As more immigrant Canadians embrace permanent life insurance for wealth building, retirement planning, and family protection, financial experts are warning that poorly structured policies could become future financial burdens if not properly reviewed and managed.
From Universal Life Insurance to Participating Whole Life plans with flexible premium structures, many policyholders are attracted by projections showing growing cash value and long-term financial security. However, industry professionals say misunderstanding the difference between Yearly Renewable Term (YRT) and Level Term insurance structures can create serious problems later in life.
According to Dr Omopeju Afanu, a Financial Advisor with Bsquare Financial, many policyholders focus on the affordability of premiums at the outset without understanding how insurance costs evolve over time.
“YRT policies work very well for younger individuals because the insurance charges are lower at earlier ages,” Dr Afanu explained. “But what many people fail to realize is that those costs increase yearly as the policyholder gets older. Without regular reviews, the policy can eventually become financially stressful.”
Dr Afanu shared a real-life scenario involving a client she currently manages to highlight the growing concern about poorly reviewed life insurance policies.
According to her, the client purchased a permanent life insurance policy in 2006 at about 50 years old under a PAC structure tied to YRT insurance charges. At the time, the client’s PAC payment was less than $100 monthly, making it appear affordable and sustainable.
Today, nearly two decades later, the client is now in her seventies and still wishes to maintain the same life insurance coverage. However, due to rising YRT insurance costs linked to age, her PAC contribution has increased to about $435 monthly.
The challenge, Dr Afanu explained, is that the client is no longer actively working and now struggles to comfortably maintain the higher premium obligation.
“If the policy had been reviewed earlier and converted into a level insurance structure years ago, she might not have found herself in this current financial situation,” Dr Afanu said. “This is why policy reviews are extremely important as people grow older.”
Under a YRT structure, insurance costs rise annually based on the insured person’s age and mortality risk. While this makes the policy relatively inexpensive during younger years, the increasing costs can significantly affect long-term affordability if the plan is not actively monitored.
Financial advisors say many policyholders wrongly assume permanent life insurance policies can simply run on autopilot for decades. Instead, changes in age, income, employment status, retirement plans, and family responsibilities should trigger regular insurance reviews.
Dr Afanu stressed that life transitions should always prompt financial reassessment.
“A change in age, work situation, retirement status, or major life event should always lead to a policy review,” she advised. “Life insurance is not a one-time decision. It must evolve alongside the policyholder’s financial reality.”
Unlike YRT structures, Level Term insurance maintains more predictable insurance costs over a defined period, helping policyholders avoid sudden premium increases later in life.
As inflation and retirement
concerns continue to affect households across Canada, experts say improving financial literacy around life insurance, PAC structures, YRT costs, and policy conversion strategies has become increasingly important, especially within immigrant communities, to build long-term financial stability.
For many families, life
insurance remains a valuable tool for financial protection and legacy planning.
But without proper structuring and continuous review, experts warn it can
quietly become an unexpected long-term debt burden rather than the safety net
people originally intended.
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