Everyone is familiar with insurance. But many Canadians aren’t so familiar with the ins and outs of life insurance, as important as it is. Term life insurance, specifically, refers to a life insurance policy that provides coverage for a specified term. Usually, the term ranges from 10 to 30 years. Unlike whole life insurance, term life doesn’t have a savings component and it’s typically less expensive.
Read on if you want to learn more about the basics of term life insurance.
Types of Term Life Insurance
There are two main types of term life insurance: level term and decreasing term.
Level Term
In a level term policy, the death benefit remains the same for the duration of the policy, regardless of the policyholder’s age. This type of policy is ideal for those who want to provide a set amount of coverage for their loved ones.
Decreasing Term
With a decreasing term policy, the death benefit decreases over time. This type of policy is often used to cover specific needs, like mortgages. This is because the death benefit decreases as the debt is paid off.
Why Consider Term Life Insurance
If you’ve been advised to get term life insurance but aren’t sure about it, here are some reasons why you might purchase a policy:
1. Financial protection for your loved ones.
The primary purpose of term life insurance is to provide financial protection for the policyholder’s loved ones in the event of their death. In essence, it means that at the time of your death, the death benefit can be used to pay for final expenses, pay off debts, and provide for your family.
2. Cover specific needs.
It’s also helpful because it can be used to pay for specific needs, like a mortgage, car loan, or a child’s education. The policy can be designed to provide protection for the length of time required to pay off the debt or to cover education costs.
3. To provide temporary coverage.
For people who have temporary needs, such as a young family or those with children who are dependent on them, term life insurance is very useful. With term life insurance, you can get a policy that will provide coverage until it’s no longer needed.
Who Needs It?
Like many Canadians, you may be wondering who needs term life insurance. Let’s put it this way: if you have dependents, life insurance can provide them with financial support in the event of your passing. So, if you have a spouse, children or parents who are financially dependent on you, having life insurance is wise.
Choosing the Right Policy
Different factors will affect your rate, including age, sex assigned at birth, smoker status, and more. When choosing a policy, it’s also important to consider the following:
1. Coverage Amount
You want to have enough coverage to provide for your family in the event of your death. The amount really depends on many factors, including your debts, other life insurance, and savings and investments. You can discuss with your financial advisor the amount that’s best for your situation.
2. Term Length
The term length you select should be long enough to take care of all your needs, but not too long that it’s too expensive.
3. Premiums
You can choose a policy that meets your budget. Work with your insurance agent to determine what’s best for you.
4. Renewability
Some policies are renewable. This means you can renew at the end of the term without providing evidence of insurability. You’ll need to decide if this is right for you.
5. Conversion Option
A conversion option allows you to convert the term policy into a permanent life insurance policy without providing evidence of insurability. This is valuable if you want to keep the policy in place as you get older.
IA Term Life
Term life insurance is a cost-effective way to provide financial protection for your family. It’s important to choose the right coverage amount, term length, and policy type to ensure that the policy meets your and your family’s needs.
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