Understanding Guaranteed vs Non-Guaranteed Life insurance in Canada
Think guaranteed is the way to go? Before you make a decision, we’d like to help you understand what you’re buying, how it works, and whether or not there’s a non-guaranteed alternative that’s more affordable and better suited to your needs.
What is “guaranteed” vs. “non-guaranteed” life insurance?
If you’ve ever searched for life insurance online, you’ve likely seen ads for guaranteed life insurance in Canada. This type of life insurance can also go by the following names: guaranteed-acceptance life insurance, guaranteed-issue life insurance, or even “no medical” life insurance.
At the end of the day, the message in these ads is simple. If you’re looking for a quick and easy approval process – without a health exam – pick up the phone or apply online today!
But before you make a quick decision, we’d like to help you understand what you’re buying, how it works, and whether or not there’s a non-guaranteed alternative that’s more affordable and better suited to your needs. Let’s compare…
Guaranteed Life Insurance (Guaranteed-Issue, Guaranteed-Acceptance, or No-Medical)
A guaranteed life insurance policy, such as guaranteed-issue, guaranteed-acceptance, or “no-medical” life insurance” is typically considered a hassle-free solution for individuals who may be otherwise uninsurable due to age or health conditions. The caveat is that the cost is typically double (or more!) for a fraction of the coverage.
Below is a summary of what you can expect with guaranteed-issue (or guaranteed-acceptance) life insurance:
- No health questions and no medical exam
- Guaranteed approval for anyone within the eligible age range
- Typically lower coverage amounts with a higher cost (because the insurer takes on more risk)
Non-Guaranteed Life Insurance (Participating or Universal Life)
Non-guaranteed life insurance, such as participating whole life or universal life, is typically a more robust life insurance policy, and comes with financial benefits that can fluctuate (i.e., they are not always guaranteed). But trust us, this is not a bad thing! Why? Because over time the rewards are significant. Here are two examples:
- Cash value1: When you buy a cash-value life insurance policy, the provider invests part of your payments, earning you interest over time. This is called the “cash portion” of your policy. The exact amount of interest you earn for the total cash value (cash value + dividends) is not guaranteed You can learn more in our guide to cash-value life insurance policies.
- Dividends2: Some insurance companies allow you to share in their annual profit through dividends that you can accept as cash, put towards buying more coverage, or let it sit and grow. Dividends are based on the company’s investment performance, expenses, and claims experience, and are not guaranteed. That said, Serenia Life policy owners have enjoyed consistent returns for many, many years. Take a look at our impressive track record.
The key to understanding what you’re buying is how the word “guaranteed” is used in this particular context. In both cases, it refers to whether or not your application for coverage is guaranteed to be approved. Simply put, guaranteed life insurance means guaranteed approval regardless of your health status, while non-guaranteed life insurance approval depends on a number of factors — including health status.
But here’s the kicker: When it comes to non-guaranteed life insurance, there’s something extra to consider – a potential for growth that can be quite significant but whose amount is not guaranteed due to market conditions, company performance, and more.
Why non-guaranteed life insurance actually comes with some guarantees!
Not to confuse you, but non-guaranteed life insurance (a.k.a., Serenia Life’s whole life insurance) actually does come with three guarantees:
- guaranteed payments – meaning the cost will never go up
- a guaranteed cash value that will continue grow over your lifetime
- a guaranteed payout to your beneficiaries after you pass away
It’s important to note that “non-guaranteed” refers to features like approval, dividends, and total cash value growth – not ‘unreliable’ insurance.
Comparing guaranteed vs. non-guaranteed life insurance policies
A simple application process and guaranteed acceptance explain why guaranteed life insurance is a popular option for people who have difficulty qualifying for coverage. In contrast, flexibility, large coverage limits, and the chance to participate in wealth-building strategies are the reasons why those who qualify prefer non-guaranteed options.
Below, we’ve compared the advantages and trade-offs to consider when shopping for guaranteed vs. non-guaranteed life insurance coverage in Canada.
The cost of coverage
Guaranteed-acceptance life insurance policies will cost more than the identical amount of coverage obtained after answering a health questionnaire or agreeing to a medical exam. For example, a $20,000 guaranteed-issue/guaranteed-acceptance policy intended to cover final expenses could be two to three times the price of the non-guaranteed acceptance option.
Non-guaranteed (whole) life insurance policies with an investment component can also be expensive – but they offer significant long-term advantages due the potential for significant growth.
Death benefit payout & cash value
Both guaranteed and non-guaranteed life insurance will provide beneficiaries with a tax-free, cash payout – as long as the policy is in good standing (i.e., payments continue to be made).
Permanent life insurance, or what we’re referring to as “non-guaranteed life insurance” in this article, is the only type of coverage that comes with a cash value that will grow over time – a sum of money you can access while you’re still alive.
Reasons why a life insurance policy might not pay out
Odds are very low that a life insurance claim will be denied but it happens. Data from the Canadian Council of Insurance Regulators show 1.1 per cent of people claiming individual life insurance and 3.9 per cent of people claiming group life benefits (such as those from a workplace plan) were denied in 2024 (source).
When it happens, it’s usually because something got missed, misreported, or there were terms and conditions in the policy that were not met. For example:
- Health condition at time of application was withheld
- The insured person provided inaccurate information when applying
- Policy lapses because premiums were missed
- The insured person dies shortly after getting insured as part of exclusion
- Death by suicide in the first two years
Another reason why life insurance policies don’t pay out is because they remain unclaimed due to the beneficiaries not being aware of the policy. You can make sure this never happens by having an up-to-date will and telling your loved ones where to find it. Not sure how to broach the subject? This article provides tips on how to have what can be a challenging talk.
Pros & cons
Guaranteed life insurance is quick and easy. But like most things that are convenient, the price is often higher, and the terms and conditions of coverage may limit your payout. No-cost advice from an experienced Serenia Life advisor is the best way to weigh the pros and cons for your situation.
Scenarios favouring guaranteed life insurance
Guaranteed coverage makes sense for individuals who have already been denied other forms of life insurance due to age, occupation, lifestyle, or existing health conditions. It’s a quick fix that can help with final expenses or household debt. That said, speaking with a knowledgeable advisor is always the best way to find the most affordable solution.
Scenarios favouring non-guaranteed life insurance
Taking the time to qualify for life insurance with an investment component is a great use of your time and money, especially when you are young, in good health, and in the early days of a long and prosperous career. The cost will always be at its lowest when time and health are on your side. Find out why you’re never too young to have life insurance.
Trade-offs
Every decision you make about money has a ripple effect through all the moving parts of your financial plan. Whether you’re trading higher cost for convenience or are choosing to invest in long-term outcomes, there are always consequences that can be measured and weighted ahead of time. To make the right choice, always get advice from an experienced insurance advisor.
Quick-glance comparison table
Here’s a quick, side-by-side comparison of guaranteed vs. non-guaranteed life insurance.
| Category | Guaranteed Life Insurance | Non-Guaranteed Life Insurance |
|---|---|---|
| Definition | A life insurance policy that requires no medical questionnaire or health exam; your application is instantly approved. | A life insurance policy with financial benefits, like dividend payments and total cash value, that are not guaranteed. |
| Underwriting/medical exam | No medical questionnaire or exam. | A medical exam is typically needed and, depending on results, may mean your application is denied or rated (which means the cost will go up). |
| Eligibility | Very few restrictions other than age and residency. | Subject to completion of a detailed application and medical exam. |
| Premium structure | Monthly, quarterly or annual payments until you die. | Monthly, quarterly or annual payments until you die. Alternatively, if you opt for a 20-pay policy, payments are only required for 20 years, after which the policy is paid in full and can never expire. |
| Death benefit | A tax-free lump sum payout, as long as the policy is active. | |
| Typical coverage amounts | Quite low; often intended to cover final expenses. | A wide range; you choose how much you need, then personalize a plan around your budget. |
| Claim period (how long it takes to settle the claim) | The waiting periods should be quite similar, but keep in mind that with guaranteed life insurance, the insurance company is doing the underwriting (i.e., the process where an insurance company reviews an applicant’s information to confirm eligibility and check for fraud) after a claim is made instead of doing this up front. This could cause some delays. | |
| Cash value | Some carriers offer a guaranteed cash value, while others don’t. | Cash-value policies provide access to a growing pool of money – some guaranteed (i.e., cash value) and some not (i.e., dividends and total cash value) that you can access when you need it. |
| Cost relative to coverage | Due to the one-size-fits-all nature of guaranteed life insurance, it will cost significantly more. | |
| Pros | Fast and easy approval. | The combination of cash value, dividends, and tax advantages make this a great long-term wealth-building tool. |
| Cons | Very expensive, with limits on how much coverage you can buy. | Policies with non-guaranteed features are typically forms of whole life insurance which can also be expensive; it’s a long-term commitment. |
| Example use cases | Typically, someone who would not qualify for coverage after a medical exam or due to high-risk occupations or hobbies. In rare cases, someone looking for a fast, hassle-free policy that can afford the extra expense. | Typically, individuals or families concerned with estate planning and looking for long-term growth and tax advantages. |
Did you know? Serenia Life members can get reimbursed up to $150 when they hire a lawyer to draft or review their will. Learn more
How to decide – a practical decision framework for you
Meeting with a Serenia Life advisor is the easiest way to start exploring your options for affordable life insurance. Ahead of your meeting, here are some things to think about.
Assess your needs
Estimate how much money your dependents will need to carry on with expenses like mortgage payments, retirement savings, and their estate plan. It’s also important to think about whether your goals are short or long term, and if your age or health may impact your application.
Estimate what you can afford
Consider how something like permanent life insurance would rebalance all of your savings goals. For example, would you need less money in retirement if you knew your kids would get a guaranteed cash payout? Don’t forget to consider other needs, like debt coverage, legacy planning, or funeral costs.
Assess cash value needs
Some people plan to access the cash value in their permanent life insurance policy and want to estimate its value as it grows. This is easy because this amount is managed with a conservative mandate that favours steady growth.
Common misconceptions & pitfalls to avoid
Guaranteed and non-guaranteed life insurance policies are often presented as opposite ends of the value spectrum. This framing can be misleading and may cause shoppers to focus on the wrong factors when choosing coverage.
Simplicity vs cost
For example, guaranteed-acceptance policies can appear attractive because of their simplicity. However, this perception overlooks an important reality: These policies are typically designed as a last resort. They are often more expensive for the amount of coverage provided, and are best suited for individuals who don’t qualify for other options due to health reasons.
The investment component
On the other end of the spectrum, life insurance policies with non-guaranteed features (e.g., cash value growth and dividends) can be dismissed as costly “nice-to-haves.” Some people may assume they can’t afford the extra expense, while others may struggle to compare their long-term growth potential with more familiar investments like mutual funds.
Without proper context, this can lead to confusion and missed opportunities.
For a better understanding of how these investments work, please see our guide to cash-value life insurance in Canada.
What questions should I ask before buying a non-guaranteed policy?
Purchasing non-guaranteed life insurance is a good long-term decision, but you should take the time to thoroughly review and understand what you’re buying and how it can set you up for success. Here are some questions to ask your advisor:
- Which parts of the policy growth are guaranteed, and which parts are only projections? Make sure that the tax-free death benefit, along with the projected values, will be enough to meet your family’s long-term needs.
- How has this policy’s dividend or interest rate performed historically, and what does that tell us about how it’s managed? Dividend interest is often considered lower risk because it doesn’t move up and down with the stock market. When reviewing it, look for steady, consistent results as a sign of good management – but don’t expect it to perform the same as higher risk investments, like equity mutual funds.
- Under what circumstances could the cost go up, and how likely is that to happen with this specific policy? The cost of a non-guaranteed life insurance policy will never go up. As you may recall, this one of the three guarantees we mentioned above.
- If the policy doesn’t perform as well as expected, or if I take out a policy loan, what minimum cash value and death benefit are still guaranteed? Even though the total cash value of a policy may fluctuate, many insurers offer a guaranteed minimum value after the first few years. Not to mention, most policies come with a guaranteed death benefit. However, if you withdraw money as a policy loan (and choose not to pay it back), your death benefit could be reduced. Even worse, your policy could lapse in the event the interest exceeds the dividends you are earning. Always speak with your advisor before taking out a loan to make sure you understand the consequences of doing so.
- If the cost of insurance increases in the future, what options would I have — and how would that affect my coverage? COI (Cost-of-Insurance) changes are more likely to come into play in policies where costs are not fully guaranteed, such as certain universal life policies. If the cost of insurance were to increase, you’d typically have options: You might use the policy’s cash value to help cover the higher cost, adjust how the policy is funded, or reduce the amount of coverage to keep it affordable. However, if you purchased a whole life policy, this isn’t something you need to worry – remember, the cost will never change.
If all these questions make buying non-guaranteed life insurance seem like hard work, don’t worry. Your Serenia Life advisor is here to walk you through the process of personalizing the ideal type of coverage for you and helping you understand how it will protect your family for generations.
Why choose Serenia Life for “non-guaranteed” life insurance?
Our whole life insurance has been refined to offer exceptional value with long-term wealth-building opportunities. Serenia Life’s strong financial foundation ensures your policy is backed by stability and we have a remarkable 99.99% claims approval rating3.
As a member-based organization that’s been around for nearly 100 years, we encourage kindness by sharing our profits. How? Through community outreach, fundraising, and unique member benefits that help Canadians support their family, their community, and the causes they care about. These benefits include:
- $2,500 post-secondary scholarships
- Up to $600 towards fundraising events, and up to $400 to cover volunteering expenses in Canada
- Financial support for legal wills through a lawyer
- And much more!
View a full list of our member benefits
For guaranteed peace of mind, talk to us first
Before you sign up for any kind of guaranteed life insurance, talk to us about the alternatives. We may be able to find you and your family a solution that is more affordable and better suited to your long-term needs.
Advice is always free, and it pays off for the rest of your life.
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 cash value of the policy will reduce the available cash surrender value and death benefit.
2Dividends are not guaranteed and are paid based on the overall experience of Serenia Life Financial, considering all the risk factors. Dividends may be subject to taxation. Dividends will vary based on the actual investment returns in the participating account as well as mortality, expenses, taxes, lapses, withdrawals, and other experience of the participating block of policies. They have the potential to increase the value of your policy above the guaranteed amount, depending on the dividend option selected.
3Life insurance claims statistics 2018-2023
