Who this is for
Anyone comparing life insurance for the first time. Parents with a mortgage and young children. Business owners with partners or loans. People renewing a term policy who are surprised by the new premium. This guide explains the two types as the Financial Consumer Agency of Canada describes them. It does not recommend one over the other.
The five things to compare
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How long you need the coverage. Term insurance covers a fixed period, such as 10 or 20 years, or until a set age such as 65. Permanent insurance covers your whole life. A mortgage or children at home point to a period; an estate or a lifelong dependant point to lifetime coverage.
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What happens at the end of the term. With term insurance, if you outlive the term there is no payout and no cash value. You can usually renew, but the premium may increase. Ask what the renewal premium would be before you buy.
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Cost now and cost later. Term premiums are lower at first and can rise on renewal. Whole life premiums are higher but do not change as you get older. Universal life combines insurance with an investment component, and the cash value depends on how those investments perform.
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Cash value. Permanent policies typically build a cash value over time that you may be able to borrow against or use as collateral. Term policies do not. Cash value is a feature with its own costs; it is not a reason by itself to choose permanent coverage.
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The beneficiary and the amount. Decide who receives the benefit and name them in the policy. Work out the amount from what the money would need to cover: debts, income replacement, education, final expenses. The amount matters more than the type.
One thing many people do not realize
A term policy that costs less today is not necessarily cheaper over your lifetime. Term premiums are set for the term and can increase substantially when the policy renews at an older age. Permanent premiums are higher from the start but, with whole life, do not change as you get older. The right comparison is the total cost over the years you actually need coverage.
What to prepare
- Your age and whether you smoke, which drive the premium
- Debts, including the mortgage, and how long they run
- Who depends on your income and for how long
- Any existing coverage through work or a lender
- Your budget for premiums now and in ten years
When professional help may make sense
Every policy decision. Life insurance is sold by licensed agents regulated provincially, and the application includes health questions that must be answered accurately. A licensed agent can explain the specific products available and what each policy excludes.
How Rex Tax may be able to help
Life insurance is arranged by Parminder Singh Oberoi through Punjab Insurance Agency Inc. The tax side of life insurance, for example a policy owned by a corporation, is a question we handle in the tax practice. This guide is general information and has not been reviewed by the licensed provider; it will be updated when it has.
Official sources
This guide is general information, not advice about your situation. It reflects the rules for the 2026 tax year. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.