Life Insurance for Couples in Canada
Couples share responsibilities for everything from household bills, to raising children, to planning for retirement. And of course, change is inevitable over the lifetime of a marriage or partnership, especially when jobs and income are more fluid than ever. That's where life insurance for couples comes in.
Why life insurance for couples?
The life insurance planning process asks you to sit down as a couple and give some thought to a few simple questions:
- How much money do you think you’ll be able to contribute to the household, after tax, between now and retirement?
- Without your income, what does life look like for your partner? How will they pay for everyday expenses?
- Who will pay for your children’s education or give them a head start when they grow up and launch their own lives?
- If you were to die, how would your partner replace your income or your non-monetary contribution – childcare, housekeeping, parental care – without you?
These questions aren’t meant to worry you. They’re simply meant to get you thinking of all the things made possible by your ability to earn an income, and why it’s so important to replace it if something terrible happens. That’s what life insurance does.
Types of life insurance for couples in Canada
Couples insurance is not a type of policy – it’s a type of planning. Some of the policies an insurance planner can recommend are tailored to coupled people, like joint life insurance, but most are the same kinds of policies that an individual might choose. Here’s a recap of the three common options and their benefits for partners. In the following section, we’ll show you how to determine the type of coverage and the amount you need.
Term life insurance
This type of coverage is typically sold in terms of 10, 20, or 30 years. If there is a significant age difference, or one partner is close to a planned retirement date, an advisor may suggest different terms for each individual. Regardless, a term life insurance policy expires at the end of the term and you have the option to renew it or let it expire. For couples, this is a good option because you can tailor your individual policies to your unique needs at a very good price.
Permanent life insurance
This kind of insurance is guaranteed to pay out as long as payments continue to be made. Serenia Life offers a form of permanent coverage called whole life insurance, that includes a cash value1 portion that grows over time. For a young married or common-law couple, the value of the cash portion could be substantial, and might reduce the need to invest in retirement savings. Whether each partner needs the same amount of coverage is something that an advisor can help you determine. When it comes to permanent life insurance, you have the choice of purchasing a single policy for each of you or a joint policy for both of you (see below).
Joint life insurance
When a couple applies for joint life insurance coverage, the insurance provider uses the age, gender, and health status of each partner to determine the cost of coverage on a single policy. You can choose between a “joint first to die” or “joint last to die” death benefit (i.e., a payment made to designated family members, other loved ones, or the charity of your choice after you die). In the first case, the policy pays out when the first partner dies. In the second case, there is no payout until the surviving partner dies. For couples, this is a good option because it costs less and is more convenient to manage than two individual policies.
Regardless of which coverage you secure, it should help cover the costs of whatever needs to be paid for, whether that’s funeral expenses, mortgage payments, childcare costs, income replacement, or any capital gains taxes triggered by the sale of a rental property or the inheritance of the family cottage.
Determining coverage needs
The younger you are, the more challenging it can be to predict what kind of income you’ll need to pay for all the expenses that could come your way as you take on debt, buy a home, start a family, or get the great news that your triplets have all been accepted to med school.
When you meet with an advisor to buy your first life insurance policy, or to get advice on consolidating your financial plan as a couple, they will help you determine how much coverage you need based on:
- Your current financial responsibilities, like rent or mortgage payments
- Expenses you’re planning for down the road, like tuition for the kids
- Your combined household income
- The progress you’ve already made on other priorities, like retirement planning
- Whether you’re just starting out, or are already in your peak earning years
All of these things matter because they help you and your advisor determine the amount of income your life insurance policy has to replace.
Choosing the right policy
Everyone knows there’s only so much money to go around in a marriage or common-law partnership. Advisors can help you set a budget for life insurance and then personalize a plan based on where you are today and what you hope to accomplish over time.
Price is obviously important – but so is the quality of the coverage you pay for. Factors to consider include the insurance provider’s reputation and financial stability, as well as any perks offered to policy owners.
For example, Serenia Life members get access to unique benefits on top of insurance planning and coverage, including monthly payments for bereaved children, reimbursements for first aid training, free access to an online will and power of attorney service2, and seed money for fundraising events. We’ll even provide up to $1503 to help you and your partner pay for a lawyer to draft update your will every five years, as well as $1,000 towards a student member’s post-secondary education4.
Financial planning beyond life insurance
Whether you’re comfortable making financial decisions or are new to the whole idea of managing money, one thing is true: couples who tackle their finances as a partnership have a much better chance of reaching their goals faster and enjoying greater financial security.
A financial plan is not something that restricts you. Its only job is to free you up to focus on what matters – things like travel, lifestyle, and even retirement. A comprehensive plan includes:
Cash flow – understanding where your money goes so you can be more in control.
Emergencies – being ready and prepared for things you can’t predict.
Taxes – keeping more of what you make by minimizing taxes.
Debt – paying for major purchases in the most cost-effective way.
Insurance – protecting what you have and knowing how to replace income.
Retirement – combining registered and non-registered assets to create income for life.
Legacy – knowing how to provide for future generations.
Your plan is a living document, designed to grow with you and adjust whenever life throws a curveball or hands you a gift.
Case studies
Case Study #1: Term Life Insurance
When Sondra’s long-term partner passed away, she suddenly became a single parent to two young children. At just 47, her life and plans for the future were upended. She was grateful for the couple’s decision to purchase term life insurance because she received a tax-free payout shortly after her partner’s death. Though it couldn’t bring him back, it was a financial lifeline.
Had she not been covered, the loss of one income, plus a host of new expenses like babysitting and childcare, would have forced Sondra to sell their home just to stay afloat. Instead, the tax-free life insurance payout gave her breathing room. She sat down with her financial advisor and they worked out a plan to put the money to work. A portion of the payout would be used to fill the income gap over the next ten years. Some money was set aside for both children to fund a portion of their tuition. The balance went into covering her mortgage and creating an emergency fund.
By the time the life insurance payout is exhausted, Sondra will be 57 and the children will likely be working and earning their own incomes. Although money couldn’t ease the pain of losing her partner, it allowed her to provide stability to her children and give them a head start in life.
This is a simplified example of how a tax-free life insurance payout can help you stay on track financially after a devastating life event. How much coverage you need will be based on your circumstances and responsibilities. A Serenia Life advisor can help you put the right coverage in place.
Case study #2 : Couples Insurance
When Maya and Ahmed realized how much their grown children would owe in capital gains taxes upon inheriting the family cottage, they decided to get a type of joint life insurance that would pay out once the last surviving partner passes. Because they already had individual term policies to protect their mortgage in case of an unexpected death, they weren’t concerned about protecting each other – they simply wanted to make sure that the kids could afford to keep the family cottage in the family.
If their children were to inherit the cottage without joint life insurance to help cover the taxes, they would have been faced with an exorbitant tax bill – one that may have forced them to sell.
But with the life insurance payout, they’ll be able to cover the capital gains tax, keep the family cottage, and as a result, keep their parents’ memory alive.
This is a simplified example of how a tax-free life insurance payout can help protect your family’s finances after you and your spouse pass away. A Serenia Life advisor can help you put the right coverage in place.
Case study #3 : Business Partners Insurance
Robin and Leslie own a small but thriving business together. They are thrilled that they get to do what they love and give back to the community they love. Their children haven’t shown much interest in taking over one day, and sometimes they worry about what will happen to the business they built after they’re gone. Their advisor recommended a type of joint insurance that would pay out after both of them pass.
What they liked about this option was that it would allow them to leave a certain amount of money to a local charity their business supports and leave enough money to the next generation – whether that be their kids or a young entrepreneur with similar dreams.
Without joint life insurance, they would not have been able to leave behind a legacy and they may have left their predecessor with unpaid debt and capital gains taxes to pay. Now they can feel good knowing their business will live on beyond their lifetime.
This is a simplified example of how a tax-free life insurance payout can help protect your business after you and your partner pass away. If you have questions, a Serenia Life advisor can help you put the right coverage in place.
Get a quote
One of the greatest ways couples can achieve greater financial success is by working together and seeking guidance. To learn more about how life insurance can help protect everything you’re building, book a no-obligation consultation with a Serenia Life advisor to get a quote today!
Disclaimers
1Cash values are accessible via a withdrawal, policy loan, or surrender. These may be subject to taxation and a tax slip may be issued. Accessing the policy’s cash value will reduce the available cash surrender value and death benefit.
2Serenia Life Financial has partnered with Willful® to give members the opportunity to create their will and appoint power of attorneys (POAs) simply, quickly – and at no cost.
3If you: (1) own a Serenia Life Financial annuity product, (2) are insured under one of Serenia Life Financial’s products, and/or (3) became a policyowner after February 23, 2021, you are indeed a member.
4In order to eligible for this one-time benefit, students must have been a Serenia Life member as of December 31st in the year previous to applying, and must be in any year of a full-time college, university, or graduate program. Review full eligibility criteria.
