What is 20-Year Term Life Insurance in Canada?

Purchasing life insurance is an essential financial decision that can protect your loved ones in case of unexpected events. While there are many options, 20-year term life insurance policies have become popular for many Canadians.

In this guide, we’ll explain 20-year term life insurance, who it’s best suited for, how it works, the pros and cons, the best companies in Canada, pricing, and everything else you need to know to make an informed decision.

What is 20-Year Term Life Insurance policy?

A 20-year term life insurance policy provides temporary coverage for a fixed period of 20 years. It offers the following key features and benefits:

• Affordable Premiums: Term life insurance premiums are lower than permanent life insurance forms like whole or universal life. You lock in a fixed premium for the entire 20-year Term.
• Guaranteed Death Benefit: The death benefit payout to your beneficiaries is guaranteed as long as you continue paying the premiums.
• Fixed Policy Term: You’re covered for a predetermined period of 20 years. After the Term expires, coverage ends unless renewed.
• Convertibility: Many term policies allow you to convert to permanent life insurance without a medical exam before the Term expires.
• Living Benefits: Some insurers offer accelerated death benefits, which pay out a portion of the death benefit if a person is diagnosed with a terminal illness.

How Does 20-Year Term Life Insurance Work in Canada?

Here is an overview of how 20-year term life insurance works in Canada:

• You select the death benefit payout amount based on your financial needs and obligations. This is the lump sum your beneficiaries would receive in the event of your death.
• The insurance company calculates your premiums based on the payout amount, your age, gender, health, lifestyle, and other risk factors.
• You pay a fixed premium each year for 20 years. The coverage remains in effect as long as the premiums are paid.
• If you pass away during the 20-year Term, the death benefit is tax-free to your designated beneficiaries.
• If you outlive the 20-year Term, coverage expires unless renewed for an additional term. The premiums increase at renewal as you age.

Who is 20-Year Term Life Best Suited For?

20-year term life insurance is best suited for individuals who need life insurance coverage for a specific period, such as:

Young Families

If you have young kids, a 20-year term aligns well with mortgage payments and college education costs. It provides budget-friendly protection as you build savings.

Read more: Life Insurance for Children in Canada

Mid-Career Professionals

A 20-year term is beneficial for those in their 30s, 40s, and 50s who need higher coverage to protect their families before premiums become prohibitively expensive.

Nearing Retirement

A 20-year term in your 50s or 60s can provide coverage until your assets are able to replace income lost with the death of a spouse.

Temporary Needs

This term length is appropriate if you need life insurance for a temporary need, like covering a debt that will be paid off in 20 years.

Pros and Cons of 20-Year Term Life Insurance

Here are some of the key advantages and disadvantages of 20-year term life insurance in Canada to consider:

Pros of 20-Year Term Life Insurance

• Lower Premiums —Twenty-year term life insurance typically offers the lowest premiums among life insurance policy types. Annual premiums can be up to 80% lower than permanent life insurance.
• Guaranteed Level Premiums – Your premium is locked in for the entire 20-year period and cannot be increased by the insurer during the Term. This allows you to budget for the expenses accurately.
• Larger Coverage Amounts – You can qualify for coverage of $1 million or higher with term life insurance, meeting the needs of high income earners.
• Easy Application – Term life insurance requires a simpler application process compared to permanent life insurance products. Approval is quick and coverage starts rapidly.
• No Medical Exam – For policy amounts under $1 million, you may not need a medical exam during underwriting, making it accessible to those with health issues.
• Conversion Options – Many term life policies allow you to convert to permanent life insurance before your Term expires without undergoing medical testing again.
• Living Benefits – Some insurers offer accelerated death benefits that pay out a portion of the death benefit if you are diagnosed with a terminal illness while the policy is active.

Cons of 20-Year Term Life Insurance

• No Cash Value – Term life insurance does not build up an equity cash value like permanent life insurance policies. Premiums paid are lost if you outlive the Term.
• Coverage Expires – The policy only provides protection for the defined 20-year period. Once the Term expires, coverage ends unless you choose to renew.
• Renewal Rates Increase – Renewal rates after the initial 20-year term ends will be significantly higher as you age and will represent a higher mortality risk.
• No Return on Premiums – If you outlive the 20-year Term, neither you nor your beneficiaries will receive any return on the premiums paid over two decades.
• Not Permanent – For lifetime protection, you would need to renew the policy annually past age 70 or 80 at increasingly expensive rates.
• Cancellation – If you cancel the policy early, you lose coverage and do not receive a refund on premiums already paid to the insurer.

Best Companies for 20-Year Term Life Insurance in Canada

Here are some of the top life insurance companies in Canada to get quotes for 20-year term life insurance coverage:

Company	Financial Strength Rating
Sun Life	A+ (Superior)
Manulife	A+ (Superior)
Canada Life	A+ (Superior)
RBC Insurance	A+ (Superior)
BMO Insurance	A (Excellent)
Industrial Alliance	A (Excellent)
Equitable Life	A (Excellent)
SSQ Insurance	A- (Excellent)
Wawanesa	A- (Excellent)

These insurers have strong financial strength ratings from credit rating agencies like A.M. Best and offer some of Canada’s most competitive 20-year term life insurance rates.

Sun Life is one of the largest life insurance companies in Canada. It offers both 10- and 20-year term life insurance options. Sun Life offers policies up to $50 million and features an easy online application process.

Manulife is another leading provider of individual life insurance plans. Their Vitality program allows you to earn premium discounts for healthy habits. You can get term life insurance from Manulife with coverage up to $50 million.

Canada Life has consistently achieved high ratings for customer satisfaction, and policyholder claims experiences. Their 20-year term life plans offer a streamlined application without lab tests or medical exams for qualifying applicants.

RBC Insurance is the life insurance arm of a central Canadian bank. You can bundle your term life policy with other RBC insurance products to qualify for multi-policy discounts.

BMO Insurance offers 20-year life insurance coverage from $100,000 to $10 million. Its Compassionate Assistance Program provides grief counselling for beneficiaries after a claim.

Industrial Alliance is one of Canada’s leading insurers with over 4 million clients worldwide. They offer both 10 year term life insurance and 20 year term life insurance products that can be customized with optional coverage enhancements.

Read more: Best Term Life Insurance Companies in Canada

No matter which top insurer you choose, be sure to compare rates across multiple providers. Working with an experienced independent insurance broker can help you secure the best pricing.

What Does 20-Year Term Life Insurance Cost in Canada?

20-year term life insurance rates depend on several factors in Canada:

• Age – Rates increase as you grow older
• Gender – Rates are lower for women than men ( Read more: Why Women Pay Less for Life Insurance Than Men )
• Health – Poor health means higher premiums
• Lifestyle – Hazardous hobbies or occupations raise rates.
• Coverage Amount – Higher payouts mean higher premiums

To give you an idea, here are sample monthly premiums for a $500,000 policy for a healthy 40-year-old:

Company	Male ($500k Coverage)	Female ($500k Coverage)
Sun Life	$43	$38
Manulife	$46	$39
Canada Life	$44	$37
RBC Insurance	$47	$40
BMO Insurance	$45	$38
Industrial Alliance	$48	$41

As shown, a 40-year-old male can expect to pay between $43 – $48 per month for a $500,000 20-year term life insurance policy from a leading Canadian insurer. Rates for females average $5 lower across the board.

Premiums will be lower in your 20s and 30s, ranging from $30 – $35 monthly for half a million in coverage. Rates start increasing significantly in your 50s and 60s as mortality risk rises. Expect to pay $90 – $150+ monthly for the same amount after age 60.

Always compare quotes from multiple providers to find the best rate for your particular situation. Work with an experienced broker to shop the market on your behalf.

How Much Coverage Should You Get for 20 year term life insurance?

Choosing the right coverage amount requires calculating your needs. Here are some common methods:

• Income replacement method – Coverage equal to 10-15 times your annual income
• Debt coverage approach – Coverage to pay off mortgage, loans, and other debts
• Expenses approach – Coverage equal to the present value of college, household, and funeral costs
• Income stabilization method – Coverage to generate replacement income via safe investments

Also, account for savings, spouse’s earnings, and other insurance policies when deciding an appropriate amount.

For example, if you earn $100,000 annually and want to replace 10 years’ worth of income, you would need a 20-year term life insurance policy with a $1,000,000 death benefit.

Most insurers allow you to adjust the coverage amount after the initial purchase. You can raise or lower it as your insurance needs change over time.

How To Get The Best Rates On 20-Year Term Life Insurance

Here are some tips to get the lowest rates on 20-year term life insurance in Canada:

• Compare Quotes – Get quotes from several providers to find the best price. Rates can vary widely between insurers.
• Improve Health – Lose weight, quit smoking, and lower cholesterol to get rated as standard or preferred risk class.
• Pay Annually – Opt for annual premiums to lower costs compared to monthly payments.
• Buy Young – Apply in your 20s or 30s when rates are lowest. Costs substantially increase every 5 years.
• Lengthen Term – 30-year terms may offer better rates if you need extended coverage.
• Bundle Policies – You may get a multi-policy discount when combined with home or auto insurance.
• ** Raise Deductibles** – Higher deductibles reduce premiums on policies with living benefits.
• Avoid Riders Initially – Add-ons like waiver of premium or accidental death raise the base cost. You can add them later as needed.

An experienced independent broker or advisor can guide you to secure the optimal policy at the best rate.

Alternatives To 20 Year-Term Life Insurance

Here are some other life insurance policy types worth considering:

10 or 15-Year Terms – For shorter temporary needs, the lower premiums of 10 or 15-year terms may fit your budget better.

30-Year Term – This option extends your coverage by 10 more years compared to a 20-year policy. It amortizes premiums over a longer period.

Decreasing Term – With this, your death benefit decreases over the Term while premiums remain level. It can match a declining mortgage balance.

Permanent Life – Whole life and universal life offer lifetime protection and build cash value you can borrow against. However, premiums are 4-8 times higher.

Mortgage Life – This declining term insurance is tied to your outstanding mortgage loan balance, with the payout decreasing over time.

Group Life – Available through employers or associations, these plans typically offer lower rates in return for limited coverage amounts and less flexibility.

Each type has pros and cons. Assess your budget, timeline, and financial goals to select the right policy. A combination of Term and permanent life insurance often provides optimal protection.

What Happens at the End of 20 year Term life insurance?

Once your 20-year term life insurance policy reaches the end of its term, you have several options:

• Renew the policy annually at much higher rates. This is called term renewal.
• Convert the term policy to a permanent life insurance policy. This maintains coverage without new underwriting.
• Purchase a new term life insurance policy. You’ll need new underwriting.

Converting to permanent insurance can provide lifetime coverage. However, the premiums will be significantly higher than your original term policy. Purchasing a new term policy is often the most cost-effective choice.

What Happens After Your 20 year Term life Expires?

Once your 20-year term life insurance policy reaches the end of its term, you have three main options:

Renew the Term Policy Annually

Most insurers will allow you to renew your term life policy annually after the initial term length. This is also called annually renewable term insurance (ART). Here’s how it works:

• You can extend your policy year-by-year without taking a new medical exam.
• Renewal rates will be much more expensive than your original locked-in premiums. Costs increase each year you renew.
• Coverage can continue as long as you pay the renewal premiums.
• If you miss a payment, the policy will lapse.

Annual term renewal allows you to maintain coverage as you age. However, premiums get extremely expensive over time due to increased mortality risk. Converting to permanent life insurance or buying a new term policy is often the better financial decision.

Purchase New Term Life Insurance

Purchasing a brand new term life insurance policy is another option once your initial 20-year term expires. The process looks like this:

• You’ll go through full underwriting again, including medical exams and health questions.
• Because you are older now, your premiums will be higher than your original policy.
• You’ll want to select a shorter term length this time, such as 10 or 15 years.
• Coverage can continue as long as you pay the new premiums.

Getting a new term life insurance policy can sometimes be more affordable than renewing an existing one annually. Make sure to shop multiple insurers to find the best rates.

Allow Policy to Expire

You can simply let the policy expire if you no longer need life insurance after your 20-year term ends. Reasons you may no longer need coverage include:

• Your mortgage is fully paid off.
• Your children are financially independent adults.
• You’ve built up sufficient retirement savings.
• Your spouse has their life insurance coverage.

For many Canadians, life insurance needs decrease by the time you reach your 60s and 70s. Allowing term policies to expire once obligations are met can prevent overpaying for unneeded coverage.

Is 20-Year Term Life Insurance Right For You?

20-year term life insurance can be an affordable way to protect your loved ones for a set period. It makes sense for temporary needs like covering household expenses and debts while your children grow up. The guaranteed premiums and death benefits allow you to lock in coverage when rates are lowest.

Thoroughly evaluate your financial obligations, income needs, and time horizon when shopping for life insurance. Consult with a licensed advisor or agent to determine if 20-year term life insurance is the most appropriate solution for providing your family with long-lasting financial security. Get quotes from highly-rated insurers to find competitive pricing to fit your budget.

Is 20-Year Term Life Insurance Worth It?

For those needing solid coverage for 20 years, a 20-year term life insurance policy can provide excellent value. It gives you guaranteed protection during your high-earning years and prime financial obligations.

The affordability of term insurance makes it feasible for most households to acquire ample life insurance. The peace of mind gained from knowing your family is financially protected in the event of your premature death is invaluable.

However, it is critical to make sure you select the appropriate term length for your needs and don’t overpay by renewing or converting the policy later on. This is where a qualified life insurance agent or broker can be invaluable. They can help you determine if 20-year term life insurance aligns well with your needs and budget.

Final Tips for Purchasing 20-Year Term Life Insurance

Follow these tips when purchasing 20-year term life insurance:

• Compare quotes from 3-5 top providers to find the best rates. An independent broker can help with this.
• Select a coverage amount to pay off debts, replace income, fund college, and cover final expenses.
• Consider adding optional riders like a waiver of premium or accidental death benefit for enhanced protection.
• Get coverage early to lock in the lowest premiums for the 20-year term.
• Undergo medical exams and testing honestly and thoroughly.
• Understand when renewing, converting, or replacing your policy later makes sense.
• Review beneficiaries, premiums, and coverage limits annually and adjust if needed.
• Avoid letting policies lapse. Set up auto-pay to ensure continuous coverage.

Getting 20-year term life insurance provides financial security for your loved ones for two decades. Understanding how these policies work and shopping carefully allows you to gain vital coverage for your temporary needs. Consult an advisor to ensure you make the best decision.

FAQ of 20 term life insurance in Canada

Article Source

The article is compiled based on the author’s knowledge and the following reputable references:

Is a 20-year term life insurance policy right for you? – guardianlife

What is 20-year term life insurance? – Canada Life

20-year term life insurance – aflac