Optional Life Insurance in Canada: How to Apply, Coverage Amounts and When It is Worth Buying

Optional life insurance is an additional form of coverage that employees can purchase through their group life insurance to increase the protection provided by basic group life insurance.

The process to secure this coverage typically begins with an application during your enrollment period and may require you to provide Evidence of Insurability and wait for the insurer’s approval.

The amount available varies by plan and is typically based on a multiple of salary or fixed-dollar increments, subject to limits such as the Non-Evidence Maximum (NEM) and overall plan maximums. In addition to personal coverage, many plans allow employees to purchase optional life insurance for their spouse and dependent children. 

Optional Life Insurance is often worth buying when your basic coverage falls short of your family’s financial needs, particularly if you have dependents, a mortgage, significant debt, or access to guaranteed-issue coverage.

What is Optional Life Insurance?

Optional life insurance is a voluntary, employee-funded addition to a group benefits plan that increases the death benefit paid to a beneficiary beyond what basic group life insurance provides. It is one of the most practical tools available to Canadian employees who need more protection than their employer’s standard coverage offers.

That said, optional life insurance provides extra coverage that is entirely funded by you, typically through convenient payroll deductions. One of the primary advantages of this arrangement is gaining access to group rates, which are often more affordable than what you might find if you were to buy an individual policy on your own.

Key features of optional life insurance include supplemental coverage on top of basic group life insurance, employee-paid premiums, flexible coverage amounts, convenient payroll deductions, and the option to insure eligible dependents. The most important characteristics of this coverage are:

• Supplemental Coverage: It serves as an addition to your existing basic group life insurance.
• Employee-Funded: You pay the full premium for the additional coverage.
• Flexible Amounts: You can often choose the amount of extra coverage you need, usually in set units (e.g., units of $25,000) up to a maximum limit set by the plan.
• Convenience: Premiums are easily managed through automatic payroll deductions.
• Coverage for Dependents: Many plans also allow you to purchase optional life insurance for your spouse and sometimes for your dependent children.

Ultimately, optional life insurance can be a practical tool for those who need more financial protection than their basic employer-provided plan offers to ensure their loved ones are sufficiently cared for.

How to Apply for Optional Life Insurance Through Your Employer

Getting optional life insurance through your employer is a relatively straightforward process. It begins with your application, followed by the submission of evidence of insurability, and ends once the insurer reviews your information and approves your coverage. Once approved, premiums are automatically deducted from your paycheque.

Below are key stages that require careful attention to detail:

Step 1: Start Your Application

Your first step is to formally begin the application process. This is typically done in one of two ways: contact the HR team or apply through the digital portal, depending on your employer’s system:

• Contact HR: Reach out to your plan administrator or Human Resources department. They will provide you with the necessary application forms and can answer any initial questions you have.
• Use a Digital Portal: Many workplaces, like the University of British Columbia, use an online HR system such as Workday. In this case, you would log in to the portal to begin your enrollment electronically.

It’s crucial to know your deadlines. Many plans have a limited window (often 31 or 60 days) after you become eligible to apply for a certain amount of coverage with simplified requirements.

Step 2: Provide Evidence of Insurability

When you apply for additional life insurance through your employer, a key step is providing “evidence of insurability.” This is essentially a health questionnaire that the insurance company uses to understand your health profile. You and your spouse, if they are also applying, will need to share information about your medical background, current health conditions, and lifestyle factors, such as tobacco use.

Many plans offer a “guaranteed-issue” amount. This means you can get a certain amount of coverage without any medical questions, as long as you enroll within a short period after becoming eligible. However, if you apply for coverage that exceeds this guaranteed limit, or if you decide to apply later on, you will be asked to complete the full health review.

To apply for or increase your coverage, you must be “actively at work”. If you are on a disability or unpaid leave, you will have to wait until you return to your duties to submit an application.

Step 3: Await the Insurer’s Decision

Once your application and health statement are submitted, the insurance company will review your information to assess the risk and make a decision.

You will be notified in writing whether your application has been approved. If you are approved, your coverage will become effective on the date of the insurer’s approval. The premium payments will then be automatically deducted from your paycheque, usually starting with the next pay period.

How Optional Life Insurance Coverage Amounts Are Structured

Optional life insurance is designed to give employees flexibility, but the amount of coverage you can purchase is not unlimited. In reality, the amount available to you depends on how your employer’s plan is designed.

Some plans calculate coverage as a multiple of your salary, while others offer coverage in fixed-dollar increments. Your plan will also impose limits on how much coverage you can purchase without medical underwriting and may allow you to extend coverage to your spouse and dependent children.

Understanding three rules will help you determine how much optional life insurance is actually available to you and whether it is enough to meet your family’s needs:

Two Models: Salary Multiples vs. Flat Dollar Increments

The optional life Insurance coverage is commonly offered in multiples of your salary, such as one to five times your annual income, or as a flat additional amount. Understanding which model your plan uses is the first step in knowing how much optional coverage you can actually purchase:

Model 1: Salary Multiples (Earnings-Based)

Under this model, your optional coverage is expressed as a multiple of your annual salary: 1x, 2x, 3x, and so on,  rather than as fixed dollar blocks.

The big advantage is that your coverage can grow with your career. If you elect 3x your salary when you’re earning $60,000 (for $180,000 in coverage) and later get a promotion to $80,000, your coverage automatically adjusts to $240,000. It helps your protection keep pace with your lifestyle, often with no new paperwork required.

Model 2: Flat Dollar Increments (Unit-Based)

Instead of salary multiples, your optional coverage is sold in fixed blocks, or “units.” under this model. The unit size varies by plan and insurer, but the most common increments in Canadian group plans are $10,000 and $25,000.

The table below compares unit size and maximum coverage across three Canadian employers to illustrate how plan structures differ:

As you can see, the differences can be substantial. These examples highlight why it’s so important to check your own benefits booklet to understand the specific options available to you.

The Structural Limits

When considering optional life insurance, your coverage is shaped by a few key structural limits. The first is the Overall Maximum, which is the absolute ceiling on the total life insurance you can have, combining both basic and optional coverage. This number is non-negotiable and is often determined by the size of your employer.

Within this limit is the Non-Evidence Maximum (NEM), also called the Guaranteed Issue amount. This is the most coverage you can get without having to answer health questions or undergo a medical exam. For example, a plan might allow you to get up to $100,000 or even $400,000 without medical underwriting. However, this “free pass” is almost always tied to your initial enrollment period, for example, the first 31 to 60 days after you become eligible for benefits.

If you wish to purchase coverage that exceeds the NEM, or if you apply after this initial window has closed, you will be required to provide Evidence of Insurability (EOI).

Coverage for Your Family

Optional life insurance is not limited to the employee. Most Canadian group plans also allow employees to purchase optional coverage for their spouse and dependent children, though at different scales. Some employers bundle this coverage with the employee’s optional life insurance at no extra cost, while others offer it as a separate, paid option.

The table below shows examples of how three employers structure and price this benefit, which you can use for reference:

Source: UBC Optional Life Insurance, UCalgary Optional Life Insurance, King’s Optional Group Term Life Insurance

When is Optional Life Insurance Worth It?

Optional life insurance is most valuable when your basic group coverage falls short of your actual financial obligations, particularly if you have dependents, a mortgage, or significant debt. 

That gap between what your employer gives you and what your family might actually need is why optional life insurance exists. Your current life stage is the best guide to figuring out if you need to bridge that gap.

The right answer depends on where you are in life, so the scenarios below walk through the most common decision points:

Single with No Dependents

At this stage, your basic group life insurance is likely enough to cover final expenses and any small debts. But this is also the cheapest time to buy optional life insurance. If you see a mortgage or family in your future, applying now while you’re young and healthy makes it easier to get approved without restrictions.

Married or Partnered with No Children

If you and your partner share a mortgage or other significant debts, ask yourselves if one income could manage the household alone. If the answer is no, getting enough optional life insurance to at least cover the mortgage is a smart move. It’s also a good time to consider spousal optional life insurance.

Parents with Young Children

This is the life stage where basic life insurance is almost certainly not enough. The costs of daily living, childcare, and future education create a financial need that often requires 7 to 10 times your annual income in total coverage. In this scenario, optional life insurance is almost always worth it, as it provides a crucial and affordable financial safety net for your children’s future.

Households with a Stay-at-Home Parent

The working parent should have enough optional life insurance to replace their income. Just as crucial, however, is recognizing the financial value of a stay-at-home parent. Their contributions, from childcare to household management, have a real replacement cost. Spousal optional life insurance can provide the funds to cover these essential services if the unexpected happens.

Approaching Retirement (Ages 55 to 65)

As you get closer to retirement, your need for life insurance might be lower. However, if you still have a mortgage or are supporting dependents, it is worth keeping your optional coverage because finding an affordable new policy at this age is difficult. Review your coverage carefully, as basic plans often reduce at age 65 and most group plans end coverage entirely.

Planning a Career Change

If you think you might leave your job in the next year, you need to weigh your options. An individual term policy offers portability, meaning it stays with you no matter where you work and prevents coverage gaps between jobs. While you can often convert your group optional life policy to an individual one within 31 days of leaving your job, the rates may not be as competitive as a policy you buy on your own while you’re in good health.

Decision Framework: Should You Elect Optional Life Insurance?

Use this step-by-step framework to determine whether optional life insurance belongs in your coverage plan. Work through each question in order:

Step 1: The Reality Check: Do You Have a Coverage Gap?

Before anything else, you need to know if you even have a problem to solve. This means calculating your “coverage gap”, the difference between the money your family would need and the resources they would have if you were gone.

• What Your Family Would Need: Think of this as the total financial impact of your absence. A simple way to estimate this is by adding up your Debts (like car loans and credit cards), the Income your family would need to replace, your outstanding Mortgage, and the future Education costs for your children (the DIME method). This final number is your family’s financial target.
• What Your Family Would Have: Now, add up all the resources that would be available to them. This includes your basic group life insurance from work, any personal policies you already own, and dedicated savings or investments.

Subtract what they would have from what they would need. If the result is a positive number, that’s your coverage gap. This is the exact amount of money you are responsible for securing.

Step 2: Choosing the Right Tool for the Job

If you have a gap, you have two primary tools to fill it: optional group insurance or an individual term policy. Choosing between them is a strategic decision based on two key questions about health and career below:

The Health Question: Is Guaranteed Coverage Your Priority?

• If you have a pre-existing health condition, this is a golden opportunity. It gives you access to coverage that might otherwise be expensive or unavailable to you. For you, optional life insurance is a powerful and essential tool.
• If you are young and in excellent health, an individual policy may be a better long-term asset. You can lock in a low, fixed premium for 20 or 30 years, offering cost stability that optional plans (with their age-banded price increases) cannot match.

The Career Question: How Portable Does Your Coverage Need to Be?

• If you are in a stable career and plan to stay with your employer long-term, the lack of portability is a minimal risk. The convenience and low cost of optional coverage are hard to beat.
• If you anticipate a job change, work on contract, or are in a volatile industry, relying on optional coverage is like building your financial safety net on rented land. An individual policy is owned by you, offering a portable and permanent solution that follows you no matter where you work.

Step 3: Executing Your Strategy with Precision

Once you’ve weighed your options, the final step is to put your plan into action intelligently.

If you decide to elect optional life, choose the amount that precisely fills your remaining gap, not a round number that “feels right.”

If the gap exceeds the plan’s optional life maximum, you will need an individual term policy regardless. In that case, consider whether it is more cost-effective to: (a) size the individual policy to cover the full gap and skip optional life, or (b) use optional life for the portion within the NEM (no health questions) and cover the remainder with an individual policy.

Last but not least, the most common mistake is failing to review your coverage regularly. You need to use your company’s annual open enrollment period as a built-in reminder to rerun this framework and ensure your financial protection is perfectly aligned with your life.

Below, you’ll find common employee scenarios, whether optional life insurance is generally recommended, and the key factors driving that recommendation:

When Optional Life Insurance May Not Be the Best Choice

In certain situations, relying solely on your employer’s optional life plan can cost you more in the long run or leave your family with less protection than you think. In particular, optional life insurance may be less attractive if you are young and healthy enough to qualify for low-cost individual coverage, if your family’s insurance needs exceed your plan’s maximum coverage limits, or if you are nearing retirement.

Here are some common scenarios where looking into a personal term life insurance policy might be a better choice for you and your family:

You’re Young and Healthy

If you’re in your 20s or 30s and in good health, you have a one-time opportunity to lock in incredibly low insurance rates for decades. A personal term life insurance policy offers fixed premiums, so the price you pay today is the same price you’ll pay 20 or 30 years from now. For a healthy, non-smoking 30-year-old, a 20-year term policy for $500,000 can cost as little as $20 to $30 a month.

This is a huge advantage over optional life insurance from work, where premiums are almost always based on age bands. As you move into a new age bracket (typically every five years), your rate goes up. The affordable coverage you have at 35 could cost two or three times as much by the time you’re 50. In contrast, locking in a personal policy at 28 means you’ll still be paying that same low rate at age 57.

Your Family’s Needs Exceed the Plan’s Maximum

Employer-sponsored plans have coverage ceilings that many growing families quickly outgrow. If you earn $90,000 a year, a common rule of thumb suggests you might need between $630,000 and $900,000 in coverage. Your basic group policy might only cover one or two times your salary (e.g., $90,000 to $180,000). Even with the maximum optional life amount added on, many Canadian families with mortgages, young children, and other debts find themselves with a significant coverage gap.

For example, if the optional plan maxes out at $300,000, your total workplace coverage would be $480,000 at most, far short of your family’s actual need. In this case, buying a single personal term policy for the full amount you need is often simpler and more cost-effective than trying to patch together different plans.

You’re Nearing Retirement, and Your Financial Obligations Have Shrunk

As you approach retirement, your financial picture often looks different. Your mortgage may be paid off, your kids are likely financially independent, and you and your spouse have retirement savings to rely on. At this stage, the need for a large life insurance payout diminishes significantly.

This is also when optional life insurance premiums are at their highest due to your age. It’s the perfect time to ask: is the high cost still worth it? For many, those premium dollars could be put to better use in an RRSP, a TFSA, or simply to enjoy retirement. The Canada Pension Plan (CPP) also provides survivor benefits that can help bridge an income gap. In 2026, the maximum monthly survivor’s pension is $803.54 for a survivor under 65 and $904.59 for a survivor 65 or older (Source)

This doesn’t mean everyone over 55 should cancel their coverage. If you still have significant debts or a dependent spouse, it may still be essential. The key is to evaluate if the cost justifies the need, rather than continuing to pay out of habit.