Term Life Insurance
Term Life Insurance is a great way to get cost-effective temporary life insurance. As implied by its name, term is purchased for a specific term of coverage between 5 and 40 years, until a financial obligation is met. Term life is useful to cover many shorter term financial obligations like your mortgage, income for dependant family members or even personal and business loans. Term can also be used as a method to preserve your estate across generations.
Convertible and Renewable Term Life Insurance Policies
All popular term life insurance policies are renewable and convertible. These options give the policy holder more flexibility in what they can do with the policy and how to proceed after the policy has elapsed.
Renewable life insurance policies give the policy holder the option to renew at the end of their term. When the term life policy is issued initially, the premiums for the renewal of the policy are set in stone. At the end of the term, even if the insured has failing health, the policy can be renewed and will still insure them. This is hugely advantageous, as obtaining life insurance with failing health is immensely difficult and prohibitively expensive.
Term life insurance policies are generally convertible as well. What this means is that at any time, you may convert the life insurance policy to a permanent policy. Permanent policies such whole life and universal life offer greater possibilities for tax deferred investing and over a whole lifetime, tend to cost less than term life insurance. In many cases, there is also the possibility of converting your term life insurance policy into a so-called "permanent" term life insurance policy, called a T100, which is like universal life without the investment component.
Comparing Terms and Types of Term Life
Term life insurance is generally available in terms between 5 and 35 years or as a T100 permanent policy. There are a few other terms, such as term to age and 40 year terms, but these are particularly rare forms of term life insurance. In order, the most popular terms of life insurance are Term 20, Term 10 and then T100. Term 10 and 20 are 10 and 20 year term life insurance policies, respectively. A T100 is a term life insurance policy that lasts until the age of 100, which is greater than the average life expectancy. For these three terms the industry is fiercely competing for your business. This means that when you're buying these terms, you'll need to compare rates side by side to make sure you get the best policy.
Typically, term life insurance is bought to cover specific financial obligations. Term 10 and 20 are useful to cover new and renewed mortgages, as well as medium length debts. Many Canadians also use Term 10 and 20 to guarantee their earning power until retirement. Shorter term life insurance is useful for shorter term financial obligations, like covering business loans or ensuring that the kids have enough money to last through university or trades school. It's important to choose the term of life insurance with specific financial obligations and goals in mind.
Term Life Insurance as Mortgage Life Insurance
In recent times, term life insurance has become a more attractive alternative to traditional creditor life insurance to cover a mortgage. Term life offers some fairly significant advantages:
- Policy cost: Term life is underwritten to an individual rather than a large demographic, which means that for most Canadians, term life insurance is much less expensive than creditor life.
- Portability: The beneficiary can be changed at any time, whereas creditor insurance's beneficiary must always be the original lender. This means that you're not tied to the original lender for your mortgage and can refinance or renew anywhere you like, bringing the policy with you.
- Flexibility: Term life can be converted to permanent life insurance much more easily.
We highly recommend talking to a broker or your financial planner before buying term life insurance. While in the short-term, term life insurance can be the best life insurance in Canada, in the long-term, it can be very expensive. In many cases, permanent whole life or universal life insurance is most appropriate.
CanEquity Insurance can help you find and setup a term life insurance policy. Our expert professional brokering services for term life insurance are free, and we'll get you quotes for the best term life policies in Canada. We'll help you compare all the different term types and offer you suggestions based on your own personal situation.Contact us to learn more and get an insurance quote!