Life insurance for doctors and physicians in Canada (2024): Explained

As a medical professional with a busy life, you’ve probably not thought of life insurance as a financial planning and estate planning tool for doctors and physicians in Canada. In this guide, we’ve explained what Canadian doctors and physicians should know about life insurance. Discover what the key benefits of life insurance for doctors and physicians are, the different policy types, and how much life insurance can cost. 

Why do doctors and physicians need life insurance?

Doctors and physicians need life insurance to primarily provide financial security for their families in case of untimely death. Given that doctors and physicians are high-income earners, the sudden loss of their income can impact their family’s stability. 

Many medical professionals start their careers with a significant amount of debt from medical school. Life insurance for doctors and physicians can help cover these debts, preventing them from being passed on to family members. 

Permanent life insurance lasts for your whole life and is useful for long-term needs like covering estate taxes, final expenses, and more. 

There are three types of permanent life insurance policies:

1. Whole life insurance
2. Universal life insurance
3. Term-to-100 life insurance  

Whole life insurance 

Whole life insurance is the most popular permanent life policy. It covers you for your entire life and allows you to access a part of the death benefit as cash value during your life. Some policies also pay dividends, further helping you to grow your wealth over time.

Whole life policies have an investment feature that builds cash value you can use during your lifetime. Some also pay annual dividends. 

Some of the features of whole life insurance are:

Universal life insurance

Universal life policies are similar to whole life insurance, except you control the investment options yourself. Normally, the insurance company does it for you.

Experienced investors may use universal policies because it has the potential for a higher rate of return when they manage it themselves. But, it also means there’s a higher risk of loss

Universal life offers:

Term-to-100 life insurance

A term-to-100 life insurance is a unique insurance product in that it is specific to your 100th birthday. It is similar to whole life insurance because it lasts for the entirety of your life. However, like term life insurance policies (that only last for 10, 20, or 30 years or more), no cash value is accumulated as you pay your premiums.

How to choose the type of life insurance for doctors and physicians?

The type of life insurance a doctor or physician needs truly comes down to their anticipated future needs. 

New residents who are young and just starting their careers will have different needs than experienced doctors and physicians. Here’s how doctors and physicians of different ages may look at using a life insurance benefit:

For young residents a term life insurance policy that is cheaper might make more sense than permanent life insurance. But for doctors and residents aged 40 and above, a whole life insurance policy that helps build cash value would make more sense. Many doctors and physicians also supplement their term life insurance with a permanent life insurance coverage. 

How much insurance coverage do doctors and physicians need?

The amount of coverage a doctor or physician needs depends on several factors, including their income, debts, family expenses, and future financial goals. However, doctors and physicians should also consider their unique circumstances, such as:

• Outstanding medical school loans and other debts
• Mortgage and other living expenses
• Children’s education and future needs
• Spouse’s financial needs and retirement plans

Doctors and physicians can assess their needs and decide on the amount of insurance coverage they need. Let’s look at this with a hypothetical example.

Dr John is a resident at a medical center where he makes $50,000. He is married and has a 2 year old daughter. His current financial liabilities include:

1. Car loan: $15,000
2. Medical school debt: $200,000 
3. Mortgage: $160,000

Future liabilities will include:

1. Education expenses for his daughter: $100,000
2. Funeral expenses: $20,000
3. Ensuring his family maintains a good lifestyle: $500,000

Dr John’s current and future financial liabilities amount to:

$375,000 + $620,000 = $995,000

A common rule of thumb is to get coverage that is at least five times your annual income. For Dr John, this amounts to $250,000. 

Dr. John needs approximately $1,245,000 in life insurance coverage to ensure that his family is financially secure in the event of his untimely death. This amount covers his current debts, and future liabilities, and provides additional financial support based on his income.

When should a doctor or physician purchase life insurance?

Doctors should consider purchasing life insurance as early as possible. The younger and healthier they are, the lower their premiums will be. Here are some key life events that may prompt doctors to buy life insurance:

• Graduation from medical school and starting residency
• Getting married or entering a long-term relationship
• Having children
• Buying a home
• Starting or joining a medical practice

What are the benefits of a life insurance policy for incorporated doctors?

Incorporated doctors and physicians get the following benefits from a permanent life insurance policy:

Looking for the best life insurance for doctors and physicians? Let our experts help!

If you’re a doctor or physician and are not sure of which life insurance policy to get, we’re here to help! Our licensed insurance advisors will be happy to assess your needs and help you compare options to make the most informed choice.