Term or permanent life insurance: how to choose

The conversation always ends up in the same place. You mention to someone that you are shopping for life insurance, and the person across from you replies: "Get term, it's much cheaper." Two weeks later, someone else tells you exactly the opposite, with the same confidence in their voice.

They are both right. And they are both answering a question you never asked them.

Because the real question is not "which one costs less." It is "how long do I need to be insured." Once that answer is written down in black and white, the choice between term and permanent stops being a matter of opinion.

Two families of contracts, two logics

According to the Autorité des marchés financiers (AMF), Québec's financial sector regulator, term life insurance "offers protection that is limited in time." You are protected for a predetermined period, and not one day longer.

The example the AMF gives is deliberately blunt: if you buy a 20-year term policy, you are covered for 20 years. "At the end of those 20 years, your contract will end and you will no longer have life insurance."

Whole life insurance, for its part, is described by the AMF as "insurance that covers you for life." Its premiums are generally guaranteed and level, meaning fixed for the entire duration of the contract. And most of the time, it includes a cash surrender value, an amount you could receive if you ended the contract during your lifetime.

That is the first structural difference, and it explains almost all the others.

What you pay, in one case and in the other

The AMF is explicit on this point: in a term insurance policy, "there is no savings component." You pay only the cost of the insurance, nothing else. That is one of the two reasons it costs less at the outset. The other, again according to the AMF, has to do with duration: "the risk of dying young is much lower than the risk of dying at a more advanced age."

With whole life insurance, by contrast, the insurer must be able to pay out the sum insured one day or another, without ever raising your premium. As the AMF explains, it therefore sets aside part of each premium and invests it. If you pay premiums for 25 years, the insurer will have been investing for 25 years.

	Term life insurance	Whole life insurance (permanent)
Length of protection	Predetermined period, for example 10, 20 or 30 years	Your whole life
How premiums behave	Generally increase at renewal	Generally guaranteed and level
Savings component	None	Cash surrender value in most cases
Proof of good health at renewal	Generally not required	Not applicable: there is no renewal
Relative cost in the early years	Lower	Higher

Source: Autorité des marchés financiers, pages "L'assurance vie temporaire" and "L'assurance vie entière et avec participation."

Renewal: the moment few people plan for

This is where most of the surprises happen, and they happen fifteen or twenty years after signing.

The AMF describes the mechanism plainly. Term contracts are generally renewable, and you will generally not need to prove that you are still in good health in order to renew them. That is real protection: if your health has deteriorated in the meantime, you still keep coverage.

But, the AMF writes, "the price increases with your age. When you renew a term insurance contract, it will cost you more than the one that has just ended."

The long-term consequence is set out in black and white by the regulator: "over time, term life insurance premiums end up costing more than those of permanent life insurance."

In other words, the price gap of the early years is not a permanent gap. It is a head start, and it eventually shrinks, then reverses. The only thing that determines whether that reversal concerns you is how long you expect to stay insured.

Which needs each family answers

The AMF publishes two lists that are probably the most useful sorting tool in this whole subject.

Needs generally associated with term insurance, according to the AMF: maintaining a loved one's standard of living for a few years, paying for the children's education, repaying personal debts, repaying joint debts.

Needs generally associated with permanent insurance, according to the AMF: maximizing the value of the estate, paying funeral costs if you believe you will never accumulate the amounts required, paying tax at death on illiquid assets such as a family business.

Look at the two lists carefully. The top one is made of things that end: children finish their studies, the mortgage gets paid off, debts are extinguished. The bottom one is made of things that have no end date, because death does not have one either.

Many Québec households, in fact, recognize themselves in both lists at the same time. Nothing prevents you from combining the two: a term amount to cover the years when obligations are heavy, and a more modest permanent amount for what will still need to be settled whatever your age.

Term-to-100, a case of its own

You may come across a product called "term to 100." The name is confusing.

The AMF specifies that this type of insurance "generally covers you for life, even if you live past 100," and that some insurers stop charging premiums once you reach 100. In practice, it is permanent protection. If it is sometimes classified on the term side, it is because it does not usually offer a cash surrender value, unlike whole life.

The general lesson is the one to remember: a product's name is not its definition. What counts is the features written into the contract.

What makes the price vary, from one insurer to another

The AMF lists the factors that influence the premium: age at the time of purchase, sex, place of residence, state of health, occupation, use of tobacco, alcohol and non-prescribed drugs, participation in dangerous sports, the amount insured, the length of the insurance, and even interest rates in effect at the time you take out the policy.

That list explains why two people of the same age can receive very different quotes, and why the same profile can be assessed differently from one company to another. The AMF puts it this way: "No insurer offers the best premiums and benefits for all types of insurance and all people."

One detail is worth knowing. According to the AMF, if you took out your policy as a smoker and you have not smoked for 12 months or more, you can inform your insurer: you could obtain a lower premium.

A protection that is rarely discussed

If your life and health insurance company went bankrupt, your contract would not vanish into thin air. Assuris, the not-for-profit organization that protects Canadian policyholders, guarantees that you would keep up to $1,000,000 or 90% of your death benefit, whichever is higher. That guarantee applies to term insurance just as it does to whole life insurance.

For the cash surrender value of a whole life policy, Assuris guarantees up to $100,000 or 90% of that value, whichever is higher.

Frequently asked questions

Can I convert a term policy into a permanent one later?

Some term contracts provide for a conversion privilege, often without new evidence of insurability. This option is neither universal nor identical from one contract to another, and it generally comes with a deadline. It is verified in the contract, not by assumption.

What happens if I change my mind after signing?

According to the AMF, if you take out insurance online without the help of a financial security advisor, you have 10 days to cancel it without penalty.

Do I have to disclose everything about my health?

Yes. The AMF is categorical: you must disclose all facts likely to influence the insurer. An omission can have lasting consequences. During the two years following the coming into force of the contract, the insurer may cancel it or reduce the amount in the event of an omission or a misrepresentation. After two years, it can still cancel it if it establishes that the misrepresentation was made with the intent to defraud it.

When does my protection actually start?

According to Éducaloi, protection begins when the insurer accepts your application without modification, when no change has occurred in the insured person's state of health between the application and the acceptance, and when the first premium has been paid.

Is it worth shopping around even for a product you keep for 30 years?

The AMF explicitly recommends it, specifying that comparing premiums is not enough: you also need to verify that the sum insured is fixed and guaranteed, know the exclusions, and find out whether the premiums are fixed or increase over time. Comparing quotes commits you to nothing.

Sources

• Autorité des marchés financiers, "L'assurance vie temporaire": https://lautorite.qc.ca/grand-public/assurance/assurance-vie/principaux-types-dassurance-vie/lassurance-vie-temporaire (accessed August 10, 2026)
• Autorité des marchés financiers, "L'assurance vie entière et avec participation": https://lautorite.qc.ca/grand-public/assurance/assurance-vie/principaux-types-dassurance-vie/lassurance-vie-entiere-et-avec-participation (accessed August 10, 2026)
• Autorité des marchés financiers, "Le prix d'une assurance vie": https://lautorite.qc.ca/grand-public/assurance/assurance-vie/le-prix-dune-assurance-vie (accessed August 10, 2026)
• Autorité des marchés financiers, "5 étapes à suivre avant de vous assurer": https://lautorite.qc.ca/grand-public/assurance/assurance-vie/5-etapes-a-suivre-avant-de-vous-assurer (accessed August 10, 2026)
• Assuris, "Assurance vie temporaire": https://assuris.ca/fr/comment-suis-je-protege/protection-dassuris/assurance-vie/individuelle/assurance-vie-temporaire/ (accessed August 10, 2026)
• Assuris, "Assurance vie entière": https://assuris.ca/fr/comment-suis-je-protege/protection-dassuris/assurance-vie/individuelle/assurance-vie-entiere/ (accessed August 10, 2026)
• Éducaloi, "L'assurance-vie": https://educaloi.qc.ca/capsules/lassurance-vie/ (accessed August 10, 2026)