Permanent life insurance

Life insurance that lasts your whole life, with options that build cash value.

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Lifelong coverage
for as long as you live
Can build cash value
to borrow against or withdraw
Protects your estate
pays the taxes and costs owed at death

How it works

Coverage for life, and value you can use

Permanent insurance lasts your whole life, as long as premiums are paid. On most plans part of each premium pays for the coverage and the rest builds cash value you can use. You choose whether to pay for a set number of years or for life.

Chart of a permanent life policy from age 30 to 100. The face amount, the coverage you buy, stays the same for life. On most plans, cash value builds on top of it, slowly at first and then faster, and you can borrow against it or withdraw from it. The death benefit grows over time on many plans, and is paid tax-free to your beneficiaries whenever you die.

How long you payCommon options (common options)

  • 10, 15 or 20 payThen paid up: coverage continues for life10, 15 or 20 pay then paid up for life
  • Life pay: premiums for lifeLife pay premiums for life

Commonly used for

  • Taxes owed at death
  • Final expenses
  • A legacy for family or charity
  • Business and estate planning

Illustration only, not to scale. On many plans, the death benefit grows as cash value builds. Some plans keep a level benefit instead. Borrowing or withdrawing can reduce the death benefit, and withdrawals may be taxable.

Three types

Which kind of permanent fits.

Each type covers you for life. They differ in whether they build cash value, who manages it and how flexible the premiums are.

Three types of permanent life insurance
FeatureParticipating whole lifeUniversal lifeTerm to 100
Cash valueYes, plus possible dividendsYesNone
InvestmentsManaged by the insurerYou choose themNot applicable
PremiumsFixedFlexible, within limitsFixed
Death benefitCan grow as dividends buy more coverageLevel or increasing, your choiceLevel
Usually suitsPeople who value guarantees and steady growthPeople who want flexibility and controlPeople who want lifelong coverage at the lowest cost
More about each typeParticipating life insuranceUniversal life insuranceTerm life insurance

  • Participating whole life

    Cash value:
    Yes, plus possible dividends
    Investments:
    Managed by the insurer
    Premiums:
    Fixed
    Death benefit:
    Can grow as dividends buy more coverage
    Usually suits:
    People who value guarantees and steady growth
    Participating life insurance

  • Universal life

    Cash value:
    Yes
    Investments:
    You choose them
    Premiums:
    Flexible, within limits
    Death benefit:
    Level or increasing, your choice
    Usually suits:
    People who want flexibility and control
    Universal life insurance

  • Term to 100

    Cash value:
    None
    Investments:
    Not applicable
    Premiums:
    Fixed
    Death benefit:
    Level
    Usually suits:
    People who want lifelong coverage at the lowest cost
    Term life insurance

What it’s used for

What people use it for.

  • Taxes owed at death

    Covers the capital gains tax owed on a cottage, investments or a business, so your estate doesn’t have to sell assets to pay it.

  • Final expenses

    Pays for the funeral and the bills that remain, so your family isn’t left paying them.

  • A legacy for family or charity

    Leaves a set, tax-free amount to the people or causes you care about.

  • Business and estate planning

    Funds a buy-sell agreement, protects a business from the loss of a key person, or evens out an estate between children.

How much coverage

Sized to what your estate will owe.

Permanent coverage is usually sized to costs your estate will face whenever you die, and to what you want to leave behind. Add those up, then subtract what’s already set aside.

Your choices

The terms you choose.

A few choices decide how you pay, how the death benefit behaves and who the policy covers. We’ll explain each one for your situation.

  • How long you pay

    Pay for 10, 15 or 20 years and your policy is paid up, or spread the cost over your lifetime with life pay.

  • Level or increasing death benefit

    On universal life, choose a benefit that stays the same, or one that grows with your cash value. The increasing option costs more.

  • Dividend options

    On participating plans, use dividends to buy more coverage, lower your premium, or take them as cash.

  • Joint last-to-die

    One policy on two people that pays when the second person dies. It’s commonly used to fund the taxes owed at the second death.

  • Joint first-to-die

    One policy on two people that pays when the first person dies. It’s less common.

  • Using the cash value

    Borrow against it, or withdraw from it, for an education, a home, a business or retirement. Either can reduce the death benefit, and withdrawals may be taxable.

Cost

What affects the price.

  • Age and sex

    Rates rise with age, and insurers price men and women differently.

  • Smoking

    Smokers pay considerably more.

  • Health and family history

    Your own history, and sometimes your family’s, affects the price.

  • Coverage amount

    The larger the benefit, the higher the premium.

  • Type of plan

    Plans that build more cash value cost more than those that build little or none.

  • How long you pay

    Paying over fewer years means higher premiums, but for a shorter time.

Frequently asked questions

All questions
How does permanent life insurance work in Canada?

Permanent life insurance covers you for your whole life, as long as premiums are paid, and pays a tax-free lump sum to the people you name whenever you die. On most plans, part of each premium pays for the coverage and the rest builds cash value you can borrow against or withdraw. You choose whether to pay for a set number of years or for life.

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What is the minimum age requirement for permanent life insurance in Canada?

A child can be insured from shortly after birth, with an adult, such as a parent or grandparent, owning the policy. In most provinces, a young person can own a policy on their own life from age 16.

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What distinguishes permanent from term life insurance?

Permanent life insurance lasts your whole life, while term insurance lasts a set period, such as 10, 20 or 30 years, or to age 65 or 85. Both pay a death benefit, but term insurance pays only if you die during the term.

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How does the cash value in a permanent life insurance policy work?

On participating whole life, cash value grows through guaranteed values plus any dividends. On universal life, it grows with the investments you choose. Term to 100 builds none. You can borrow against the cash value or withdraw from it, though either can reduce the death benefit. You can also cancel the policy and take its cash surrender value, but your coverage ends. Using your cash value may be taxable, so speak with us before you decide.

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Does permanent life insurance ever expire?

No. Permanent life insurance covers you for your whole life, as long as premiums are paid. With universal life, coverage lasts as long as the account inside the policy can cover the monthly cost of insurance and fees.

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