Is Life Insurance Worth It?

Is Life Insurance Worth It?

It depends on whether your death would leave a financial gap. Life insurance is worth it if someone depends on your income, your unpaid work at home or your share of a debt, and your savings would not cover that loss. If nobody would face a shortfall, you may need little coverage or none, whatever your age.

Compare the types of life insurance against that gap, how long it will last and the premiums you can afford. For a sense of the numbers, see how much life insurance costs in Canada.

How Does Life Insurance Work?

Life insurance is a contract between an insurer (the company) and a policyholder who pays premiums in exchange for a death benefit if the insured person dies while the policy is in force.

The death benefit is usually paid out to the beneficiary, the person or people you name in the policy, often a spouse or family member. According to the Financial Consumer Agency of Canada (FCAC), it is a one-time, tax-free payment that your loved ones can use to replace your income, care for your children, pay for a funeral or pay off debts. Quebec has its own rules on designating a beneficiary, so check them before you name one.

When Life Insurance Is Worth It

Life insurance is worth considering when your death would leave a partner, children or other dependants without enough money for living costs, mortgage payments or other expenses. It can also help fund final expenses. The need comes from the financial shortfall, not simply from reaching a particular age. To put a number on that shortfall, see how much life insurance you need in Canada.

Estimate those needs, then subtract savings and existing insurance available to meet them. Consider how long the gap may last: raising children or paying a mortgage may create a temporary need, while a lifelong dependant may need longer-term planning. Here is how that plays out for common situations.

Parents and couples who share expenses

If your household budget relies on two incomes, losing one can make rent, groceries and childcare hard to keep up with. Coverage is often sized to replace the lost income until the children are independent, or to give the surviving partner time to adjust. Single parents usually have the clearest need, since there is no second income to fall back on.

Stay-at-home parents and caregivers

A parent who earns no salary still provides something with a price: childcare, transport, meals and care for a relative. If that work had to be paid for, the cost could be significant. The Ontario Securities Commission's GetSmarterAboutMoney.ca suggests caregivers count the cost of childcare when they estimate their need.

Homeowners and co-signers

A shared mortgage, a co-signed loan or a line of credit can fall on the person you leave behind. Individual life insurance lets your beneficiary decide how to use the money, whether to pay down the debt or cover other costs. Mortgage life insurance sold by a lender works differently; our guide to mortgage insurance compares the two.

Young adults and early-career workers

Being young is not a reason to buy coverage on its own, and it is not a reason to wait either. The question is still who would face a shortfall. Price does climb with age: in TD Insurance's published examples, a non-smoking man pays $18.17 a month for $250,000 of 20-year term at age 20, $27.82 at 40 and $69.30 at 50. Your health when you apply also affects the offer you get.

Self-employed people and business owners

If you have no group plan at work, there may be no employer coverage to count on. Business loans you guaranteed personally, partners who would need to buy your share, or a business that depends on you can all add to the gap. Policies owned by a business raise tax and ownership questions, so involve your accountant before you choose that route.

Retirees and older adults

Once the mortgage is paid and the children are financially independent, the income gap often shrinks or disappears. Some people still keep coverage to pay final expenses, settle remaining debts, leave money to a charity or provide for a dependant who will need support for life. If none of those goals apply and your savings are enough, a new policy may not be worth its cost at this stage.

When You Should Pass On Life Insurance

You may not need life insurance if nobody relies on your income and your savings can cover final expenses and any financial obligations you want to leave funded. Consider existing coverage too, including any life insurance through work, before buying more.

Being young, early in your career or in debt is not, by itself, a reason to wait. Ask who would face a financial shortfall if you died. If a quote is unaffordable, compare a different coverage amount or term rather than assuming all life insurance is out of reach. On a tight budget, a smaller term policy that covers the years when your family is most exposed can be more useful than no coverage at all, as long as the premium does not crowd out essentials such as rent or an emergency fund.

What Does Life Insurance Cost Compared With What It Protects?

Term life insurance often costs less than people expect. TD Insurance publishes sample monthly premiums for its term policies, calculated as of September 2026, for people in good health and without discounts. For a 30-year-old non-smoker on a 20-year term, they look like this:

These are another insurer's examples, not Emma prices, and your premium depends on your age, health, smoking status, coverage amount and term length. For permanent coverage, Sun Life's article dated February 5, 2026 says a healthy 30-year-old male non-smoker may pay about $25 a month for $250,000 of 25-year term, compared with around $155 a month for $250,000 of permanent insurance. More examples and the factors behind them are on our life insurance cost page.

The comparison that matters for "is it worth it" is the premium against the gap. A few dozen dollars a month for several hundred thousand dollars of protection can be worth it for a young family, and not worth it for someone whose savings already cover everything.

Types of Life Insurance: Term and Permanent

Life insurance comes in two main types: term life and permanent life. Term life insurance pays a death benefit if you die during the covered period while the policy is in effect. It has no cash value, and there is no payout simply because you reach the end of the term. Some policies can be renewed, but premiums may increase.

Permanent life insurance includes whole life and universal life and provides lifetime coverage while the policy remains in effect. Many policies build cash value, but access depends on the contract. An unpaid policy loan may reduce the death benefit or the amount you receive if you cancel.

Which type is worth it for your need?

Match the length of coverage to the length of the need. A 20-year mortgage or children who will be independent in 20 years point to a term of about that length. Permanent coverage is designed for needs that last for life, such as final expenses, a dependant with a lifelong disability or money you want to leave to your heirs or a charity. For many households the main need is temporary, which is why term is often the starting point. Our comparison of term vs whole life insurance goes through the trade-offs.

Is Life Insurance a Smart Investment? Pros and Cons

Life insurance is primarily financial protection, not a substitute for savings. Savings are money you can use while alive; a life insurance death benefit helps cover the financial gap your death would leave. Term insurance does not build cash value. Permanent insurance may include cash value or an investment account, depending on the policy.

The trade-off is the ongoing cost of premiums. Term premiums are generally lower than permanent premiums when you first buy a policy, but may rise at renewal. Compare any optional riders separately. For universal life, flexible premiums have limits, and lower investment returns can mean you need to pay more. The FCAC also notes that the cash value you get back if you cancel a permanent policy is less than what you paid in premiums for the insurance.

What Happens After 20 Years of Paying for Term Life Insurance?

When a 20-year term ends, the coverage ends. If you are still alive, nobody receives a payment, and because term insurance has no cash value, you do not get your premiums back. That is not money wasted, any more than home insurance is wasted when your house does not burn down: your family was protected during the years they needed it.

Before the term ends, you usually have three options, depending on your contract:

• Let it end if the mortgage is paid and the children are independent.
• Renew it if the policy allows. The FCAC notes that premiums may increase when you renew.
• Convert it to permanent coverage if your plan offers conversion. Some insurers allow it on select plans and up to a certain age.

Read the renewal and conversion clauses when you buy, not when the term is about to expire.

What Are the Alternatives to Buying Life Insurance?

Before buying, count what would already be available to your family. Each alternative has limits:

• Savings and investments. An emergency fund, RRSP or TFSA can cover part of the gap. Building enough to replace years of income takes time, which is the gap life insurance fills in the meantime.
• Life insurance through work. TD Insurance points out that employer coverage may not be enough for your needs and may not follow you if you leave your job.
• Government death benefits. The Canada Pension Plan death benefit is a one-time payment of $2,500, with a possible top-up to $5,000 for deaths since January 1, 2025, if the contributor meets the contribution and eligibility conditions. In Quebec, the Québec Pension Plan death benefit is a maximum of $2,500, paid if the deceased contributed enough. Survivor pensions may also apply. The one-time death benefits alone are not a substitute for ongoing income.
• Insurance offered with a mortgage. It can protect the loan, but the benefit goes to the lender, not to your family.

If these resources cover your family's needs, buying more coverage may not be worth it. If they leave a gap, life insurance is one direct way to fill it.

What Happens If You Die Without Life Insurance?

Without a policy, your family relies on what you leave behind: savings, investments, any workplace coverage and government benefits. Your estate generally has to settle your debts before your heirs receive what is left, and a co-borrower on a joint mortgage or a co-signed loan remains responsible for that debt.

For a family that relied on your income, the bigger loss is usually the income itself. Rent or mortgage payments, groceries and childcare continue while the paycheque that covered them stops. Government death benefits can help with funeral costs, but at a maximum of a few thousand dollars, they are not designed to replace a salary. When a policy names a beneficiary, the death benefit goes to that person; if no beneficiary is named, the FCAC explains that the insurer generally pays it to the estate, where it is distributed with everything else.

Camille rents, but her family still depends on her income

Illustrative scenario, not a customer story or an insurance quote.

Camille lives with her partner and their child. She assumes life insurance is something to consider when they buy a house. Yet her pay already covers part of the rent, groceries and childcare. If she died, those bills would not disappear.

She and her partner review the savings and workplace coverage available to the family. Then they ask which expenses would remain and how long the family would need help meeting them. If those resources leave a gap, they can compare coverage for that need.

Camille’s reason to consider insurance is not homeownership. It is the difference between what her family would need and what would be available. A renter with dependants can face that gap; a homeowner with sufficient resources may not.

How to Compare Life Insurance Policies Before You Buy

If you decide coverage is worth it, the details of the contract matter as much as the monthly price:

• Compare like with like. Quotes are only comparable for the same coverage amount, term length and smoking status.
• Check renewal and conversion. Ask how premiums change at renewal, and until what age the policy can be renewed or converted to permanent coverage.
• Read the exclusions. TD Insurance, for example, says its policies will not pay for fraud or suicide within two years of issue. Contracts differ, so check the one you are offered.
• Name your beneficiary carefully. In Quebec, under the Civil Code, naming a married or civil-union spouse as beneficiary outside a will is irrevocable unless the designation says otherwise. Our guide to life insurance beneficiaries explains what that means.
• Answer every question accurately. The insurer relies on your answers about health and lifestyle to decide whether to cover you and at what price.

How to Decide in Five Steps

1. List the people who would be affected if you died, and what they rely on you for.
2. Add up the debts, living costs and goals you would want covered, and for how many years.
3. Subtract savings, workplace coverage and other resources already available.
4. If a gap remains, compare term lengths and amounts that fit your budget, using the checks above.
5. Apply, then review your coverage when your family, debts or income change.

Emma's online tool takes you through your situation.

Frequently Asked Questions

Do single people without children need life insurance?

Often not, unless someone else would be left with a debt you share, you support a parent or relative, or you want to cover final expenses and your savings would not. If nobody would face a shortfall, you may not need a policy now.

How much is $100,000 of life insurance a month?

It depends on your age, health and term. In TD Insurance's examples calculated as of September 2026, $100,000 of 20-year term for a 30-year-old non-smoker in good health is $10.80 a month for a woman and $12.60 for a man. Those are TD's figures, not a quote.

Is the death benefit taxable in Canada?

The FCAC describes the death benefit as a one-time, tax-free payment to your beneficiaries. Other amounts, such as growth on a permanent policy's cash value, can have tax consequences, so ask a tax professional about your case.

Is life insurance through work enough?

It can help, but it may be limited and may end when you leave your job. Compare it with your actual need and check what happens to it if you change employers.

Do I get my money back if I outlive my term policy?

No. Term insurance has no cash value, so the coverage simply ends at the end of the term unless you renew or convert it. You paid for protection during those years, not for savings.

Final thoughts

Start with what your family would need if you died, then compare it with the resources already available. If there is a gap, choose coverage and premiums that fit your situation. If there is no gap, you may not need a policy. Review the decision when your family, debts or finances change.