What's the Most Popular Type of Life Insurance?
In Canada, the most popular type of life insurance is term life insurance.
Term life insurance is affordable, lasts for a specific length of time, and usually doesn’t require a medical exam, depending on your age and the amount of insurance you need.
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What is term life insurance?
Term life insurance gives you coverage for a specific period of time that you choose, usually between 10 and 40 years, although it’s possible to choose term coverage for five years.
How old do you need to be for term life insurance?
Term life insurance is available to people between the ages of 18 and 70 years.
What’s the point of term life insurance?
Term life insurance provides a financial payout to the beneficiary if the policyholder dies within the term you have chosen. It's designed to cover potential financial obligations like mortgage payments, debts, or educational costs and it’s tax free.
How does the beneficiary get the term insurance payout?
The payout for term life insurance is typically made to the beneficiary when the insured person, the policyholder, dies within the policy's term. The beneficiary will then file a death claim with the insurance company and the tax-free payout is usually made within a few weeks to a few months.
Why is term life insurance so popular?
Term insurance is popular in Canada because you can choose the term (amount of years) that suits your needs and it’s more affordable than permanent life insurance, which lasts for the duration of your life.
The price of term life insurance is determined by your age, health, gender, lifestyle (do you smoke or not), coverage amount, term length, and the specific policy type.
Why is term insurance affordable?
It’s affordable because you pick the duration of this life insurance policy. Term insurance lasts for a set period of time and that makes it more affordable than permanent life insurance.
Term life insurance is also affordable because it’s for a fixed period of time and the tax-free death benefit is only payable to your beneficiaries if you die. This helps keep premiums lower than permanent life insurance policies, which provide lifetime coverage and often build cash value.
Note that: If you choose a 30-year term at the age of 30, you could outlive the policy at the age of 60 and need to renew it.
If you choose term insurance, make sure your debts are covered to avoid leaving behind major expenses for your loved ones.
Does the price of term insurance go up over time?
No. Term insurance is typically offered at a fixed price for the duration of the term you have chosen, meaning the premium does not go up. When the term expires and if you decide to renew the policy, the price may increase due to your increased age and risk factors.
What’s the payout range for term life insurance?
The specific payout amount is determined by the individual's coverage needs and the policy purchased. The term of the policy (for example 10, 15, 20 years) affects the payout amount. The longer the term, the more potential for a larger payout for your term insurance policy.
The lowest payout for a term life insurance policy can range from $5,000 to $10,000, depending on the type of policy and its purpose, such as covering funeral expenses.
Others range from $100,000 to $1 million payout. Payouts for some term insurance policies can be in the millions.
How much does term life insurance cost?
The term you choose, your age, and your health will influence the cost. Some term life policies can start at $15 to $20 per month.
The average premium for term life insurance in Canada is $20 t $30 per month for $500,000 coverage for a health person who’s around 25.
Note that older term life policyholders usually have higher premiums.
Do you need a medical exam for term life insurance?
Many insurers offer term life insurance policies with no medical exams, especially for lower coverage amounts and healthy applicants. Your age, health, and amount of coverage can influence whether you need a medical exam is needed for term life insurance.
Can you get term life insurance with a pre-existing condition?
It is possible to get term life insurance in Canada if you have a pre-existing medical condition. The main factor influencing your eligibility for term insurance is the severity of your condition, how well it's managed, and the specific insurance company's guidelines for pre-existing conditions.
Diabetes, for example, might not affect your ability to get term life insurance. A more serious illness such as cancer might require more medical tests and result in higher premiums, specific exclusions, and a waiting period. Guaranteed acceptance policies, though often more expensive, are an option for those with pre-existing conditions.
It’s important to be honest and provide all relevant medical information when applying for term life insurance.
Should I get term life insurance if I am over 60?
If you have financial obligations and debt, it can be a good idea. Note that term life insurance typically ends when the insured person reaches age 85.
Should younger people get term life insurance?
Yes, you should consider getting term life insurance as early as possible because you will lock in the price of premiums over the term you choose, such as a 30 or 40-year term with premiums that don’t increase. If you have a young family, a mortgage, and debt, term life insurance can protect them financially.
I don’t want term life insurance. What other life insurance can I get?
Permanent life insurance covers you for your entire life and it’s more expensive than term life insurance.
In most cases, your permanent life insurance premiums are guaranteed to stay the same during your life and don’t go up. You don’t need to renew your permanent life insurance because it doesn’t expire. Your coverage is lifelong.
It typically includes a cash value component that grows over time, which can be accessed through loans or withdrawals, potentially offering tax-advantaged savings and investment opportunities.
It also offers a tax-free death benefit.
Plan how life insurance can meet your family’s needs
Life insurance is about protecting your family for the future. As your circumstances change over the years, it’s a good idea to reassess how your life insurance can protect your family.
Your Western Financial Group life insurance expert can speak to you about how life insurance can help protect your family over the years.
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