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Term Life Insurance in Canada


What is term life insurance? How does a term life insurance policy look like? And why is term life insurance usually the cheapest insurance package compared to other life insurance packages?

Read this article to learn more with Best Insurance Online!

What is Term Life Insurance?

Term life insurance is a contract between an insurance policyholder and an insurance company (the insurer), which guarantees that the insurer will pay a sum of money to the designated beneficiary when the insured dies within the period agreed in the insurance contract.

Who should buy Term Life Insurance?

Term life insurance Canada is affordable for everyone. If the insured is looking for a budget-friendly type of insurance, term life insurance is precisely the one!
– If you are female, 30 years old, a non-smoker, you are supposed to pay about 14$ a month (for the term of 10 years)
– If you are male, 30 years old, a non-smoker, you are supposed to pay about 19$ a month (for the term of 10 years)
Suppose the insured is the financial pillar of your family. All of his beloved ones depend on him financially. In that case, it is highly advised that the insured choose this package for his family members’ safety. In the worst case in the future that the insured were to pass away suddenly, term life insurance would pay a sum of money to the people the insured designated during this difficult time. The pay-out is also tax-free!
Due to its affordability, the insured can buy it even when he is young, in his twenties or thirties.
The insured should buy term life insurance if they are against the risk of death. And as we mentioned beforehand, term life insurance has no savings purpose.

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Characteristics of Term Life Insurance policy

– The time specified in the contract is usually the maturity date.

If the insurance period expires but the insured is still alive, the insurer will not be responsible for paying any amount to the insurance buyer.

In other words, term life insurance is a pure death benefit. There is NO accumulation/savings value.

– Thus, the insurer’s payment is uncertain; the insurer only pays when the insured dies during the insurance contract.

Even if the insured dies shortly after the policy’s expiration, for example, one day later, the insurer still does not have to pay.

– For that reason, the premiums in these policies are usually the lowest compared to other life insurance packages.

Types of Term Life Insurance in Canada

Term insurance is one of the most basic types of life insurance. In fact, there are many different variations of term insurance policies. Variants of term insurance include:

(1) Fixed Term Life Insurance (also known as Level Term life insurance)

Level term life insurance is the most classic and simplest form of a term insurance policy. This type of insurance policy’s distinctive feature is that the premium and the sum insured do not change during the policy term.

(2) Renewable Term Life Insurance

Renewable term life insurance is an insurance policy in which the insured can renew the contract termination date.

The cost of renewing this policy is negligible because the insurer already knows the insured’s health status relatively well, so the beneficiaries do not need to provide additional evidence about the insured’s health.

However, the insurer usually stipulates that the insured’s age must be limited to a certain age, generally for this policy type. When the insured enters 65, they cannot be renewed.

(3) Convertible Term Life Insurance

Convertible term life insurance is a form of a fixed-term insurance policy. However, it gives the insured the option of converting part or all of the insurance policy into a mixed life insurance policy or permanent insurance policy while the contract is still effective.

Like Renewable term life insurance, the insured does not need to re-qualified when the insured converts to any form of lifelong insurance offered by the same insurance provider.

(4) Decreasing Term Life Insurance

Decreasing term insurance is a type of insurance contract with the sum insured gradually decreasing throughout the policy. The reduction of the premium is specified in the insurance contract.

(5) Gradual Term Life Insurance

Gradual term insurance is the Incremental term insurance that serves the need to deal with the adverse effects of inflation to reduce the actual sum insured of the insurance policy when the value of money is reduced over a certain period.

(6) Family Income Insurance

Family income insurance is the type of life insurance that provides an income for a family in the event of the death of a breadwinner.

(7) Conditional Term Life Insurance

It is a form of term life insurance with a definite term but the necessary and sufficient conditions for the insurance enterprise to pay (usually the periodical allowance) that the insured dies and the beneficiary specified in the policy.

Besides, term life insurance Canada is classified based on the number of years agreed:

  • 5-year renewable term
  • 10-year renewable term
  • 15-year renewable term
  • 20-year renewable term
  • 25-year renewable term
  • 30-year renewable term, etc.
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More info that the insured need to know about Term Life Insurance in Canada

  • Term life insurance is the primary insurance product
  • This insurance does not participate in interest sharing and has no cashback
  • Contract term: typically, 10/15/20 years
  • Premium payment term: equal to the contract term
  • Premium payment: annual, semi-annually, and quarterly
  • Age participating in insurance: from 18 to 65 years old (65 is usually the maximum age to renew this insurance)

To sum up

If the insured is looking for temporary protection for his family members after their death, such as: helping them pay the mortgage or day-to-day cost of living in a period, or take care of the expenses for their funerals, or partly support tuition fee of the children, it is worth investing in term life insurance! Also, take a look at the Whole Life Insurance and Universal Life Insurance to see the differences.

When you want to buy term life insurance in Canada, you can either go directly to the insurance companies or go with the other direction – use an insurance brokerage service. We’d like to recommend Insurance Direct Canada as a broker since they are one among the most trusted ones in Canada.

Frequently Asked Questions

1. When joining a term life insurance policy, what happens when the policy expires, and the insured is still alive?

Term life insurance is the type of life insurance that only covers the sum assured within the agreed time specified in the contract. Therefore, if the insured person outlives the insurance policy’s expiration date, the customer will not receive any money/ benefits after that.

2. Why should I buy term life insurance while I do not expect to die in the term life insurance’s period of 10-30 years?

Yeah, nobody wants to die in 30 years, but sadly, nobody can know what happens when tomorrow comes. The main benefit of buying term life insurance in Canada is the assurance you can receive from the insurance company. It is a huge relief always to be aware that your loved ones will be cared for after you pass away, thanks to the insurance policy.

3. Do customers participating in term life insurance receive any interest during the insurance term?

Term life insurance is a type of life insurance that is only involved with a protection factor – safeguarding customers against any risks in the insurance term. If the insured passes away, the insurance company will pay the sum insured to the designated beneficiary to cover necessary costs. However, participating in a term life insurance policy does not help you gain interest. Still, in return, you are expected to pay low premiums yet be protected at an extremely high level.

4. How is the premium of term life insurance policy compared to other life insurance packages?

Being a type of insurance that provides only protection within a limited term, the premiums of term life insurance products are the lowest compared to other life insurance packages such as universal life insurance or whole life insurance packages.

For example, when you are a 30-year-old man in a normal health condition, you are expected to pay about $3,000 for permanent life insurance packages. In comparison, you are expected to pay about $300 for a 20-year term life insurance policy.

Similarly, you are supposed to pay an approximate $6,000 for any permanent life insurance package when you are a 50-year-old, while $800 is a number you can expect to pay for a 20-year term life insurance policy.

You can see the difference, right?

5. How can I know that I should choose a Term Life Insurance for 10 years, 20 years, or 30 years?

We cannot give you a thorough answer just in some lines. A safe reply should be that it depends on your current financial status, current situation, and incentive to buy the term insurance package during this period.  

If your budget is tight, go for the shortest time – 10 years, because it provides the lowest premium that you can afford. Or a 10-year term life insurance is suitable for you when it takes 10 years for your child to graduate from university and earn money by himself etc.

If your financial status is better, pick a 20-year or 30-year term life insurance package, from which you can get protection for 2-3 decades. You can consider a 30-year term life insurance in Canada when you are in your 30s, with a good income, and you already plan for your retirement in 20-30 years.

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  1. […] Term life insurance is a type of insurance that the company will pay the death benefit if you pass away within a period, thus the word “term.” The length of the term is up to your choice. Typical terms are 10-year, 20-year, 30-year. Some insurance companies offer custom periods to suit your needs. When the term expires, you can renew it, switch to a permanent life policy, or terminate it.  […]

  2. […] Term life insurance only offers protection for a limited time, but they do not cost as much as whole life insurance policies. That said, for many millennials, this is a preferred choice because they do not have to spend too much to receive insurance coverage. Furthermore, sometimes, millennials only need life insurance coverage for a short period. For example, if you are starting a family with kids, you might need a term life insurance policy for a while, at least until your kids are fully grown. If certain unfortunate events occur, the family will still receive adequate financial support in this case.  […]


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