How Do I Choose a Life Insurance Company?

How Do I Choose a Life Insurance Company?

You’ve made the decision to purchase life insurance, and you’ve scoured the internet to learn all about different policy types. But there are so many companies on the market that attempting to choose one can be an overwhelming prospect.

This is especially hard for first-time buyers. There’s no doubt that purchasing life insurance provides you and your loved ones with a sort of safety net and give you peace of mind that everything is taken care of.

But how can you choose a life insurance company that you can trust? We’ll teach you all of the most important factors to take into account when choosing an insurance company in our How Do I Choose a Life Insurance Company article.

What is life insurance and how does it work?

It’s possible that you feel that you already know generally how life insurance works. But if you’re asking yourself “How do I choose a life insurance company?”, then you can surely use more than the broad strokes.

Life insurance is a type of contract in which you’ll pay your life insurance company a specific amount in monthly payments- called premiums- and in return, upon your death your family will be paid a previously agreed upon amount.

Anyone asking themselves “How do I choose an insurance company?’ should know that your premium amount depends on a number of factors, like the type of policy you choose, the coverage you need, and more.

Typically people will choose packages that will cover both their funeral expenses as well as their outstanding debt.

Many people also opt to include coverage that will provide financial assistance for your loved ones throughout their period of grief to cover the loss of income they may experience (time off work) and to cover some of the finances they’ll lose if you die (I.e. remaining spouses going from two paychecks to one).

Life insurance benefits can also be used for future expenses, like paying for children’s college educations, or making charitable donations.

Be sure that you understand that life insurance doesn’t benefit you. It’s designed to help your loved ones once you die. It should give them the ability to make mortgage payments, education costs, household bills, debt, and any future expenses.

Do you need life insurance?

If you’re asking “How do I choose a life insurance company?”, you should first ask whether you need life insurance. If you don’t have dependents or debt, then you may be able to get by without. But you should ask yourself these questions to determine if you really need life insurance:

  • Are you currently in an exclusive, serious, committed romantic relationship?
  • Do you have any dependents? (Spouses, children, parents, etc.)
  • Have you got a mortgage? And if so, how many years are left on it?
  • Are there any outstanding student loans in your name?
  • Do you have any outstanding debt that could be transferred to your family in your absence?
  • Do ou have plans to leave money to charity?
  • Would you like to cash out a life insurance policy for big purchases at some point in the future?
  • Can the money in your kids’s RESP (Registered Education Savings Plans) cover their secondary education expenses?
  • Would your family function well if your income suddenly went away?
  • How much is tucked away in your savings?

If you answer these questions and discover that your loved ones could benefit from life insurance, then it’s a good idea to request a quote.

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How much life insurance do you need?

Another important question to ask yourself when you’re asking “How do I choose a life insurance company” is “how much life insurance do I need?”.

Determining your coverage amount depends on both how comfortable you want your family to be after you pass, and how much you can afford to pay in premiums every month.

A lot of life insurance policies pay out around $200,000, but a lot of financial experts agree that’s not quite enough. Instead, it should cover ten times your annual income.

The ideal coverage amount will depend on not only your income, but your lifestyle choices and your family.

When you’re asking “How do I choose a life insurance company?”, you need to learn how to determine the amount of coverage you need.

This calculation should help you figure out the amount of coverage you need. It’s based on the DIME (debt, income, mortgage and educational expenses) method.

Life insurance policy amount should = Outstanding debt + Your net income plus the number of years you want to provide for your family + the mortgage you still owe + your children’s education costs

One of the best tips we can give you in our how do I choose a life insurance company article is to make a detailed inventory of your current assets. This will let you get a better picture of your financial state.

Here’s some of the things you should add to your asset inventory list:

  •  The value and resale value of your home, furnishings, and your vehicles
  • The amount of savings in your account
  • Any registered investments you have (like TFSAs or RRSPs)
  • Any non-registered investments you have (such as EFTs, mutual funds, segregated funds, stocks, real estate, etc.)

You should also list your liabilities:

  • Your car loan
  • The balance on your mortgage
  • Any credit card debt or lines of credit you may have
  • The estimated estate settlement costs and funeral costs.

Different types of life insurance

One thing we couldn’t leave off of our “How Do I Choose A Life Insurance Company” article is a section that explains the different types of life insurance.

This should help you determine which type of life insurance you want, and therefore allow you to choose a company that provides that sort of policy.

  • Term Life Insurance: This insurance is typically purchased for a set amount of time (e.g. 10, 20, or 30 years). It can be the cheapest permanent life insurance option for lots of people.
  • Term 100 Life Insurance: This coverage will cover you until you’re 100 years old. Not only are you provided with a lifetime of insurance coverage, you won’t have to pay premiums once you’re 100 years old. Because of that, they’re considered permanent policies. However, Term 100 policies don’t accumulate a cash value like other policies.
  • Whole Life Insurance: This permanent life insurance type doesn’t expire. It covers you for your whole life, as the name suggests. These policies accumulate a cash value over time.
  • Universal Life Insurance: This permanent life insurance option also provides you with an investment account. This means you can invest and build up your wealth. Some investments allow you to lower your premium after a while.

How much does life insurance cost?

Along with “How do I choose a life insurance company”, you should also learn how much life insurance costs. Don’t worry, our How Do I Choose a Life Insurance Company article has you covered!

Life insurance costs vary greatly and can cost as little as $15 per month or over $100 per month on the other extreme.

Here’s a table to give you an idea of the average life insurance costs. These costs are based on premiums for a 30 year old woman in good health who pays annual premiums:

 Life Insurance PolicyPremiums ($250,000 coverage)Premiums ($500,000 coverage)
Term Life (10-Year Term)$16/month$23/month
Term Life (20-Year Term)$22/month$35/month
Term Life (30-Year Term)$37/month$67/month
Whole Life$115/month$212/month

How do I choose a life insurance company-factors to consider

We’ve discussed different types of life insurance, and the cost of life insurance so far in our How Do I Choose a Life Insurance Company article, so you should know approximately what sort of policy you want and approximately what you’d like to pay for it.

Now you’re ready to learn “How do I choose a life insurance company?”! Here are a few of the factors you should consider:

Reputation

One of the first things to consider when researching “How do I choose a life insurance company” is the reputation of the company. After all, you should be able to trust your life insurance company with your life, right? One of the most important things you should research is how the company handles claims.

You can start your research with the Better Business Bureau, the insurance commissions, and various government agencies. This should give you a good indication of how the company deals with claims.

It’s a good idea to ask your friends and family about the company. Word of mouth is a great way to find out more about their reputation. Ask them about how they feel about their own life insurance companies, as well, and how easy they are to work with.

Financial stability

If you’re here asking “How do I choose a life insurance company”, then a major consideration is the company’s financial stability.

You definitely don’t want to choose a company that goes out of business and then can’t issue a settlement to your family! So, considering your policy will span a matter of decades, you want to choose a company that will be in business for the long run.

Life insurance company rating

When you’re asking “How do I choose a life insurance company”, you should definitely check out the company’s rating.

Independent companies exist to evaluate life insurance companies and give them ratings. A couple of these independent companies include Moody’s and A.M. Best. You can check out their online ratings.

This is only one factor to consider.

Of course, if the company that you’re considering offers excellent rates and a great policy, but only has a B rating, while another company has an A rating but has policies and prices that aren’t as good as the B-rated company, then obviously don’t choose the better-rated company just based on its letter grade.

Captive or non-captive agents

When you’re asking “How do I choose a life insurance company?”, one important bit of information to have is the difference between captive and non-captive agents.

Agents that are captive are allowed to work only for one life insurance agency, while non-captive agents are allowed to work for other agencies if they choose, are independent and unbiased.

Non-captive agents are also called “independent brokers”. They’re allowed to assess a customer’s needs and then compare policies, rates and companies and then provide the customer with options from several different companies.

When you’re asking “How do I choose a life insurance company”, you should be asking potential life insurance companies whether their agents are captive or non-captive.

Flexible life insurance products

You need to know when asking “How do I choose a life insurance company” that your policy should be flexible. Your policy will span the course of your life, and your life will have several changes.

You’ll encounter things like medical conditions, different professions and lifestyle changes. Make sure you choose a life insurance company that will provide you with flexible life insurance policies that can change to meet your needs.

Find out if your coverage is renewable and convertible.

You should know whether your life insurance company will allow you to renew or convert your policy to allow for additional coverage after your policy has expired.

The reason this is important is because you could experience some sort of change in the future that makes you un-coverable, so being able to convert or renew your policy prevents you from being disqualified from a new underwritten policy.

Reasonable and competitive rates

Sometimes people who are asking “How do I choose a life insurance company” focus solely on the rates that companies offer. This is an important factor, but it isn’t the only factor you should consider, which is why it’s so far down our list.

We know that there are people who only care about how much they’ll pay for insurance. And if it comes down to it and you find two companies with great reputations, policies, non-captive agents, and coverage that’s renewable and convertible, then the deciding factor should likely be the company’s rates.

Find a life insurance company that meets your needs

When you’re asking “How do I choose a life insurance company”, the most obvious, but the most difficult thing to do is to find a company that meets all of your needs.

It takes a bit of research to find a company that offers all of the features and services you want, with the plans and coverage you want at rates you can afford. Check out the plans and rates of each company and compare them to each other carefully.

Consider critical illness and disability insurance

While you’re asking “How do I choose a life insurance company”, you should also consider whether you could get by if you were out of work for a month or more due to a serious illness or disability.

Of course, many people don’t even consider this unexpected calamity, but not preparing for misfortune could spell disaster.

Many life insurance companies offer critical and disability insurance along with their life insurance plans. Some of these companies can help you out for as long as 6 months to a year!

Add-ons and riders

When you’re asking “How do I choose a life insurance company” you should learn about add-ons and riders. A rider is a bit like a modification or amendment to your life insurance policy, and there are loads of different riders offered by insurance companies.

Anyone asking “How do I choose a life insurance company” should also be asking what they want out of their life insurance. If you have a family, you may want to consider a child rider.

Those who are self-employed should consider short and long-term disability insurance because, well, your employer won’t be able to help you out in those instances, will they?

Best life insurance companies in Canada

Our “How Do I Choose a Life Insurance Company” article wouldn’t be complete without providing you with a list of great life insurance companies that will jumpstart your research. Here are some of the best life insurance companies on the market:

Walnut

Walnut offers life insurance eligibility to Canadians who are within the age range of 18 to 70 years. They give users valuable member benefits, such as access to amazing products and services. However, these benefits cost monthly payments.

Perks

Walnut states clearly how much payment you would be charged. So, you don’t have to worry about hidden charges once you’ve gotten started. They give members an amazing online buying experience with no surprise fees and commissions. They offer 10 and 20 years term life insurance and don’t offer universal or whole-life products.

Partnerships

Walnut strives to give its members access to an interesting life experience. So, they partner with Headspace, Classpass, and Dashlane for mental health, fitness classes, and account security respectively.

PolicyMe

PolicyMe is a life insurance company that started operations in 2018. It is one of Canada’s best life insurance companies. They offer 10 to 30 years of insurance, which covers between $100,000 and $5,000,000.

Application

PolicyMe has made it easy to access a term life insurance policy by simply completing a 15 minutes online application. They pay your dependents money when you die, which helps you to ensure that the financial well-being of your dependents is safe. You can save along with your spouse in a joint account on the site.

Perks

All options on PolicyMe cover children who are stated as dependents at no extra cost. The application process is easy on the site. PolicyMe offers affordable rates of about 10%. It could be more, depending on the plan you opt for.

PolicyAdvisor

Policy Advisor is an insurance broker who connects users with 30+ life insurance companies that you can choose from. Through them you can access about $2.5 billion in coverage.

Application

The entire application process can be completed within minutes online. Policy Advisor pays your beneficiaries money from your policy with them if you pass away.

Policies

Policy Advisors offers both whole-life and term-life insurance options on their site. The site has several insurance options, which include disability insurance, children’s insurance, mortgage insurance, and more. Advisors on the site are paid salaries and do not earn incentives for each policy they sell. So, the advice you receive from them is genuine.

How do I Choose a life insurance company in Canada conclusion

When it comes to choosing a life insurance company in Canada it really comes down to knowing what you want in a policy. Check out our life insurance comparison page to see what’s right for you.

Thanks for checking out how do I choose a life insurance company in Canada!

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FAQs about how to choose a life insurance company

When should you get life insurance?

If you’re asking “How do I choose a life insurance company”, you’ve probably already made the assumption that you should get life insurance when you’re older, but before your health starts to fail. It’s less important to choose life insurance based on your health than it is to choose life insurance based on your situation in life. You need to get life insurance when you have people you would leave behind, like a spouse, children, etc. Of course, if you buy life insurance when you’re healthy then it will cost less, but that should be a secondary consideration.

Why should you shop for life insurance online?

Anyone asking “how do I choose a life insurance company” has probably already learned that they can buy life insurance from their bank. But the reason you should shop around instead of going with the first option offered to you is that you can choose from different plan options, rates, and reliable companies. Maybe the company your bank uses isn’t as trustworthy as you’d like, or maybe they don’t have the plans you want.

Is life insurance taxable?

It’s only natural when asking “How do I choose a life insurance company” to also ask about whether life insurance benefits will be a major tax hassle for your loved ones. The good news is that most of the money your loved ones receive isn’t taxable. But they will have to deal with things like estate planning or probate fees.

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April 1, 2023
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