Term life insurance is a type of life insurance policy in Ontario that provides coverage for a specified period. This period is known as the term. This coverage is temporary and is usually purchased for a specific purpose, like paying off a mortgage or providing for the family in case of the policyholder’s death.
Here we will look at what term life insurance is and how much coverage you need. We will also look at the different types of policies in Canada and their premium costs.
This will help you choose the best insurance option according to your needs. We will also look at some of the most affordable insurance policies.
What is Term Life Insurance?
Term life insurance provides coverage for a specific period, usually ranging from five to 30 years. The policyholder pays a premium in exchange for coverage, and if they pass away during the term of the policy, the death benefit is paid out to their beneficiaries.
If the policyholder outlives the term of the policy, the coverage expires and no death benefit is paid out.
One main benefit of a term life insurance policy is that it is usually more affordable than other types of insurance, like whole life insurance. This is because the coverage is temporary in term life, and the premiums are based on the likelihood of the policyholder passing away during the term of the policy.
How Much Term Life Insurance Do I Need?
Determining how much term life insurance coverage you need can be a bit tricky, as there are several factors that need to be considered. Some of the factors include:
- Your current and future financial obligations
- Your income and earning potential
- Your age and health
- The number of family members you have
To determine how much coverage you need, it’s a good idea to work with an insurance agent.
Types Of Term Life Insurance In Canada
In Canada, there are three main types of term life insurance policies available:
1. Level Term Insurance
This type of policy provides a fixed amount of coverage for a fixed period of time. The premiums remain the same throughout the term of the policy.
2. Yearly Renewable Term Insurance
This type of policy provides coverage for one year at a time and can be renewed annually. The premiums increase each year as the policyholder gets older.
3. Decreasing Term Insurance
This type of policy provides coverage for a fixed period of time, but the death benefit decreases over time. This type of policy is often used to cover a specific debt, such as a mortgage.
Choosing Your Term Insurance Length
When choosing the length of your term life insurance policy, it’s important to consider several factors.
Your age and retirement plans – If you are nearing retirement, you won’t need much coverage. So a shorter term is best.
Mortgage and debt – If you have a mortgage or other significant debt, you may want to choose a longer term.
Children – If you have young children, you may want to choose a longer term.
Cost – It’s important to choose a term that provides enough coverage while still being affordable.
Some insurance companies also offer the option to convert a term life insurance policy to a permanent policy, such as whole life insurance.
Does Term Life Insurance Expire?
Yes, term life insurance policies do expire. Typically, term life insurance policies have a set term length, such as 10, 20, or 30 years. Once the term is up, the policy will expire, and the coverage will end.
However, some term life insurance policies offer options to renew or convert the policy. However renewable and convertible term life insurance options may come with higher premiums compared to standard term policies. Their availability may also vary by policy.
Renewable Insurance
Renewable term life insurance allows policyholders to renew their policy for another term without having to go through a medical exam or underwriting process again. This is a good option for those who need coverage but can’t be eligible for a new policy due to age or health changes.
Convertible Insurance
Convertible term life insurance allows policyholders to convert their term policy to a permanent life insurance policy, such as whole or universal life insurance, without having to undergo a medical exam or underwriting process.
This can be a good option for those who want the option to convert their policy later on, as their financial situation or insurance needs change.
Final Thoughts
Term life insurance can be a brilliant way to get covered for the worst-case scenario but at a lower monthly expense than other types of life insurance. Before you get a term life policy in Ontario, it’s important to consider all the factors above.
It’s vital to ensure that you are fully covered for everything that your family may need if you pass away. Sometimes it’s better to pay that little bit extra for peace of mind. If you’re unsure what is the best option for you, then make sure you speak to an insurance expert.
