Why Term Life Insurance is the Most Popular Life Insurance Product
Term life insurance is the most popular life insurance product. A major reason why most get term life insurance, is for the comfort and security of those left behind. When someone dies, if they have a term life insurance policy, their beneficiary receives the remaining term on the policy. A term life insurance policy stays in force for a set time like 5, 20, or 30 years, and when that time is up it expires.
Canadians are underinsured
In 2020, about 18% of life insurance was secured through employers, according to the Canadian Life and Health Insurance Association. But as Dejan Mirkovic, CEO of Goose Insurance points out, “we’re seeing a substantial shift from traditional workers moving into gig jobs, but there are no benefits that come with those roles.” But gig economy workers need life insurance as much as other Canadians, and some households rely entirely on gig income.
Gig workers are not the only Canadians who are underinsured. According to Cision, “40% of Canadians have no life insurance. Furthermore, while 64% of Canadians believe life insurance is one of the most important types, nearly 80% are dramatically underinsured. These coverage gaps, especially amongst millennials, largely exist because consumers don't feel they understand life insurance (70%) and/or feel the process is too difficult and slow (67%).”
Term life insurance is a popular solution for Canadians
Fortunately, term life insurance is easy to understand, affordable, and flexible enough to make it easy for Canadians to provide a financial safety net for their families, which makes it the most popular life insurance product sold.
One benefit that makes term life insurance so popular is its affordability. Term life insurance policies are more affordable than other types of life insurance and your premium will stay the same until the term is over.
According to Investopedia, “The average 30-year-old man can get a 20-year term policy with a $500,000 death benefit for $27.42 a month. Because of her typically longer lifespan, the average 30-year-old woman can purchase the same policy for just $21.74.” Factors like a larger death benefit, longer term, and your health at the time of purchase affect the cost, but term life insurance is generally a fraction of the cost of permanent life insurance.
Because you can choose the length of time your policy will be active, term life insurance is a great option if you want a safety net for your children until they reach adulthood, for example. Or you can choose a term that corresponds with achieving a financial goal like paying off your mortgage or other debt that you would otherwise pass on to someone else if you died. Many parents use term life insurance policies to cover their children until they finish their post-secondary education. You can also choose to renew your policy but your rate will go up and it will increase each time you renew.
Choosing a term life insurance policy
When deciding on a term life insurance policy, think about the situation or debt you need covered. For example, if you just purchased a house with a 30-year mortgage, you will need a 30-year term for your policy. Term life insurance is usually available for terms of 5, 10, 15, 25, or 30 years and 20-year terms are the most popular.
The other factor to consider is how large your death benefit needs to be. Multiply how much annual income your dependents need by how long they will need financial support. Make sure to add some extra coverage for inflation and unexpected expenses.