is important to do your research and find the policy that best suits your needs.

Types of Life Insurance for Couples

There are many different types of life insurance policies available for couples, and the right one for you will depend on your specific needs and circumstances. Some common types of life insurance for couples include term life insurance, permanent life insurance, and joint life insurance.

Term Life Insurance

Term life insurance is a type of life insurance policy that provides a death benefit for a predetermined amount of time, typically 10, 15, 20, or 30 years. If the insured individual passes away while the policy is active the beneficiaries will receive the death benefit. Term life policies do not typically accrue any cash value, so once the term is over, the policy ends and no further benefits are paid out. Some term policies may also offer the option to either renew your policy or convert it to a permanent policy depending on various factors such as policyholder age. Term life insurance policies are the best life insurance policies in Canada for couples looking for shorter term commitments and affordability.

Permanent Life Insurance

A permanent life insurance policy is a type of life insurance policy that provides lifelong coverage, as opposed to term life insurance which provides coverage for a set period of time. Permanent life insurance policies are typically more expensive than term life insurance policies, but they also offer additional features such as a cash value component. This cash value component allows policyholders to borrow against the value of their policy and use the funds for various purposes such as wealth building, investment, and retirement planning. Permanent policies are a great option for couples looking for long-term life insurance with a savings or investment component.

Joint Life Insurance

A joint life insurance policy is a type of life insurance that covers two people, typically a married couple. This type of policy provides a death benefit to the beneficiaries of the policy in the event that either person dies during the policy term. Joint life insurance policies are typically less expensive than two separate individual life insurance policies since they only require one application and one set of underwriting procedures. This can make them an attractive option for couples who value affordability. Joint life insurance policies cover both partners for the same amount, requiring only one monthly premium instead of two. Upon the payout of the policy’s total coverage amount, the policy will terminate. For instance, if the policy has a $500,000 coverage amount, both partners are covered and the beneficiary will receive the full $500,000 upon the death of one of the policyholders.

What is joint life insurance

Joint Life Insurance for Couples

Joint life insurance is a great option for couples who want to save money, as it is usually cheaper than individual policies. It also provides a greater amount of coverage for both parties, as the same policy is in effect for both lives of the insured members. Joint life insurance ensures that both partners will be financially secure no matter the circumstances as the surviving spouse will be covered for financial losses that can be expected with the death of a partner.

There are two main types of joint life insurance policies, joint first-to-die policies and joint last-to-die policies. Which policy best applies to you and your partner depends on a variety of factors so it is best to review each option carefully before making a final decision.

Joint First-to-Die life insurance policy

Joint first-to-die policies provide a death benefit when the first person covered by the policy dies. After the first death, the policy typically terminates unless it includes a conversion option that allows the surviving spouse to convert the policy into an individual policy. A joint first-to-die life policy is helpful for those who share a common financial obligation, such as a mortgage. This is because the death benefit is paid out when a spouse dies leaving the surviving spouse with financial obligations that were once shared. This type of policy can also be used to help replace income that the surviving spouse may depend on and can help pay off business liabilities that may be shared between partners.

Joint first-to-die policies provide some unique advantages, such as insurability privilege and the possible double payout upon the simultaneous death of both those insured. Insurability privilege means that the surviving spouse can obtain additional life insurance coverage without having to go through medical underwriting. The double payout benefit is something that certain companies offer and provide an additional payout to the beneficiary if both those insured under the first-to-die policy pass away simultaneously or within a short time of each other.

Joint last-to-Die life insurance policy

Joint last-to-die policies, also known as survivorship policies, provide a death benefit when both insured parties have passed away. These policies are often used by couples to provide financial support for their children and dependents or other beneficiaries after both spouses have passed away. While this type of policy does not provide a financial benefit to the surviving partner after the first death occurs, it can help beneficiaries pay off funeral costs or potential debts and recover any income they may have expected from the policyholders. After the first death occurs, the surviving partner will be expected to keep paying the premiums to prevent a lapse in the policy.

Check out this table showing the differences between joint first-to-die life insurance and joint last-to-die life insurance policies:

Types of Joint Life Policies

What Happens to Joint Life Insurance After Divorce?

Divorce is not an easy thing for a couple to go through and it can be difficult to figure out what happens to a life insurance policy during a divorce. For couples with a joint life insurance policy, their options will be determined by the type and terms of the policy. Couples have the option of either keeping the policy in effect or completely cancelling the policy. Alternatively, a couple can come to a mutual decision where one of the policy holders takes over the joint policy and continues to pay the premiums by themself.

Another option available to divorced couples with joint life insurance is to split the policy into two individual policies. While this is not offered by all insurance providers it is a viable option for couples who wish to keep the policy intact and divide it between them and their partner. When a couple decides to split a policy they will have to go through the underwriting process again which typically involves undergoing a medical examination and a reassessment of potential risk factors. The premiums and coverage for the now split policies will likely differ from the joint policy and new beneficiaries can be chosen.

Can You Get a Joint Life Policy if You’re Not Married?

It’s not necessary to be married to purchase joint life insurance. The main types of people who purchase these policies are married couples, common-law partners, and business partners as it ensures that both parties will be financially secure in the event of a death. The key requirement for joint life insurance policies is having an “insurable interest” in the life of the other party. What this means is that you will suffer financially if the other party were to die. This means that joint life insurance is popular for those who are connected either in a personal relationship or through shared business interests.

Here is a quick overview of the pros and cons of joint life insurance for couples:

Pros and cons of joint life insurance for couples

Individual Life Insurance for Couples

With an Individual life insurance policy, an individual would cover the costs of premiums and in the event of their death, a death benefit would be paid towards whoever they had named as the beneficiary of the policy. Individual life insurance offers more flexibility than joint life insurance policies as it can be customized to meet the needs of the individual policyholder. It also allows more control over who the beneficiary is and how the death benefit will be distributed. With individual life insurance, premiums are based solely on the risk of the insured individual and are not influenced by the health or age of anyone else as would be the case in a joint policy.

Overall, individual policies are a great option for couples that wish to have more control and flexibility over their policies, but it is important to keep in mind that individual life insurance policies tend to have higher premiums than a joint life insurance policy would.

What is the Best Life Insurance for Couples

There are many options when it comes to life insurance for couples, which can make it difficult to know which option is best for your relationship. There is no one size fits all option when it comes to choosing a life insurance policy so it is important to figure out what would be best for your unique circumstances. That being said, the most popular options of life insurance for couples tends to be either joint life insurance or two individual life insurance policies. Joint life insurance is an affordable option for many couples however these policies are less flexible and can become complicated in the event of a divorce. Two individual policies that cover both partners is also a great option as it allows for a high amount of flexibility however it does tend to be more expensive than a joint life insurance option. In the end, it’s important to speak with your partner about what is best for your relationship and what options are the best for you.

Talk to an advisor today.

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Cost of Life Insurance For Couples

The cost of life insurance for couples in Canada varies depending on the age, health, lifestyle, and coverage amount a couple is interested in. Generally speaking, the average cost of life insurance for couples in Canada ranges from $20 to $100 per month with higher costs for additional coverage. It is essential that couples consider how much coverage they are interested in, the affordability of the monthly premiums, which type of policy they are interested in, and which provider is best for them.

How much coverage do we need?

Finding out how much life insurance coverage you and your partner needs is essential before choosing a life insurance policy. There are two main ways to figure out the coverage needed, either through the DIME formula or through the ‘ten times method’. The Dime formula tends to be the most accurate way of calculating the coverage you need as it considers your debts, income, mortgage, and the education cost for your dependents (if applicable).

Here is a quick overview of how to apply the DIME formula:

Using the DIME formula to help figure out how much life insurance coverage you need.

The other popular life insurance coverage formula is the ‘ten times method’ which is a much simpler way to get a rough estimate of the coverage you need. To apply this method all you have to do is multiply your income times ten. For example if you make a yearly income of $60,000 you would do the following equation: $60,000 X 10 = $600,000. So, someone who makes $60,000 would need roughly $600,000 of life insurance coverage. This method doesn’t account for other variables like the DIME formula does, but it is an easy way to figure out the ballpark of what you might need.

Tax Considerations of Life Insurance for Couples

In Canada, the tax implications of life insurance for couples can vary depending on the specific type of life insurance policy and how it is structured. Generally, life insurance payouts are not taxable for the beneficiaries, including spouses or partners, as they are typically received tax-free. This means that if one spouse passes away, the surviving spouse will generally not have to pay taxes on the life insurance benefit they receive as a beneficiary. However, there are some exceptions, such as when the life insurance policy is held within a business context or if there are significant investment components within the policy. It is essential for couples to consult with a qualified tax advisor or financial planner to ensure they understand the specific tax implications of their life insurance policy and how it fits into their overall financial plan. It’s also important to note that premiums paid for life insurance are not tax-deductible for individuals, including couples, as life insurance is considered a personal expense.

Couples Case Studies

The decision to purchase life insurance depends on the circumstances and needs of each couple. Couples should carefully evaluate their financial situation and goals before deciding whether life insurance is right for them. Here are some case studies of couples who would benefit from purchasing a life insurance policy.

Case Study #1

Chris and Robin are a young couple who are both in their early 30s. Chris has been working for tech companies since graduating university and Robin is a lawyer. They do not own a house yet, but plan to in the near future because they want to raise a family. This couple would benefit from purchasing life insurance. If one or both of the individuals were to pass away, the life insurance policy would provide financial support for the surviving spouse, helping to cover expenses such as mortgages, car payments, and future childcare, or education costs if they do have a child in the future. Life insurance  would also be more affordable to this couple as they are still young and low risk.

Case Study #2

Boris and Rosa are a couple with a high net worth, they are both business owners and are in their 40s, they have a child who is still in elementary school but they plan for their child to go to college or university. This couple would also benefit from purchasing life insurance as, in the event one of them passes away, the death benefit would cover any debts, taxes, and funeral expenses, as well as help provide funds for their dependants future education and make up for the income expected from the deceased. Additionally, since they both own a business, the death benefit could help cover the business costs the surviving spouse anticipated from their partner.

Case Study #3

Rob and Amy are a married couple in their early 40s. They both work full-time and have two teenage children. Rob is self-employed so his income is often unpredictable, whereas Amy’s income is more stable. In this case the couple would benefit from a joint life insurance policy as Rob’s unpredictable income could make individual policies more difficult to fund. A life insurance policy would ensure that the surviving spouse and their dependents would be financially secure in the event of one of them passing.

Frequently Asked Questions (FAQs) about life insurance for couples

Obtaining life insurance is essential for all couples who want to protect their loved one’s financial future. However, it can be difficult to navigate life insurance for LGBTQ+ couples in Canada. If you and your spouse are interested in purchasing a life insurance policy check out our Guide to Life Insurance for Same-Sex Married Couples because it’s important for all types of partnerships to understand what their options are when it comes to purchasing life insurance in Canada.

Yes! You can absolutely get life insurance if you have any health or medical issues. There are certain types of life insurance products, like no medical or guaranteed issue life insurance policies, that do not require a medical exam. If you’ve been denied a life insurance policy in the past due to a health condition, no medical life insurance might be the right option for you.

This depends on the particular terms of your life insurance policy. If your policy is revocable, this means you can switch the beneficiary on file without alerting the previous beneficiary. However, your policy may be irrevocable, meaning the policy owner is unable to change the beneficiary without the original beneficiaries approval. This is why it’s important to choose your beneficiary carefully.

There are many great life insurance providers in Canada, all with their own unique specialties and benefits. Check out our helpful guide on which providers are best for which specialties to determine which provider would be best for you and your partner.

Yes, depending on the type of joint life insurance you purchase, the benefit will be paid out upon either the first or last death of the insured. In either scenario, there is only one lump sum payment of the coverage amount.

Is Life Insurance Right for you and your Partner?

There are many things to consider when deciding to get a life insurance policy as a couple in Canada. Options include term or permanent individual policies or a joint first-to-die or last-to-die policy. Couples should consider how much coverage they need, the affordability of the monthly premiums, and other options and additional benefits they may want. Life insurance is an essential way to protect you and your partner’s financial future which is why it is important to work with a knowledgeable insurance expert who can find the best policy for both of you.

At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to find the best solution for you and your needs. We’ve been providing expert life insurance solutions since 2007 to couples and individuals looking to find the best policies from the most trusted insurers in Canada. To schedule a consultation about your income protection goals, or if you have any questions about life insurance for you and your partner, feel free to contact us online or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, Ontario and service clients anywhere in Alberta, British Columbia, or Ontario, including areas such as Edmonton, Victoria, and Oakville.

Talk to one of our expert advisor’s today at no cost to you!

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