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Types of Life Insurance in Canada
There are really only two categories: term and permanent. Almost everything else is a product built on one of those two, sold under a different name. Here is how each type works, who it fits, and the few I will usually tell you to skip.
By Parvesh Benning, Licensed Life Insurance Broker
Updated: June 17, 2026
Types of Life Insurance in Canada
There are really only two categories: term and permanent. Almost everything else is a product built on one of those two. Here is how each type works, who it fits, and the few I will usually tell you to skip.
By Parvesh Benning, Licensed Life Insurance Broker, Updated: June 17, 2026
The names multiply, the actual choices do not. Once you know whether your need has an end date or runs for life, you have basically picked your lane, and everything below is detail inside it. Start with term or permanent, then narrow from there.
Here is the quick version before we get into the detail.
Term life
Covers a set period, usually 10, 20, or 30 years.
Lower premiums, no cash value.
Best when the need ends: a mortgage, kids at home, your working years.
Renews or converts, then expires.
Permanent life
Covers you for life, as long as premiums are paid.
Higher premiums, can build cash value over time.
Best when the need never ends: estate, a dependent with lifelong needs, final costs.
Stays in force, no expiry.
If you only read this far, here is the honest take: term is the right fit for most Canadians, most of the time. Permanent has real uses, but it gets sold a lot more often than it actually fits, and I will flag where that happens as we go.
And here is every type on this page at a glance, with where each one actually earns its place.
| Type | Best for | The trade-off |
|---|---|---|
| Term | A mortgage, young kids, an income people depend on | Coverage ends when the term does |
| Whole life | A lifelong need, estate planning | Higher premium than term |
| Universal life | Flexible permanent coverage you will actively manage | More moving parts, cash value not guaranteed |
| Term-to-100 | Lifelong coverage at a lower cost | Usually no cash value to draw on |
| Simplified issue | A health issue, or you need coverage fast | Costs more than a fully underwritten policy |
| Guaranteed issue | A last resort when nothing else approves | Highest cost per dollar, plus an early waiting period |
| Mortgage (bank) | Rarely the best option | The bank is paid, not your family |
| Group (employer) | A top-up while you are employed | Ends when the job does |
The rest of the page is just these eight, one at a time.
On this page:
- What is Traditional (Fully Underwritten) Life Insurance?
- What is Term Life Insurance?
- What is Permanent Life Insurance?
- What is No Medical Life Insurance?
- What is Mortgage Life Insurance?
- What is Group Life Insurance?
- What is the Best Type of Life Insurance for Me?
- Frequently Asked Questions About Life Insurance Types
What is Traditional (Fully Underwritten) Life Insurance?
Traditional life insurance is the fully underwritten path most term and permanent policies still run through. Before making an offer, the insurer reviews your health, lifestyle, medications, and family history, and sometimes pulls a report from your doctor.
What the insurer looks at depends on your age, the coverage amount, and your health. It can run the full review, or almost none of it:
What they may check
A nurse visit with bloodwork, a urine sample, or a report from your doctor. On smaller, simpler files, sometimes no exam at all.
What you get for it
It takes longer than no-medical coverage, but the insurer knows more, so a clean file generally earns a lower premium than any no-medical option.
This is where I start for most people in reasonably good health who are not in a rush. The no-medical routes further down exist for speed, or for health that would make this path hard, not as the default.
What is Term Life Insurance?
Term life insurance covers you for a set number of years, then it ends. You pick the length, usually 10, 20, or 30 years, and if you pass away during that window your beneficiary gets the payout. Outlive the term and the coverage simply expires.
This is the one most people actually need. It lines up with the years you carry the most financial weight: a mortgage, young kids, an income your family depends on. Cover those years, and once the mortgage is gone and the kids are grown, the need usually shrinks anyway.
It is the cheapest type for a simple reason. The insurer is only on the hook for a defined period, not your whole life, so the premium reflects that.
A few things to know before you buy term:
You choose the amount and the length. Those two numbers drive your premium. More coverage or a longer term costs more.
The payout goes to your beneficiary tax-free. Most families take it as a single lump sum. Some policies offer alternative settlement options, so it is worth asking what a given policy allows.
Most term policies can convert. Many let you switch to permanent later without a new medical, which matters if your health changes before the term ends. Worth confirming the conversion window on any policy you are considering.
It works for more than just you. You can put term coverage on a whole family, add it for children, or attach it as a rider to an existing policy.
If your budget is tight and your need has an end date, this is almost always where I start the conversation.
What is Permanent Life Insurance?
Permanent life insurance covers you for your entire life, not a set number of years, as long as the premiums are paid. It is an umbrella term, not a single product. Whole life, universal life, and term-to-100 all sit underneath it.
The part that gets people interested is the cash value, though not every permanent policy builds it. Whole life and universal life can grow cash value over time, with a portion of each premium going into an account inside the policy. Term-to-100 usually skips that, giving you lifelong coverage at a lower cost with little or no cash value to draw on.
Where there is cash value, you can borrow against it, withdraw from it, or in later years surrender the policy and take the value out. Any of those moves can reduce or end the death benefit and may have tax consequences, so it is worth getting advice before you touch it.
The honest part
Permanent costs a lot more than term for the same death benefit, and that gap is the whole reason it gets oversold. It earns its keep in specific situations, not as a default for everyone. If you are buying it mainly as an investment, slow down. For many families, buying term and investing separately can do more than using permanent coverage as an investment.
Where it actually fits:
A need that never ends. Final expenses, or leaving something behind no matter when you pass.
A lifelong dependent. Coverage that has to outlast any 30-year term.
Estate and tax planning. Usually higher-income or business-owner files, once the simpler needs are handled.
Permanent is a tool for a specific job. The three types below are just different versions of that tool, and the deeper comparison of permanent types walks through how they differ.
What is Whole Life Insurance?
Whole life is the most common form of permanent coverage. It covers you for life, the premium is set, and it builds guaranteed cash value over time under the contract. There are three variations worth knowing.
Limited pay
You pay for a set period, say 10 or 20 years, then payments stop while coverage and cash value continue for life. You front-load the cost so you are not paying premiums into your 80s. Manulife, for example, offers participating whole life on pay-10, pay-20, and pay-to-age structures, though options and pricing vary by carrier and are subject to underwriting.
Term-to-100
Permanent coverage stripped down: covered for life at a level premium, but typically no cash value to build or borrow against. That trade is the point. You get lifelong coverage at a lower cost because you are not funding a cash value account.
Participating vs non-participating
Participating pays dividends, your share of the insurer’s results, which can buy more coverage, cut premiums, or be taken in cash. Dividends are not guaranteed. Non-participating skips that and just provides the coverage at a lower cost.
What is Universal Life Insurance?
Universal life is a type of permanent insurance built to give you more flexibility than whole life. It is its own product, not a version of whole life. It covers you for life and builds cash value, but the premiums are flexible, the death benefit can be adjusted, and the cash value growth is not guaranteed. More control, more responsibility.
The flexibility cuts both ways, so it helps to see it plainly:
What you gain
You pick a premium within a set range and can adjust it as your income shifts. The death benefit can usually be changed too. Lowering it is generally simple. Raising it normally means new underwriting, including a medical.
What you take on
The cash value is not guaranteed. It depends on what you pay in and how the chosen investments perform. There is usually a guaranteed minimum interest rate, but the upside, and the risk of underfunding, sits with you.
This is the type I am most careful with. It can work well for someone with variable income or a real estate-planning reason who will actually manage it. For most people who just want lifelong coverage without homework, whole life or term-to-100 is the simpler call. The whole life versus universal life comparison goes deeper if you are weighing the two.
What is Funeral Expense Insurance?
Funeral insurance, also called burial or final expense insurance, is a small permanent policy built to cover the costs around your death rather than replace an income. Coverage is modest, usually enough for a funeral and related expenses, and it lasts for life as long as premiums are paid.
Think of it as a narrow tool, useful for one job and the wrong size for most others:
Built for the funeral and the bills right around it, so that final cost does not land on your family.
Not built for a mortgage, a child’s education, or lost income. For those you want term or a larger permanent policy, not this.
Where it fits is the older client with no dependents or big debts who just wants the funeral handled. It is often sold as a no-medical product, which is why it fills late-night ads aimed at seniors. Right tool for that person, oversized as a first reaction for everyone else.
What is No Medical Life Insurance?
No-medical life insurance is coverage you can get without the exam. No nurse visit, no bloodwork. You answer a few health questions, or sometimes none at all, and approval is fast. That speed is the whole appeal.
The trade is price. When the insurer knows less about your health, they price in the unknown, so no-medical premiums generally run higher than a fully underwritten policy for the same coverage. You are paying for convenience, not getting a deal.
It really comes down to two groups:
Need it fast
You want coverage in days, not weeks, and would rather skip the underwriting wait.
Hard to insure
A health condition makes a traditional policy tough to land, or it would come back heavily rated.
One caution before you assume this is your route. No-medical is not one product, it is a ladder, and where you land on it changes the price a lot. A healthy person who grabs no-medical out of impatience is usually overpaying for something a quick underwritten policy would beat. Let a broker check whether you would qualify for standard coverage first. The two rungs below are where most of that decision gets made, and whether no-medical is right for you goes deeper.
What is Simplified Issue Insurance?
Simplified issue is the higher rung on the no-medical ladder. No exam, but you do answer a set of health questions, and your answers decide whether you qualify and at what price. Fewer questions and cleaner answers generally mean a better rate.
It can be sold as term or permanent, and the question set is not one-size-fits-all. Carriers tier it, and the tier you land on drives the cost. To give a sense of how that ladder looks in practice:
Fewer, easier questions, immediate coverage. Carriers like Canada Protection Plan and Assumption Life run multiple simplified tiers. The cleaner your health answers, the higher the tier you reach and the lower the premium, with full coverage starting from day one.
More questions you cannot pass, graded or deferred coverage. If the health answers do not clear, you may still be approved on a tier where the full death benefit only applies after a waiting period, usually a couple of years. Covered, but with a catch in the early years.
This is exactly where a broker earns the fee, except there is no fee to you. The same health profile can land on very different tiers across carriers, and matching you to the one that grades your situation most kindly is the difference between a fair rate and an expensive one. Tiers, questions, and pricing vary by carrier and are subject to the insurer’s current rules.
What is Guaranteed Issue Insurance?
Guaranteed issue is the bottom rung: no exam, no health questions, approval is essentially automatic as long as you fit the age window. That is its only real advantage, and it is a big one for the right person. You cannot be turned down for your health.
The trade-offs are real, so go in clear-eyed:
Age-gated
Usually offered around ages 40 to 70, though the window varies by carrier.
Highest price per dollar
Because the insurer takes everyone, the premium per dollar of coverage is the steepest of any type here.
Graded early years
The full death benefit typically applies only after a waiting period, often two years, except for accidental death.
This is a last resort, not a starting point. It exists for people who genuinely cannot qualify anywhere else, often older applicants with serious medical conditions. Before anyone lands here, it is worth having a broker test whether a simplified tier or even a rated underwritten policy would take you, because either one usually beats guaranteed issue on price. Specifics vary by carrier and are subject to current rules.
What is Mortgage Life Insurance?
Mortgage life insurance, the kind the bank offers when you sign your mortgage, is creditor insurance: it pays the lender, not your family, and the payout shrinks as your balance drops. I rarely recommend it, and here is the plain reason why.
First, a naming trap worth clearing up. Bank mortgage life insurance is not the same as the mandatory CMHC-type default insurance required when your down payment is under 20%. That mandatory product protects the lender if you default. The optional one the branch upsells is life coverage tied to your mortgage. Different things, often confused at the same signing table.
Where it falls short against an individual policy:
The payout shrinks
As you pay down the mortgage, the benefit drops with it, but the premium usually does not.
The bank is the beneficiary
The money clears the mortgage. Your family does not get to decide how to use it.
It is not portable
Switch lenders or move, and the coverage usually ends. You start over, older, maybe less healthy.
A personally owned term policy for the mortgage amount fixes all three. The benefit stays level, your family controls it, and it follows you regardless of which lender holds the mortgage. Same job, better tool, and often a similar or lower price. If a bank has offered you mortgage insurance, that is the moment to get a second opinion before you sign.
What is Group Life Insurance?
Group life insurance is the coverage your employer provides as part of a benefits package. It is easy to get, usually requires no medical, and is often free or close to it. Treat it as a nice extra, not your real plan.
The good part is genuine. No exam matters if your health would make individual coverage hard to land, and the price is hard to beat when the employer foots the bill. Typical coverage runs about one to two times your salary, with the option to buy a bit more.
Here is why I never let a client lean on it alone:
- It leaves when you do. Change jobs or get laid off and the coverage usually ends with the paycheque, often at the worst possible time.
- It is rarely enough. One or two times salary does not clear a mortgage and raise a family. It is a top-up, not a foundation.
- You cannot shape it. It is a set package, with no choosing the amount, the length, or the structure to fit your situation.
Conversion to an individual policy on the way out is sometimes offered, but the price can jump sharply. The better move is to own a personal term policy that stays with you no matter where you work, and let the group coverage sit on top as a bonus. Keep the extra. Just do not build the house on it.
What is the Best Type of Life Insurance for Me?
For most Canadians, most of the time, the answer is term. It is the cheapest way to cover the years you carry real financial weight, and that is what the majority of people actually need. The other types exist for specific jobs, not as upgrades to that one.
After 25 years of placing these, here is the short version of how I think about it when someone sits across from me:
Mortgage, young kids, an income people depend on? Start with term. Match the length to how long the need lasts and the amount to what would have to be replaced.
A need that never ends, a lifelong dependent, or estate planning? Now permanent earns its place. This is the genuine job it was built for.
A health condition making approval hard, or you need it fast? A no-medical tier may fit, but let someone check whether you would qualify for standard coverage first.
Just want the funeral handled, later in life? A small final expense policy does that one job without overbuying.
Two rules cut through most of the noise. First, own your coverage yourself rather than renting it from a bank or an employer, so it stays level and follows you. Second, match the tool to the job: for many families, term plus investing separately is the better fit, but in the right situation, a maxed-out cash-value policy is a genuine tax-advantaged asset, not a consolation prize. Estate planning, a corporation with retained earnings, a maxed RRSP and TFSA: that is where permanent earns its place as an investment, not just as coverage. The reason a broker matters here is simple: I am not tied to one company, so I can put your situation in front of several carriers and find the one that treats yours best. That comparison costs you nothing and it is the whole point of working with us.
Frequently Asked Questions About Life Insurance Types
Q1
What is the difference between simplified issue and guaranteed issue?
Simplified issue asks a set of health questions and uses your answers to decide the tier and price, with no medical exam. Guaranteed issue asks no health questions at all and cannot turn you down for health, but it carries the highest price per dollar of coverage and usually a waiting period before the full benefit applies. Simplified is the better deal if your health answers can clear it.
Q2
What is a fully underwritten policy?
It is the standard application path most term and permanent policies go through, usually including a medical exam and a review of your health history. Because the insurer knows more, a healthy applicant generally gets a lower premium than on a no-medical policy.
Q3
What is underwriting?
Underwriting is how the insurer reviews your application, health, and lifestyle to decide whether to offer coverage and at what price. The more an insurer knows, the more precisely they can price the risk, which is why a clean underwritten file often beats a no-medical rate.
Q4
Is funeral insurance the same as life insurance?
Funeral or final expense insurance is a small type of permanent life insurance aimed only at covering end-of-life costs. It offers a smaller benefit than a standard term policy because its job is narrow: the funeral and the bills around it, not replacing an income or clearing a mortgage.
Q5
Which type of life insurance is best for most people?
For most Canadians, term is the right starting point. It is the most affordable way to cover the years you carry a mortgage, raise children, or support an income, and it fits the majority of needs. Permanent, no-medical, and final expense each solve a more specific problem. Comparing options across carriers with a broker is the simplest way to land on the right one for your situation and budget.
Finding the right type for your situation
The hard part is rarely understanding the types. It is matching the right one to your life and then finding the carrier that prices your situation best. That second step is where an independent broker earns their keep, and it costs you nothing.
Talk to a broker who compares the whole market for you
We are independent, so instead of one company’s products we put your situation in front of more than 20 Canadian carriers and bring back the one that fits. We provide life insurance and segregated fund solutions, including term, permanent, no-medical, and critical illness coverage.
Get in touch or call 1-877-654-6119 to go over your options.
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