What is Term Life Insurance in Canada?

It can be beneficial to buy life insurance if you want to protect your loved ones financially in the event of your death. While you’re shopping around, you may come across an option called “Term life insurance” and be wondering what this means. Term life insurance is a common type of life insurance among many other kinds of life insurance. In this blog, we’ll go over what term life insurance is, the key differences between term life insurance and permanent life insurance in Canada, as well as if term life insurance is the right fit for you and your family. 

In this Article:

What is term life insurance?

Term life insurance is a type of life insurance that provides coverage for a specific period of time (a term). If the insured person passes away during the contract’s term, the insurance company pays the death benefit to the policy’s beneficiaries. Unlike permanent life insurance, term life insurance does not build cash value or provide any other ongoing benefits beyond the death benefit. It is generally less expensive than permanent life insurance and is often chosen by people who want to ensure that their loved ones will be financially protected in the event of their death.

Term life insurance policies will have a fixed premium, which means that the amount you pay for the policy will not change over the term of the policy. The term of the policy can range from just 1 year to 40 years, but the most common term lengths are 10, 20, and 30. Note that once the term of the policy ends, the coverage will expire, and you will no longer have life insurance unless you choose to renew the policy or purchase a new one. If you choose to renew your term, your premiums will tend to be higher in order to reflect your current age and health. This makes term life insurance a good option for people who have temporary financial protection needs, such as young families or people with short-term debt obligations.

How to get term life insurance in Canada?

In Canada, you can purchase term life insurance from insurance companies directly, or through brokers or financial advisors. To purchase term life insurance in Canada, you will need to go through an application process, which may include answering questions about your health and lifestyle, and possibly undergoing a medical examination. The insurer will use this information to determine your eligibility for coverage and the premium (cost) for your policy.

It’s important to shop around and compare quotes from different insurers to find the best policy for your needs. You can do this by working with a life insurance broker, who will help you find the best prices and policy for your needs.

While researching, you should also consider the financial strength of the insurer, as this will affect their ability to pay out a claim if you die during the term of your policy.

The process and steps to getting life insurance in Canada usually as follows:

Process to get term life insurance in canada
  • Determine your coverage needs: The first step in getting term life insurance is to determine how much coverage you need. This will depend on your personal circumstances, such as your age, income, debts, and dependents.
  • Shop around: It’s important to shop around and compare different term life insurance policies from different insurers. This will help you find the best policy for your needs at the most affordable price.
  • Choose a term length: Term life insurance policies come in different term lengths, such as 10, 20, or 30 years. Choose a term length that aligns with your coverage needs and financial goals.
  • Fill out an application: Once you’ve found a policy that meets your needs, you’ll need to fill out an application. This will typically involve answering questions about your personal and medical history. Working with an insurance broker can make this process much easier.
    • Undergo a medical exam: Some insurers may require you to undergo a medical exam as part of the application process. This exam will typically be conducted by a nurse or other medical professional and will involve taking measurements such as your height, weight, and blood pressure, as well as collecting a blood and urine sample.
  • Wait for approval: Once you’ve completed the application and medical exam (if required), the insurer will review your application and determine whether to approve your coverage. If approved, you’ll be given a policy with the terms and conditions of your coverage.
  • Pay your premiums: To maintain your coverage, you’ll need to pay premiums according to the schedule set out in your policy. If you fail to pay your premiums, your coverage may be cancelled.

It’s important to note that the process for getting term life insurance in Canada may vary depending on the insurer and the specific policy you choose and can be expedited. It’s a good idea to consult with a life insurance broker to help you understand the options available and choose the best policy for your needs. At PolicyLife we can also help you determine the amount of coverage you need, based on factors such as your debts, income, and family responsibilities.

How much does term life insurance cost?

The cost of term life insurance varies depending on several factors, including the insured person’s age, health, and lifestyle, as well as the length of the policy term and the coverage amount of the death benefit. Generally, younger people and those who are in good health will be able to obtain term life insurance at a lower cost than older people or those who have pre-existing medical conditions. As well, the longer the policy term or the higher the death benefit, the more expensive the policy will be. 

For example, the monthly cost for 10-year term $500K in coverage life insurance policies in Canada can typically range from $22 to $30 for non-smokers, and $44 to $78 for smokers depending on the insured’s age. Additionally, typically women pay less than men, and smokers will pay more than double the cost due to the health risks of smoking that life insurance companies take into account. This is because the cost of the premiums is based on the life insurance companies risk assessment of you passing away within your term policy. 

Term Life Insurance vs. Permanent life insurance

Term life insurance and permanent life insurance are two different types of life insurance policies. The main difference between the two is the length of the coverage. Term life insurance provides coverage for a specific period of time (term), while permanent life insurance provides lifelong coverage.

Term life insurance is generally less expensive than permanent life insurance because it only provides coverage for a specific period of time. Once the term of the policy ends, the coverage will expire and you will no longer have life insurance unless you choose to renew the policy or purchase a new one. Permanent life insurance, on the other hand, provides lifelong coverage and typically has higher premiums because the insurance company is taking on more risk.

Another difference between the two types of life insurance is the cash value component. Term life insurance does not have a cash value component, which means that it does not build any cash value over time. Permanent life insurance, on the other hand, has a cash value component that allows it to build cash value over time. This cash value can be borrowed against or withdrawn, providing the policyholder with additional financial flexibility.

Overall, term life insurance is a good option for people who have temporary financial protection needs, while permanent life insurance is a good option for people who want lifelong protection and the ability to build cash value over time.

Frequently asked questions (FAQ) about Term Life Insurance

Term life insurance can be a good option for some people in Canada. There are a few reasons why term life insurance might be worth considering:

  • It can provide financial security for your loved ones: If you have dependents who rely on your income, term life insurance can provide them with financial support in the event of your death.
  • It is generally less expensive than permanent life insurance: Term life insurance is typically less expensive than permanent life insurance because it only provides coverage for a specific period of time.
  • It can be a good choice if you have temporary needs: If you only need life insurance for a specific period of time, such as while you have a mortgage or while your children are young, term life insurance can be a good choice.

However, term life insurance may not be the best option for everyone. It is important to carefully consider your needs and circumstances before deciding if term life insurance is right for you. Still unsure about the type of life insurance policy for you and your family? Contact us today for experienced life insurance advisors to help you understand your options and make an informed decision. 

Determining how much life insurance coverage you need is an important and personal decision that depends on your individual circumstances. Here are some factors to consider when determining the amount of coverage you need:

  • Your financial obligations: Consider your current and future financial obligations, such as your mortgage, car loans, and credit card debt. You may also want to consider your children’s education expenses and your spouse’s potential income loss. 
  • Your income: Consider the financial impact your death would have on your loved ones. If you are the primary breadwinner in your family, you may want to consider a higher level of coverage to ensure that your loved ones can maintain their current lifestyle. 
  • Your assets: Consider the value of your assets, such as your home, savings, and investments. If you have significant assets, you may be able to use them to help provide for your loved ones in the event of your death, which could reduce the amount of coverage you need. 
  • Your debts: Consider any debts you may have, such as a mortgage or student loans. You may want to consider purchasing enough coverage to help your loved ones pay off these debts in the event of your death.

It is a good idea to speak with a financial advisor or insurance professional to help you determine the amount of coverage that is right for you. At PolicyLife, we can help you consider your specific circumstances and needs, and can provide guidance on the best way to protect your loved ones.

There is no specific age that is “best” for term life insurance. The best time to purchase term life insurance depends on your individual circumstances and needs. Here are a few things to consider when deciding when to purchase term life insurance:

  • Your age: Generally, the younger you are when you purchase term life insurance, the lower the premiums will be. This is because the insurance company is taking on less risk by insuring you at a younger age.
  • Your financial responsibilities: If you have dependents who rely on your income, it may be a good idea to purchase term life insurance sooner rather than later. This can provide financial security for your loved ones in the event of your death.
  • Your financial goals: If you have specific financial goals, such as paying off a mortgage or saving for your children’s education, it may be a good idea to purchase term life insurance to help protect those goals.
  • Your health: If you are in good health, you may be able to qualify for lower premiums on term life insurance. If you have certain health conditions, you may still be able to qualify for term life insurance, but the premiums may be higher.

It is a good idea to speak with a financial advisor or insurance professional to help you determine the best time to purchase term life insurance. They can help you consider your specific circumstances and needs, and can provide guidance on the best way to protect your loved ones.

The cost of life insurance in Canada can vary depending on a number of factors, including your age, gender, health, and the amount of coverage you need. In general, term life insurance tends to be less expensive than permanent life insurance.

In general, the proceeds of a life insurance policy in Canada are not taxable to the recipient. This means that if you receive a death benefit from a life insurance policy as a result of someone’s death, you will not have to pay taxes on the money you receive.

However, there are a few exceptions to this rule. If the life insurance policy was owned by a company and the policy was used to provide income replacement for the owner or an employee, the death benefit may be taxable. Additionally, if the policy was owned by a non-resident of Canada and the beneficiary is a resident of Canada, the death benefit may be subject to Canadian income tax.

Yes, it is possible to get term life insurance for more than one person. This is known as a joint life insurance policy. A joint life insurance policy provides coverage for two people under a single policy. 

Joint life insurance policies can be a good option for couples, such as married couples or domestic partners, who want to provide financial protection for each other. They can also be a good choice for business partners who want to provide financial protection for each other in the event of one partner’s death.

There are two main types of joint life insurance: first to die joint life insurance, and last to die joint life insurance. 

  • With first to die joint life insurance, if one of the insured individuals dies, the policy pays out the death benefit to the beneficiary (typically the surviving insured), and the coverage will end after payout. 
  • On the other hand with last-to-die joint life insurance, the beneficiary will receive the benefit when both insureds pass away. This beneficiary can be children, or the estate to pay off any outstanding loans/mortgages.

It is important to carefully consider your needs and circumstances when deciding if a joint life insurance policy is right for you. It is a good idea to speak with a financial advisor or insurance professional to help you understand your options and make an informed decision.

In Canada, you can purchase term life insurance from insurance companies, brokers, or financial advisors. Note that if you choose to directly go to a life insurance company, they will only provide quotes for their own products, while a life insurance broker or advisor is licensed to quote you from various companies to help you compare costs and options.

No, term life insurance does not have a cash value. Term life insurance is typically used as a temporary or budget life insurance solution. Permanent life, also known as whole life, insurance policies are a type of life insurance that may provide cash-value. This will generally depend on the company and the type of permanent life insurance policy you choose.

Is Term Life Insurance for you? 

Picking the right policy for yourself can be tough – especially when there are so many different options to customize your own insurance package including term, permanent, or no-medical life insurance types, as well as extra coverage and add-ons like critical illness and disability insurance. On top of that, each company has their own personal different types of benefits and discounts for all sorts of people in different situations in life. 

Which is why it is highly recommended you seek out a professional to help you make an informed decision. Contact PolicyLife today to find you the right life insurance package that suits you and your family’s needs. PolicyLife has a secure and easy online Quote Tool and online application process to easily compare the prices from all the top life insurance companies in Canada. PolicyLife services customers in Alberta (AB), British Columbia (BC), and Ontario (ON).