Should you get term or whole life insurance?
Determine which type of coverage is better for your family’s financial needs
Head-to-head: term life insurance versus whole life insurance
Features | Whole | Term |
|---|---|---|
Who it's for Green Column Description | Best suited for those with high-net-worth with complex estate planning needs | Best suited for the average Canadian family |
Type of coverage Green Column Description | Permanent coverage | Coverage lasts as long as you need |
Average cost Green Column Description | Costs up to 7.5x more than term | Starts at around $20-30 per month |
Policies Green Column Description | Comes with surrender fees, taxes and other restrictions | Policies are easy to understand, with little-to-no fine print |
Payout Green Column Description | Death benefit is tax-free, but beneficiaries are taxed on the policy’s interest | Your loved ones get a tax-free lump sum if you pass during your term |
Features | Whole life insurance | Term life insurance |
|---|---|---|
Cost Green Column Description | Premiums are more expensive than term life insurance. | Premiums can start at $20 to $30 per month. |
Policy length Green Column Description | Covers you for your entire life as long as you keep up the payments. | Covers you for a specific period, typically 10, 20 or 30 years. |
Cash value Green Column Description | Accumulates cash value over time. | Doesn’t accumulate cash value. |
Investment Green Column Description | Investment component that helps the policy build cash value over time. | No investment component. |
Premiums Green Column Description | Usually fixed for the life of the policy. | Usually fixed for the entire term and increase on renewal. |
Flexibility Green Column Description | Potential to use as collateral for loans. | Can be renewed or, at times, converted to permanent life insurance. |
Benefits Green Column Description | Tax-free lump sum payment to beneficiaries. Can pay out dividends. | Tax-free lump sum payment to beneficiaries. |
Best for Green Column Description | High-net-worth Canadians or those with permanent dependents. | The average family with short-term responsibilities: mortgage, minor kids etc. |
Features | Mortgage insurance | Term life insurance for mortgage |
|---|---|---|
What it's for Only used for paying off the remainder of the mortgage balance. | Only used for paying off the remainder of the mortgage balance. | Financially protecting your family in any way they need. (Example: mortgage, childcare, tuition, time off, etc.) |
Average cost per month $73.10 / month* | $73.10 / month* | $32.85 / month* |
Level premiums Subject to change | Subject to change | Yes |
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Cons
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Features | Whole | Term |
|---|---|---|
Who it's for Green Column Description | Best suited for those with high-net-worth with complex estate planning needs | Best suited for the average Canadian family |
Type of coverage Green Column Description | Permanent coverage | Coverage lasts as long as you need |
Average cost Green Column Description | Costs up to 7.5x more than term | Starts at around $20-30 per month |
Policies Green Column Description | Comes with surrender fees, taxes and other restrictions | Policies are easy to understand, with little-to-no fine print |
Payout Green Column Description | Death benefit is tax-free, but beneficiaries are taxed on the policy’s interest | Your loved ones get a tax-free lump sum if you pass during your term |
Option to convert or renew policy Green Column Description | No | Yes |
Cash value Green Column Description | Builds cash value, option to withdraw as a loan | No cash value |
Rate of return Green Column Description | ~3.5% (compare to roughly 4.8% from the stock market or 8.5% from index funds) | None. Save with term and put the difference in traditional investment vehicles |
Features | Life Insurance Through Work | PolicyMe Insurance |
|---|---|---|
Policyholder Green Column Description | Your employer | You |
Coverage amount Green Column Description | 1-2x your salary | Apply for between $100,000 to $5 million, personalized to your family's needs |
Coverage length Green Column Description | As long as you're working at the company | Policies from 10-30 years, personalized to your family's needs |
Keep your coverage if you change jobs? Green Column Description | Not Included | Yes |
Medical Exam? Green Column Description | Not required | Not required in most cases |
Get term life insurance. Invest the rest.
Whole life insurance, in a nutshell
Should you get whole life insurance?
- Lasts your entire life, mixing a death benefit with cash value
- Premiums are fixed, so you pay the same rate over the course of your lifetime
- More costly than term life insurance, sometimes up to 7.5x more
- Ideal for very high income earners seeking tax-deferred options
- For most, term might be a better financial safety net for their family
Term: the smarter coverage option for Canadian Families.
Learn more about why thousands of Canadians choose affordable term life insurance they can count on; when their families need it most.
About PolicyMe term life insurance
PolicyMe is a Canadian digital insurance solution that makes financial protection for families simple and affordable. It was founded by two insurance consultants, Andrew Ostro and Laura McKay, and an experienced Chief Technology Officer, Jeff McKay. PolicyMe has partnered with Canadian Premier, a Fortune 500 company Securian Financial subsidiary.
How PolicyMe makes money
PolicyMe operates like any other insurer: we sell insurance products, which are underwritten by Securian Canada. The great news is that because we've automated operations, cut out the middleman and reduced underwriting requirements (such as medical exams), we're able to pass along the savings to you, while still delivering the same quality of coverage.
