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What are the different types of life insurance?
February 18, 2026
By Sun Life Staff
What’s the difference between term, permanent, participating and universal life insurance policies? And which ones meet your needs?
You may already know that life insurance can help financially protect you and your family. But do you know about the different types of life insurance? And do you know which types can help meet your needs? Here’s a quick look at common types of insurance available in Canada and what their differences are:
What are the main types of life insurance in Canada?
Two types of life insurance in Canada are term life insurance and permanent life insurance. Additionally, there are three subtypes of permanent insurance called whole, participating and universal. Altogether, this gives us four common types of life insurance. Let's explore each in more detail:
Term life insurance
What is term life insurance? Term life insurance is a type of insurance policy that covers you for a specific period (e.g., 5 to 40 years, depending on one’s age).
Is there a death benefit? Yes, term life insurance policies provide a death benefit, which refers to the amount of money paid to a beneficiary after an insured person dies.
What happens after your term ends? You have the option to renew your term policy for the same term length or convert to a permanent life insurance policy.
Is term life insurance low cost? Yes, initially, premiums (fees) for term life insurance are more affordable and budget friendly than permanent life insurance. However, term premiums will increase upon renewal.
Who is term life insurance ideal for? It’s best suited for people looking to cover specific short-term needs (e.g. a mortgage, a business, etc.)
Permanent life insurance
What is permanent life insurance? Permanent life insurance is a policy that provides lifelong coverage. It includes three different subtypes to choose from:
- Whole life insurance, which offers fixed premiums and guaranteed cash value growth.
- Universal life insurance, which offers flexible premiums, cash value growth and investment options.
- Participating life insurance, which offers cash-value growth and potential for dividends.
Is permanent life insurance low cost? In Canada, permanent insurance can be more expensive than term insurance since coverage lasts throughout an insured person’s lifetime. That said, with a permanent policy, your premiums are typically guaranteed to remain the same whereas term policies increase in rates upon renewal.
Is there a death benefit? Yes, permanent policies provide a death benefit to your beneficiaries in the event of your death.
Is there cash value? Unlike term policies, permanent life insurance builds cash value over time. Cash value is a savings component in permanent life insurance policies that can grow over time. An insured person can access the funds in their cash value while they’re still alive.
Learn more about how cash value works
Who is permanent life insurance ideal for? It’s typically best for people seeking lifelong financial protection and cash value, which can be accessed later in life for various needs. It’s also suitable for those who wish to leave a guaranteed death benefit for estate planning purposes.
What’s the difference between term and permanent life insurance?
The main difference between term and permanent life insurance is duration of coverage and cash value. Term life insurance provides coverage for a specific period with initially lower premiums and no cash value. By contrast, permanent life insurance offers lifelong protection with higher premiums and a cash value component that can grow over time.
Learn more about the differences between term and permanent life insurance.
You can choose between term, permanent, or even have multiple life insurance policies. Ultimately, your choice depends on your financial needs, budget, and long-term goals.
Compare our life insurance products
Every type of life insurance policy comes with its own features and benefits. The table below breaks down key differences like cost and cash value to help you understand which option might suit your needs best.
| Features | Term life insurance | Whole life insurance | Universal life insurance | Participating life insurance |
|---|---|---|---|---|
| How long does it last? | Coverage ends after a set period. | Lifelong | Lifelong | Lifelong |
| Is there cash value? | No | Yes | Yes | Yes |
| How much does it cost? | Premiums are initially the cheapest. |
Pricier than term, but offers lifelong coverage and cash value. | Pricier than term, but offers lifelong coverage and potential death-benefit growth. | The priciest option, but offers lifelong coverage, cash value and potential for dividends. |
| Do rates stay the same over time? | No, rates can rise upon renewal. | Yes, rates are usually guaranteed. | Yes, rates are usually guaranteed. | Yes, rates are usually guaranteed. |
| More details | More about Term Life rates | More about Whole Life rates | More about universal life insurance | More about participating life insurance |
Other types of life insurance
While term and permanent life insurance are common choices, Canadian insurers like Sun Life also offer other options to help meet specific needs:
Group life insurance
Your employer may offer group life insurance as part of your employee benefits. This covers multiple employees under one policy, often at a lower cost. But keep in mind, group coverage is typically basic and may not meet all your needs. It can also end abruptly if you leave your job. That’s why getting individual life insurance alongside your group benefits can be a smart move.
An individual life insurance plan can complement your group benefits, creating a stronger safety net for you and your family. It can also give you more control and long-term security, extending into retirement when group coverage may no longer apply.
Life insurance for final expenses
This specialized policy is intended to help cover final expenses (e.g. funeral and burial expenses). It helps ensure your loved ones won't face financial stress during a difficult time. The payout is usually quick, helping with immediate costs.
Learn more about life insurance for funeral and burial costs
Family insurance
Family insurance helps protect multiple family members through a combination of insurance solutions . It often includes life, health, and critical illness insurance . This comprehensive coverage can simplify your insurance needs and potentially save you money.
Mortgage protection solutions
This solution offers a combination of critical illness insurance and term life insurance. It can help pay off your mortgage if you die or become critically ill. This coverage may help your family keep their home during financially challenging times.
Accidental death and dismemberment insurance
This is an add-on to a life insurance policy or included as part of a group benefits package. It pays out if you die or lose specific body parts in an accident and provides extra protection for unexpected events.
What type of life insurance is right for you?
The short answer: It depends on your life circumstances and financial needs.
Consider your current situation. Are you starting a family? Buying a home? Planning for retirement? Each life stage has unique insurance needs. Term life insurance can offer affordable protection for specific periods, while permanent insurance can provide lifelong coverage and build cash value. You can even have multiple policies for different needs. Think about your budget, long-term goals, and who depends on your income.
If you need help finding out what life insurance policy suits your financial situation, connect with a Sun Life advisor. An advisor can help you figure out what’s right for you and build life insurance into your financial roadmap.
For example, maybe your needs are simple, and you only need one type of insurance to help financially protect your spouse or kids. Or maybe your situation is complex, with a blended family or a business to protect. In such cases, you may need more than one type of life insurance. An advisor can walk you through all your insurance options to help ensure you have coverage that meets all your goals and needs.
Connect with an advisor near you.
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This information is meant for educational and illustrative purposes only. Some conditions, exclusions and restrictions may apply.
