What is term life insurance?
Term life insurance is temporary coverage. The length of that coverage can vary; Canada Life My Term™ insurance, for example, can last from 5 to 50 years depending on your needs. It pays out a lump sum to whoever you choose as long as it’s during the set term.
It can be a budget-friendly option, especially if you get your coverage when you’re younger and healthier where the cost of coverage is usually lower.
When should you consider getting term life insurance?
Term life insurance payments stay the same for as long as you’re covered. For example, if you bought a 30- year term life insurance policy in 2000 and your monthly payment was $20, it will still be $20 per month in 2025.
Because the cost of coverage is calculated based on your age and health status, it can often be more cost-effective to get term life insurance when you’re younger and less likely to have developed any health conditions that might cause your coverage to cost more. Since your premium payments don’t change during your selected term, this means you can keep this lower cost even as you age and your health might change.
Here’s an example:
Ivana is a 45 year old non-smoker who’s looking for term life insurance. She’s a mom of 3 and wants to help cushion the financial blow for her family if something happens to her while they’re still young.
If she got a Canada Life My Term™ 10-Year policy now, she’d pay about $15 each month. If she was 55, however, that same coverage would cost $5 more each month.
That might not seem like a lot, but over the lifetime of her policy that adds up to $600 more.
Should you only get term life insurance when you have kids?
Big life milestones, like getting married or having children, can often be a trigger for people getting term life insurance. You might feel the need to make sure that the people who depend on you now aren’t left struggling financially if something happens to you.
That said, there are other reasons why you might want to think about term life insurance.
Here are 3 examples:
Tyrone is 25 and a non-smoker. He has $150,000 in debt because he recently started his own small business. He plans to pay this off in the next 10 years but wants to make sure this is paid off if something happens to him in the meantime.
So, he gets a Canada Life My Term™ 10-Year policy for $150,000. This costs him about $17 a month.
Life insurance can also be a way to replace income if something happens to you. For example, Angela is 30 and a smoker. She and her partner don’t have kids, but they recently bought a house together. To make sure her partner can still pay the mortgage if something happens to her, Angela gets a Canada Life My Term™ 30-Year policy for $1 million. This costs her about $128 a month.
Lucy is 20. She doesn’t have many commitments at this point in her life, but she likes to plan ahead. By 30, she hopes to buy a house and have a baby. Because she knows her payments will be lower now than in 10 years, she decides to get term life insurance now rather than paying more when she’s a decade older.
What age is too old for term life insurance?
Most existing policies no longer cover you if you’re over 85, and most won’t issue you a new policy if you’re over 80.
If you’re looking for insurance that can last a lifetime, you might consider permanent life insurance instead.
If you do this, you might consider “converting” your term policy when you’re a bit younger. These kinds of insurance can sometimes require a medical exam, so bear that in mind, too. (You usually don’t need a medical exam if you are converting a Canada Life term policy to a permanent policy.)