Do I Need Life Insurance and a Will?

You need both. A will and life insurance are not competing options; they answer two different questions. The will answers “who gets what I already have, and who looks after my kids?” Life insurance answers “where does the money come from so my family can keep going?” Having one without the other leaves a gap that the other can’t fill.

I’ve been helping Ontario families plan for almost thirty years, and this is one of the questions I hear most from new parents, new homeowners and people who’ve just watched a relative’s estate turn into a mess. The good news is that both pieces are simpler to put in place than people expect.

This guide explains what each document does, how they interact (including who wins when they conflict), and how to structure them so your family gets the money quickly and with the least tax.

What a will does that life insurance cannot

A will is a legal document that takes effect at death and does four things:

1. Names an executor (called an estate trustee in Ontario) to gather your assets, pay debts and taxes, and distribute what’s left.
2. Directs who inherits your property: your house, vehicles, bank accounts, investments without a beneficiary designation, business interests and personal belongings.
3. Appoints a guardian for minor children. In Ontario this appointment is temporary until confirmed by the court, but it carries significant weight.
4. Creates trusts if you want money held and managed for someone, such as children until they reach a certain age, or a family member with a disability who receives ODSP.

Life insurance does none of this. A policy can put $500,000 in your spouse’s hands, but it can’t say who raises your children, can’t distribute your home, and can’t tell anyone what to do with your RRSP. Our guide to estate planning basics for Ontario families covers the will side in more depth.

What life insurance does that a will cannot

A will can only distribute what you own. If you’re 34 with a mortgage, two kids and $40,000 in savings, the most beautifully drafted will in Ontario still leaves your family with $40,000 and a mortgage.

Life insurance creates money that didn’t exist the day before. For a healthy non-smoker in their thirties, indicative premiums for $500,000 of 20-year term coverage run roughly $25–$40 a month, with your actual rate depending on age, health, smoking status and insurer. That’s the mechanism that turns a plan on paper into a funded plan.

Three features make it especially useful in an estate:

• The death benefit is generally received tax-free by a named beneficiary in Canada.
• It bypasses probate. A payout to a named person never becomes part of the estate, so it isn’t subject to Ontario’s Estate Administration Tax (roughly 1.5% of estate value above $50,000) and isn’t held up while the court processes the will.
• It arrives fast. Straightforward claims are commonly paid within a few weeks, as our guide on how life insurance claims work explains. Probate in Ontario can take months.

Life insurance vs. will: side by side

Question	Will	Life insurance
What does it distribute?	Assets you already own	A new lump sum created at death
Who decides who receives it?	Your instructions in the will	The beneficiary named on the policy
Goes through probate?	Yes, for most estate assets	No, when a person is named as beneficiary
Subject to Estate Administration Tax?	Yes, on probated assets	No, when a person is named
Exposed to your creditors?	Yes, debts are paid before heirs	Generally protected when a spouse, child, parent or grandchild is named
How fast do heirs receive it?	Months, sometimes longer	Usually weeks
Names a guardian for children?	Yes	No
Appoints an executor?	Yes	No
Can hold money in trust?	Yes, through a testamentary trust	Only indirectly, by naming a trustee for a minor or naming the estate
Cost to set up	Lawyer’s fee or will kit; a one-time cost	Ongoing premium

Who wins when the will and the policy disagree?

This is the question that causes real family conflict, so let’s be clear about it.

The beneficiary designation on the policy generally wins. If your policy names your sister and your will says everything goes to your spouse, your sister receives the insurance money. The will governs the estate; the insurance proceeds never enter the estate.

The common ways this goes wrong:

• A former spouse still named on the policy. In Ontario, divorce does not automatically revoke a beneficiary designation on a life insurance policy. If you don’t update it, your ex-spouse is paid.
• A will written after the policy that tries to redirect the money. A will can, in limited circumstances, change a beneficiary designation if it specifically refers to the policy, but relying on this invites disputes. Update the policy itself.
• No beneficiary named at all. The proceeds default to the estate, and everything the insurance was meant to bypass, probate, delay and creditors, applies.

The fix is simple: keep both documents saying the same thing. When you sign a new will, review every beneficiary designation on every policy, RRSP, TFSA and pension the same week. Our guide on choosing a life insurance beneficiary walks through the options.

Should the estate ever be the beneficiary?

Occasionally, yes, but it should be a deliberate choice made with your lawyer, not a default.

Reasons to name the estate:

• Your will sets up a testamentary trust (for young children, or a Henson trust for a family member on ODSP) and you want the insurance to fund it. Some insurers let you name the trustee directly instead, which keeps the money out of probate.
• You want the insurance to pay specific estate debts or taxes before anything is distributed, such as the tax bill on a cottage or an RRSP.
• You have complex distribution wishes that are easier to express in a will than on a beneficiary form.

The costs of doing so: Estate Administration Tax on the proceeds, exposure to the estate’s creditors, and a delay of months while probate runs. On a $500,000 policy added to an estate already above the $50,000 exemption, the probate tax alone is roughly $7,500, money that a named beneficiary would never have paid. Our guide on probate in Ontario and how insurance avoids it goes further into this.

For most families, naming a spouse as primary beneficiary and children (with a trustee) as contingent beneficiaries achieves everything the estate route would, faster and cheaper.

What happens if you have neither

Dying without a will in Ontario means dying intestate. The Succession Law Reform Act decides who inherits: a spouse receives a preferential share (a fixed amount set by regulation) plus a portion of the remainder, with the rest split among children. Common-law partners have no automatic inheritance rights under intestacy. A court appoints the guardian for minor children, and the family must apply to have someone named estate trustee before anything can be done.

Dying without life insurance means the family has whatever you’d saved, minus debts, minus taxes, minus probate. For a household where one income covers the mortgage, that’s often a forced sale of the home.

Dying without either is the worst of both: a formula-driven distribution, a court-chosen guardian, and not enough money for any of it to matter much.

Life stage: what most families need and when

Single, no dependants. A basic will so your assets and belongings go where you want, and enough coverage for final expenses and any co-signed debt. Our guide on life insurance for single people with no kids covers the nuances.

Couple, no kids, shared mortgage. Wills for both partners (especially if common-law, given the intestacy gap). Term life sized to clear the mortgage and replace income for a few years.

Parents of young children. This is where both become urgent. A will to name a guardian and set up a trust for the children. Term coverage sized to replace income until the kids are independent, typically several hundred thousand dollars per parent, as our guide on how much life insurance you need works through.

Business owners. Wills that address business succession, plus insurance to fund a buy-sell agreement or provide liquidity for the estate’s tax bill. Our piece on life insurance for business owners covers this.

Retirees and estates with a cottage or large RRSP. Permanent insurance to cover the deemed disposition tax at death, with a will that anticipates it. This is where I spend most of my time, and it’s where the two tools interact most.

Getting both done: a practical order

1. Buy the life insurance first, or at the same time. It takes a few weeks to be underwritten and approved, and it’s the piece that depends on your health today. A will can be drafted any time; your insurability can’t.
2. Name real people as beneficiaries, with contingents. For minor children, name a trustee.
3. Draft the will with a lawyer, particularly if you have children, a business, a blended family or a family member with a disability. Will kits work for simple estates but miss the situations that matter.
4. Align the two. Show your lawyer your insurance beneficiary designations. Show your broker the relevant parts of your will. Make sure they tell the same story.
5. Write a one-page summary listing every policy, account and the will’s location, and give it to your executor.
6. Review both every few years and after any major life event.

Tax and estate law are complex, and this article is general information rather than legal advice. For anything beyond a straightforward family situation, confirm the details with an estate lawyer or accountant.

How Hayes can help

We’re not lawyers and we don’t draft wills, but we work alongside estate lawyers and accountants every week to make sure the insurance side fits the plan. That means sizing coverage properly, structuring beneficiaries so the money bypasses probate, naming trustees for children, and choosing term or permanent coverage depending on whether the need is temporary or lifelong.

Compare quotes from 30+ Canadian insurers in about two minutes. Free, no obligation. If you’d like to talk through how a policy fits with your will, get in touch and we’ll walk through it together.