06/14/23
Term life insurance is a type of life insurance characterized by premiums that are level for a defined period of time. After that time, premiums generally increase (if the policy is renewable) or the policy expires (if the policy is not renewable).
The period of time during which the intial premiums are level is known as the ‘term’. So a policy that has level premiums for 10 years, is a 10 year term. If the premiums are level for 20 years, then it’s a 20 year term policy.
Common terms are 10,20, and 30 year term policies, however terms of 15 and 25 are also available. A few companies (RBC, Canada Life for example) have terms of durations anywhere between 5 and 40 years. 10 year, 20 year and 30 year term are the most commonly purchased term policy types in Canada and as a result tend to have the most competitive premiums. Other terms tend to be less competitive with their premiums.
Term Life Insurance does not have cash surrender values or any investment options as it’s meant for shorter term durations – shorter term being ‘less than life’ so could be as long as 30 years.
Term life insurance has a variety of options. These options are generally available for free when the are available, but different companies have different variations of these options. Some of these options (particularly Renewable and Convertible) are vital to your term life insurance policy so you should care these options in addition to premium. Curiously, these options are not generally well correlated with price – often the least expensive products have great options and more expensive policies lack some options.
The four most common options on term life insurance are:
To get the best term life insurance policy at the best premiums, you should initially start with an online quote. Then starting at the least expensive, compare policy options and companies to find the best, at the cheapest price. Companies change their premiums somewhat routinely and each company targets different coverage amounts, term policy types, and ages so there’s no one perfect solution for everyone as to what the best company is for you.
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