Term life insurance is one of the oldest type of life insurance policies. The policy is set in such a way that the policyholder gets coverage for a specified period of time. Within this time, the policyholder gets to pay a level premium. Once the term life insurance policy has expired, the policyholder has the option of renewing the policy at much higher premiums without having to take a medical or shopping for another Canada term life insurance. Some term life insurance policies also have the option of converting it into a whole life insurance policy at any point within the coverage period. Taking a term life insurance Canada policy has various advantages and disadvantage. To determine whether term life insurance is for you or how long a term you should go for, you may need to review your financial plan or seek the advice of a professional.
Advantages of Term Life Insurance
- Low Initial Premiums – Canada term life insurance has very low premiums as compared to the other types of life insurance policy in the first period of coverage. The premiums of a term life are pretty much affordable to all Canadians. Because of the low rates, the cover is ideal even when you are unsure of your future incomes or when your incomes are unstable. A sizable term life insurance policy for a 10 year term can go for as low as $20. According to term life insurance quotes for 2010, a non smoking female aged 40 seeking a 20 year term life insurance Canada policy will be charged on average $63.90 month premiums by Canada Life Insurance, $68.85 by RBC Insurance, $64.58 by Empire Life and $70.65 by Sun Life Assurance. The rates are however subject to other underwriting factors and may range slightly depending on your particular situation.
- Convertibility – Another advantage of Canada Term Life Insurance is that most Life Insurance companies in Canada will offer conversion to a permanent life insurance policy at any point without a need for a medical. This means that you can enjoy low rates for a period of time that you may not comfortably afford a permanent cover and convert once your finances are stable. However, you need to note that the rates during conversion may drastically increase.
- Renewal of Policy – With most Canada Term Life Insurance companies, they will offer renewal of the life insurance policy usually until one is 80 years old. Therefore, if you are 30 year and take up a 20-Term Life cover, you can renew the policy once you get to 50 years old and renew it again to a 10-Term Life to take you to 80 years old. There are still companies that offer renewal until one is 100 years old which is pretty much like a permanent policy.
Limitations of Term Life Insurance
Again, depending on your particular situation, a Term Life cover may have various limitations making it not ideal for your life cover. Some of these limitations are described below.
- No Cash Value – One of the limitations of a term life that is unique to this type of policy is that it does not build a cash value over time. A policyholder receive no other benefit apart from the death benefit once the policyholder dies within the term period. Whole Life Insurance and Universal Life Insurance will have a cash value that can be of use to the policyholder within their life.
- High Renewal Premiums – The Term Life insurance has high renewal premiums. If you choose to renew a term life insurance policy without taking a medical, the premiums will usually go up more than 10 times. The same happens if you choose to convert the Term Life Insurance into a permanent life cover.
Therefore, depending on your financial plan, your age, your dependents number and age and many other factors, you may need to review term life against other options and make a more informed decision.