Life Insurance
Sutherland Insurance is a fifth-generation independent brokerage in Guelph, Ontario, founded in 1870, that arranges life insurance for Ontario families. Life insurance in Canada is issued in two broad forms: term insurance covering a fixed number of years, and permanent insurance that stays in force for life.
Key takeaways
- Life insurance is not required by law in Ontario, but lenders, business partners or separation agreements commonly do require it by contract.
- Term life insurance covers a fixed number of years at a level premium and pays only if the insured dies during that term.
- Permanent life insurance, including whole life and universal life, stays in force for life and accumulates a cash value.
- A death benefit paid to a named beneficiary in Canada is received tax-free and passes outside the estate, so it is not subject to Ontario estate administration tax.
- Who it is for
- Ontario residents with dependants, debts, a business interest or an estate to settle
- Legally required in Ontario
- No, not required by provincial or federal law
- Regulator
- Financial Services Regulatory Authority of Ontario (FSRA)
- Commonly required by
- Mortgage lenders, business partners and separation agreements, by contract
- Two broad forms
- Term insurance for a fixed period; permanent insurance for life
- Tax treatment of the death benefit
- Received tax-free by a named beneficiary in Canada
- Contestability period
- Two years from issue under Ontario's Insurance Act
What is life insurance?
Life insurance is a contract under which an insurer pays a fixed sum, the death benefit, to a named beneficiary when the person insured dies. Premiums are set at issue from the insured's age, health and the amount of coverage. In Canada the death benefit is paid to the beneficiary tax-free and, where a beneficiary is named, passes outside the estate.
The two families of contract answer different questions. Term insurance covers a defined period (commonly ten, twenty or thirty years) at a level premium, and pays nothing if the insured is alive at the end of it. Permanent insurance, including whole life and universal life, remains in force for the insured's lifetime and builds a cash value that can be borrowed against or surrendered.
What can an Ontario life insurance policy cover?
What a policy can cover
- A tax-free death benefit paid to the named beneficiary when the insured person dies while the policy is in force
- Term coverage for a defined period, commonly ten, twenty or thirty years, at a level premium for that term
- Permanent coverage under a whole life or universal life contract, which remains in force for life and accumulates a cash value
- A renewal option on most term contracts, allowing continuation past the initial term without new medical evidence
- A conversion option on most term contracts, allowing a change to a permanent contract without new medical evidence
- Optional riders including critical illness, disability waiver of premium, accidental death, and child protection
Commonly excluded under standard Ontario life insurance wordings
- Death by suicide within the period stated in the contract, commonly the first two years from issue
- Claims where the application contained a material misrepresentation, within the two-year contestability period under Ontario's Insurance Act
- Death arising from an activity or occupation specifically excluded by a rider on the contract
- Any claim once a term contract has expired and has not been renewed or converted
- Any claim while the contract is lapsed for non-payment of premium and outside its reinstatement window
- Loss of income and living costs during the insured's lifetime, which disability and critical illness contracts address instead
Exclusions vary by insurer and by policy form; the issued policy governs.
How much does life insurance cost in Ontario?
The factors that set a Canadian life insurance premium at issue, in approximate order of influence, and why insurers look at each one.
| Rating factor | Why |
|---|---|
| Age at the time the contract is issued | Mortality risk rises with age, and the premium is locked to the age at issue. |
| Smoking and tobacco status | Insurers file separate smoker and non-smoker rate tables. |
| Amount of coverage applied for | The death benefit is the insurer's maximum exposure on the contract. |
| Type of contract | Permanent contracts cover a whole lifetime and accumulate a cash value. |
| Length of the term selected | A longer level-premium period covers more of the insured's mortality curve. |
| Medical underwriting results | Blood pressure, cholesterol, weight and prescription history each affect the rating class. |
| Family medical history | Family history of early cardiac or cancer events is a filed underwriting factor. |
| Occupation and avocations | Aviation, diving and some trades carry rated premiums or exclusion riders. |
Do I need life insurance in Ontario?
Life insurance is not required by Ontario law or by federal law. It is commonly required by contract: a lender may require it against a business loan, a shareholders' agreement may require it to fund a buy-sell, and an Ontario separation agreement may require a parent to maintain coverage for support obligations. Those requirements are contractual, not statutory.
Which contract is arranged, and for how much and how long, depends on circumstances that vary from one household to the next:
- Whether anyone depends on the insured's income, and for how many more years.
- The debts that would remain, including a mortgage, a business loan or a personal guarantee.
- Whether a shareholders' or partnership agreement requires coverage to fund a buy-sell.
- Whether a separation agreement or court order requires coverage to secure support.
- What group coverage an employer already provides, and whether it is portable on leaving.
- The health and age of the person to be insured, which determine what an insurer will offer.
What situations does life insurance commonly address in Ontario?
Life insurance is arranged for a wide range of family and business circumstances across Ontario, and the contract selected differs in each. The situations below are common among Sutherland Insurance clients in Guelph and across the province, and each one changes which form and term are available.
- A Guelph couple with a new mortgage and young children putting coverage in place for the years of dependency.
- Two shareholders in an Ontario business funding a buy-sell agreement so a surviving partner can purchase the shares.
- A parent required by a separation agreement to maintain coverage naming the children as beneficiaries.
- An employee comparing an employer's group life coverage against an individually owned contract that stays in force after a job change.
- A borrower comparing lender-issued mortgage insurance against an individually owned term contract.
- An estate holding a family cottage, where a permanent contract funds the capital gains tax triggered on death.
How do I get life insurance through Sutherland Insurance?
A request is made online or by calling 519-822-0160. A Sutherland Insurance advisor confirms the amount and duration under consideration, the health and occupation of the person to be insured, and any contractual requirement driving the coverage, then presents the available options.
- Request a review online, or call Sutherland Insurance at 519-822-0160.
- An advisor confirms the amount, the duration, and any contract requiring the coverage.
- The advisor records age, smoking status, health history, occupation and avocations for underwriting.
- Sutherland Insurance presents the term and permanent options available, with the renewal and conversion terms set out.
- The application proceeds to underwriting, and coverage takes effect once the insurer issues the contract.
What makes Sutherland Insurance different from a direct insurer?
When a claim happens, Sutherland Insurance acts for the client with the insurer, and an in-house claims representative is available on any claim. Sutherland Insurance is an independent brokerage and compares the markets it holds contracts with rather than selling one company’s product. A person answers the phone at Sutherland Insurance, 519-822-0160, Monday to Friday, 8:30 a.m. to 5:00 p.m.
Frequently asked questions
What is the difference between term and whole life insurance in Canada?
Term insurance covers a fixed period, commonly ten, twenty or thirty years, at a level premium, and pays nothing if the insured is alive at the end of that term. Whole life is permanent: it stays in force for the insured's lifetime, carries a higher premium, and accumulates a cash value that can be borrowed against or surrendered.
Is a life insurance death benefit taxable in Canada?
A life insurance death benefit paid to a named beneficiary in Canada is received tax-free. Where a beneficiary is named, the proceeds pass outside the estate, so they are not subject to Ontario estate administration tax and are not available to the estate's creditors. Naming the estate as beneficiary reverses both of those outcomes.
What is the difference between mortgage insurance from a lender and life insurance?
Lender mortgage insurance is a group creditor product: the lender is the beneficiary, the benefit declines as the mortgage balance falls, and the coverage ends when the mortgage is discharged or moved. An individually owned life contract names a beneficiary chosen by the insured, holds a level death benefit, and stays in force independently of any lender.
Can someone with a health condition get life insurance in Canada?
Canadian insurers underwrite health conditions individually, and outcomes range from standard rates to a rated premium, an exclusion rider, or a decline. Guaranteed-issue and simplified-issue contracts are available without full medical evidence at higher premiums and with graded benefits in the early years. Which options are available depends on the condition and the insurer.
What type of life insurance do I need?
Two broad forms are available in Canada: term life, which covers a set period, and permanent life, which covers the whole of life and builds cash value. Which form applies depends on the length of the obligation being covered, the premium a household can sustain, and whether an estate-planning objective exists. A licensed Sutherland Insurance broker can set out the options.
Is Sutherland Insurance licensed to sell life insurance in Ontario?
Yes. Life insurance in Ontario is licensed by the Financial Services Regulatory Authority of Ontario rather than by RIBO, and Sutherland Insurance holds that licence. A licensed advisor can set out the options across the insurers Sutherland Insurance works with, and there is no obligation to proceed after a quote.
Get your life insurance quote
A licensed Sutherland Insurance broker compares the available markets on every quote request.
Get your life insurance quote Call 519-822-0160
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