Comparing types of life insurance

Get the type of insurance that best meets your needs. The table below summarizes the types of insurance available and how each is most commonly used.

Type of life insurance policyInsurance policy A written contract for insurance. It describes how long you are covered, what you are covered for, any part that you have to pay (the deductible) and what you will pay for the insurance (your premium).+ read full definition Premiums and coverage time How this insurance might be used
TermTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition Insurance coverage guaranteed for a pre-defined term, typically 5, 10 or 20 years
Premiums stay the same for length of the term
Renewal of term is guaranteed, but at a higher premium rate
Coverage ends at a specified age (often age 75 to 85)
Lowest cost form of insurance
Often used during working years to provide the capital needed to replace income when a key breadwinner dies
Coverage is not guaranteed for life, so may not be appropriate for estate planningEstate planning The plans you make to build and manage wealth for your lifetime and thereafter. Goals may include leaving the most money possible to your loved ones, with the least amount of taxes. Other goals may include caring for children, paying off debt or passing on a business.+ read full definition goals
Term to 100 Permanent insurance guaranteed for life
Premiums stay the same until age 100, or may in some cases be payable over 20 years
Typically has no savings component or cash value
Lowest cost form of permanent insurance
Pre-retirement – can be used to replace income if you were to die unexpectedly
Retirement – can be used to cover your estateEstate The total sum of money and property you leave behind when you die.+ read full definition’s taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition liability or add to your estate’s value
Universal life Permanent insurance guaranteed for life
Premiums are adjustable depending on savings and insurance needs
Policy provides both insurance protection and tax-sheltered savings
Retirement – savings can be used to cover ongoing premiums, increase the policy’s death benefitDeath benefit Money that your life insurance or savings and pension plan(s) pays to your estate or beneficiary after your death. Example: If you contributed to the Canada Pension Plan, money may go to your estate, spouse or common-law partner and children.+ read full definition or used as loanLoan An agreement to borrow money for a set period of time. You agree to pay back the full amount, plus interest, by a set date.+ read full definition collateralCollateral Property or assets that you pledge as a borrower as a guarantee that you will repay the loan. You may lose your collateral if you don’t pay back your loan.+ read full definition to provide money in retirement
Estate – can be used to cover your estate’s tax liability or add to your estate’s value
Whole life Permanent insurance guaranteed for life
Premiums stay the same for life
Retirement – savings can be used as loan collateral to provide money in retirement, or withdrawn if you end the policy
Estate – can be used to cover your estate’s tax liability or enhance your estate’s value

Learn more about your life insurance options.

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