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What is term life insurance?
In return, your beneficiaries are entitled to receive a tax-free, lump-sum death benefit if you die within the term of the policy. Once the term ends, your coverage also expires and you can stop paying premiums.
The term in term life insurance refers to the exact time period you are covered.
Some typical terms are:
- 10-year term
- 20-year term
- 30-year term
- Until age 65
Additionally, some insurance providers let you pick your own term between 5 and 40 years that best suits your needs. These are all examples of level term policies where the death benefit and monthly premium remain the same through your chosen term.
Lastly, there are specific term policies for unique applications:
- Annual Renewable Term. A short-term life insurance policy that locks in your premiums for one year and can be optionally renewed at the end of each year. Sometimes referred to as Yearly Renewable Term.
- Decreasing Term Policies. A form of term life insurance where the death benefit decreases in later years of the policy.
How does term life insurance work?
Term life insurance is a contract between you (the individual being insured) and a life insurance company (the insurance provider you choose). The insurance company agrees to make a lump sum, tax-free payment to a beneficiary should you (the insured individual) die during the entire term of the policy.
Life insurance providers use detailed statistics and actuarial models in the application process to determine the premiums for this coverage. Premiums are the monthly or annual fees you pay to ensure your policy is in force. Insurance companies use this data to assess life expectancy and the likelihood they will have to pay out the full death benefit. If the likelihood is higher, the premium rates are higher. If the likelihood of a payout to your beneficiaries is lower, the premiums are lower (or you may even qualify for preferred rates).
A beneficiary is a person (or people) the policyholder chooses to receive their death benefit. While they are typically a spouse, partner, or children, the beneficiary can be anyone you choose, including charities or trusts.
In some cases you may need to go through a medical exam to qualify for your term life insurance policy, but there are no-medical insurance options for those who wish to skip medical underwriting.
Unlike other types of life insurance, term policies hold no cash value or savings component. This is one of the reasons why term life insurance is one of the most cost-effective insurance plans for Canadians.
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What does term life insurance cover?
Does term life insurance cover accidental death?
Does term life insurance cover disability?
How much does term life insurance cost?
The cost of a term life insurance policy is influenced by personal factors and the specific details of your desired coverage. Age, smoking status, and health are key determinants affecting the cost of such a policy.
A term policy tends to be more affordable when you are younger, a non-smoker, and in good health. Generally, term life insurance is less expensive compared to permanent policies. While providing a universal premium payment for different coverage amounts is not feasible here, an experienced advisor (like us) can help you discover the most suitable coverage within your budget. You’re in the right place to find cost-effective life insurance to secure your dependents’ financial future!
Pro tip: Opting for annual premiums—paying once a year instead of monthly—can lead to savings on insurance coverage. Annual costs may be 10-15% lower than monthly premiums. Consult your advisor about this money-saving option!
What happens after your term life insurance ends?
Your available choices for continuing coverage may vary depending on the specifics of your policy when your initial term life insurance period concludes.
Let your coverage lapse
Renew your coverage
If you selected renewable term life insurance with your existing provider, you have the option to renew your coverage without undergoing a medical exam or answering medical questions. However, this renewal typically comes with an increased premium.
Convert your coverage
Get a brand new life insurance policy
What’s the difference between term life insurance and whole life insurance?
Term life insurance and whole life insurance represent opposite ends of the protection spectrum. As previously discussed, term life insurance serves temporary needs, while whole life insurance provides coverage for a lifetime, remaining in force as long as premiums are paid.
While term life insurance is suitable for addressing temporary needs such as reducing mortgage debts and supporting dependents, whole life (or permanent) insurance is designed to meet enduring needs, ensuring coverage throughout your entire life. This can encompass provisions for permanent obligations like final tax expenses, funeral arrangements, or creating a tax-advantaged legacy for children or grandchildren.
Frequently asked questions
Term life insurance products come without any hidden catches or “gotcha” moments. They represent a transparent and affordable form of insurance, allowing you to maximize the financial protection you can acquire while staying within your budget.
Virtually all life insurance companies provide renewal options as a key feature of term life insurance policies. For instance, if you have a 10-year term life policy, it automatically renews for another 10 years at the end of the term, unless you decide to cancel your coverage. However, this renewal comes with an increased premium, and many Canadians may still qualify for a lower premium by applying for entirely new coverage.
Typically, companies permit policy renewal up to a specified age, like 70 or 75 years old. Once you reach that age, the policy becomes ineligible for renewal, and the coverage expires.
PolicyAdvisor is dedicated to assisting Canadians in finding the most suitable life insurance policy for their individual needs. To be candid, there isn’t a single “best” insurance provider; rather, there’s the best insurance provider for you.
Canada’s leading insurance companies offer distinct policies tailored to meet the unique coverage requirements of each Canadian. The key is having the freedom and knowledge to select the policy and provider that aligns with your specific situation.
That’s precisely why PolicyAdvisor collaborates with over 20 of Canada’s top insurance companies—the highest number among online brokers. We ensure you have an extensive array of options when choosing the insurance company to safeguard yourself and your loved ones. We can assist you in securing a life insurance plan from renowned providers such as Assumption Life, BMO Insurance, Canada Life, Canada Protection Plan, Desjardins, La Capitale, Empire Life, Equitable Life, Foresters, Humania, iA Group, ivari, Manulife, RBC, Sun Life, SSQ, and Wawanesa.
As noted earlier, the primary factors influencing the premiums set by all life insurance providers are age and health. Taking these criteria into account, it is highly beneficial to apply for life insurance coverage at an earlier age. Applying while younger is advantageous because it is less likely that any health conditions have impacted you, thereby minimizing the potential increase in the cost of your premiums.
Unlike permanent life insurance, term life insurance does not accumulate cash value or surrender value. This distinction is a key factor contributing to the affordability of term life insurance compared to permanent life insurance options, making it a more cost-effective means of financial protection.
No, there is no cashback at the conclusion of a term life insurance policy. Once the term expires, your coverage concludes, and premium payments are no longer obligatory. Term life insurance can be likened to leasing insurance for a specific, temporary requirement, rather than incurring additional costs to own the policy permanently.
A widely accepted rule of thumb is to select a death benefit ranging from 8 to 10 times your annual income. For a more accurate calculation, consider factors such as your existing debts, the living expenses of your family, anticipated education costs for your children, provisions for end-of-life expenses, and any other allocations (e.g., charitable donations) you wish to include. Utilize PolicyAdvisor’s Life Insurance Calculator for the most precise estimate tailored to your life insurance plan and requirements.
Life insurance is essential for anyone with dependents or loved ones. However, due to their unique circumstances, single parents often shoulder a greater responsibility in the upbringing and protection of their children, and this extends to the crucial aspects of life insurance and financial protection.
Certainly, you can purchase insurance for your loved ones, but it requires their consent and knowledge that their life is being insured. The only exception would be in the case of children below the age of consent, where you are their legal guardian. In essence, we need to communicate with anyone you intend to insure, including your loved ones.
While health problems may not automatically disqualify someone from obtaining life insurance, they can significantly impact the cost of premiums. The price is likely to be influenced by the nature of the ailment, its diagnosis timeline, and its current impact on health. Our seasoned advisors can assist in assessing coverage options and connecting you with a life insurance company offering policies tailored to your specific situation. We provide support in applying for simplified non-medical insurance policies or guaranteed non-medical insurance coverage, whenever these options are the most suitable for our clients. Rest assured, our expert advice is readily available whenever you need it.
The duration of your term life insurance policy should align with your specific life insurance requirements.
A 30-year term life insurance policy is suitable for covering a new mortgage. Opting for a 20-year term life insurance policy can offer financial security for a new family. Meanwhile, a 10-year term life insurance policy may be utilized by seniors to handle final expenses or replace income for their beneficiaries. Online term life insurance provides flexibility, allowing you to choose the policy length that best fits your needs, whether it’s a 25-year term, 40-year term, or any duration in between.
PolicyAdvisor stands out as the digital brokerage representing the highest number of insurance carriers, guaranteeing that you discover the most competitively priced term life policy for your specific needs and budget. You have the convenience of comparing rates from 25 of the country’s top life insurance companies.
Easily compare term life insurance rates and apply for the coverage you require within minutes by clicking here!