Life insurance is a financial product that is often misunderstood. Many people associate it only with death benefits, while in reality it comes in different forms and serves different purposes depending on life stage and financial goals. Term life insurance is typically used for pure protection over a defined period, while Permanent life insurance — such as Whole life or Universal life – combines long-term coverage with a cash accumulation component. Understanding these differences is essential when evaluating whether life insurance makes sense in your 40s.
For many people, their 40s represent one of the most complex phases of life financially. Children are often still young and increasingly expensive, with rising costs for education, activities, and daily living. Many households are maintaining and financing multiple assets such as a primary home, a cottage or investment property, vehicles, and other long-term commitments. At the same time, aging parents or other loved ones may require financial support, especially given the ongoing cost-of-living pressures in Canada. Careers tend to be at or near their peak, while time and flexibility become more limited. With multiple responsibilities overlapping, this is often the point where people take a closer look at whether life insurance is needed and how it fits into their broader financial picture.
If you have children who are still minors or not yet earning their own income, life insurance plays a critical protective role. Coverage helps ensure that their living expenses, education costs, and long-term opportunities are not compromised if something happens to you. According to a MoneySense cost analysis updated in August 2023, raising a child in Canada cost roughly $16,900 per year, or more than $320,000 from birth to age 18 based on prices at that time. If we adjust these estimates for inflation from 2023 through 2025 using Canada’s consumer price index — which averaged around 2.4 % in 2024 and about 2.1 % in 2025 — the current yearly cost today would be closer to $18,000–$18,500 per child, and the total lifetime cost from birth to age 18 would likely exceed $340,000–$350,000 in today’s dollars.
Life insurance is equally important if you provide financial support to elderly parents or other dependents. Whether for housing, medical expenses, or daily living costs, insurance ensures your support continues without placing additional strain on family members. Government programs like CPP (up to ~$1,433/month), OAS (up to ~$810/month), and the Guaranteed Income Supplement (up to ~$1,100/month for eligible low-income seniors) provide some income but rarely cover all expenses. Life insurance can help bridge the gap and protect your loved ones’ financial security.
Mortgages, lines of credit, and personal loans are common in your 40s and often represent the largest financial obligations a household carries. Life insurance can be used to pay off or significantly reduce these debts, ensuring that your partner or family members are not left with financial burdens they may not be able to manage on their own. By choosing a personal life insurance policy rather than bank-provided mortgage insurance, you avoid being locked into limited coverage that often only protects the lender. Working with a qualified insurance broker allows you to tailor coverage to your actual needs—typically at a lower cost—while giving you full flexibility to decide who receives the benefit and how it can be used.
Permanent life insurance policies provide lifelong coverage and differ from term insurance in that they remain in force as long as premiums are paid. They have two main components: the death benefit, which provides a payout to your beneficiaries upon your passing, and the cash value, which accumulates over time on a tax-deferred basis. This cash value can be accessed during your lifetime through policy loans or withdrawals, offering flexibility for financial planning. As a result, permanent life insurance can complement traditional investments such as RRSPs, TFSAs, or non-registered accounts, adding diversification, stability, and a long-term savings element to your overall financial strategy.
Certain permanent life insurance products, such as whole life or universal life, are designed to grow over time through dividends, indexing mechanisms, or adjustable death benefits. This growth helps preserve the real value of both coverage and accumulated cash in an inflationary environment. Some policies allow the death benefit to increase over time, while participating whole life policies can use dividends to purchase Paid-Up Additions, boosting both death benefit and cash value. The cash value itself grows steadily and can be accessed to cover rising costs, providing a flexible buffer against inflation. While not a replacement for high-return investments like stocks or real estate, these features make permanent life insurance a resilient component of a long-term financial strategy.
Here is a detailed article on how Life Insurance Can Protect You from Inflation.
Life insurance can play a strategic role in estate planning and tax efficiency. Death benefits are generally paid out tax-free to beneficiaries, which can help cover estate taxes, reduce the need to liquidate assets, and preserve wealth for the next generation. For higher-income individuals or those with complex estates, insurance can be an effective tool to smooth wealth transfer and manage tax exposure.
Here is a detailed article about life insurance and taxes.
Some permanent life insurance policies allow policyholders to borrow against the cash value of the policy. This approach—often referred to as infinite banking—can be used to finance major purchases, investments, or temporary cash needs. While it requires careful structuring and discipline, it offers an alternative source of liquidity without relying on traditional lenders.
Here is a detailed article on Life Insurance and Infinite Banking.
Life insurance can also be used to support charitable or philanthropic goals. If you regularly contribute to a foundation, charity, or cause that is important to you, a policy can designate part of the proceeds to continue that support after your passing. This allows you to leave a lasting legacy aligned with your values.
We hope these insights help clarify when and why life insurance may be relevant for people in their 40s. While some reasons are essential and driven by financial dependency and obligations, others are optional and relate to planning, optimization, and legacy goals. Every situation is unique. If you would like to discuss your personal circumstances and life insurance needs, you are very welcome to connect with us. Our team includes life insurance brokers and specialists who work with more life insurance companies than most other brokerages and agencies in Canada, allowing us to help find solutions tailored to your goals.
