With most products, there are pre-set lengths of time, called terms, and if you die during your term, the people you choose – also referred to as a beneficiary – will receive a tax-free payout. When you set up your policy, you choose how much that lump sum will be. The regular payments that you pay into the policy, called premiums, stay the same over that time.
Canada Life’s My Term™ product offers a completely customizable option that lets you choose a term tailored to help meet your specific needs. That can be any term length from 5 years to 50 years, up to age 85. For example, if you have a mortgage that takes 22 years to pay off, and you only need coverage for that amount of time, then you can choose the exact term length that fits your budget.
What term life insurance typically covers:
- Death benefit: A lump sum payment provided to the beneficiaries of the insured person upon their death.
- Natural causes: As long as the death is not excluded from the policy terms.
- Accidental death: As long as the death meets the policy’s definition of an accident and is not excluded in the terms and conditions.
Here are some examples of a family and an individual and how their term life policies may differ:
Young family with a mortgage
- Scenario: A young couple in their 30s has recently purchased their first home and started a family. They have a 30-year mortgage and want to help ensure that, in the event of their untimely passing, their spouse and children can continue living in the house without financial strain. They also want to cover their outstanding debts.
- Insurance policy: They opt for a 30-year term life insurance policy with a coverage amount that matches their mortgage balance and includes additional funds to cover debts and provide for their children's future education expenses.
Single individuals with dependent parents
- Scenario: A single individual in their late 40s is financially responsible for their aging parents. They want to help ensure that, should anything happen to them, their parents will have the financial support they need. They also have some personal loans.
- Insurance policy: They choose a 20-year term life insurance policy with a coverage amount that not only covers their outstanding loans but also provides a financial cushion for their parent's living expenses and potential medical bills. This policy ensures their parents' well-being during a critical period.
How do payments work?
Your premiums depend on the coverage amount, term length, and factors such as age, health, gender, and occupation. These payments stay the same over your chosen term. When the term is up, the policy will renew automatically on a yearly basis until its ultimate expiry date, unless you cancel it. Or, if your needs change, you may be able to change it to longer-term or permanent coverage.
There are 2 main types of coverage to consider, depending on whether you’re insuring just 1 person or 2.
- Single-life coverage pays the death benefit on the death of the insured person.
- Joint first-to-die coverage pays the death benefit on the death of the first insured person to die.
Term life insurance also has its own set of features and options that could include:
- Cost over time: Premiums are set for a specific term (e.g., 5 to 50 years).
- Health exams: Many term life insurance policies require a health exam as part of the underwriting process. The results of this can affect premium rates. Other policies may offer “no-exam” or” simplified issue” policies, which have higher premiums, but don’t require full health exams.
- Cash value and withdrawals: Term life insurance policies don’t build cash value over time. They provide pure death benefit coverage.
- Convertibility: Some policies offer a conversion option that allows you to convert the policy into a permanent life insurance policy. Convertibility allows them to change their policy into a permanent one, ensuring that their heirs receive a death benefit.
Example: Imagine a young couple who recently became parents. To help protect their growing family, they purchased a 20-year term life insurance policy because it was the most affordable option at the time. As the years pass, they realize that they want to help ensure financial security for their children and grandchildren even after the term ends.
- Riders and additional coverage: Term life insurance policies can offer additional coverage options, or riders, that you can add to your policy for an extra cost.
You also have the option to add other custom features, called additional benefits or riders, that are not part of the base insurance. Some examples include:
- Guaranteed insurability: Allows you to purchase additional insurance on specified option dates without answering more health questions.
- Child term life: Allows you to purchase increasing term life insurance coverage on your children under 1 policy.
- Accidental death benefit: Provides additional coverage if your death is caused by an accident, with specific restrictions.
Term life insurance provides a flexible and cost-effective way to help safeguard your loved one’s financial future in the event of your unexpected passing. It can be customized to suit your needs, protect your family, and help achieve long-term financial goals. Speak with an advisor if you'd like to start securing your family’s future.