Canadian Term Life Insurance
As the name implies, term insurance is designed to provide coverage for a specific number of years, or 'term'. When term insurance was first introduced to the marketplace, policies would expire at the end of the term or when the insured person reached age 65 or 70. Today, you can find term policies that will insure you until age 100.
The main advantage of purchasing term insurance is the low initial premiums. But you should keep in mind that most term policies have a set renewal period. At the end of this period, you'll need to 'renew' the policy at new premium rates. Since age is a major factor in pricing insurance, the cost of your insurance will most likely increase.
Term insurance can be used to cover a variety of insurance needs, such as a mortgage, personal or business loans or replacement of income after a death, to name just a few. Its real strength is in providing larger amounts of coverage at a lower cost. This can be especially important to a young family with small children where there is a need to provide financial security, at low cost, for the years when the children are financially dependent on their parents.
Term to age 100 insurance was developed in the early 1980s for people who wanted term insurance but who were concerned about losing their coverage at age 65 or 70. By eliminating policyholder access to the cash reserves that build up in a policy over the years, companies were able to reduce the premiums they needed to charge for this type of coverage. Today, due to improved conservation, mortality and lower long-term bond rates, the difference in premium between policies with and without cash and paid-up values has narrowed considerably.
One of the most popular forms of term insurance is 10-year renewable and convertible term. This type of policy will usually provide coverage until age 75. Because the premiums renew every ten years, the initial premiums are quite reasonable and they stay level for ten years at a time. Be sure to look for a guaranteed renewable term insurance plan so that you are guaranteed the right to renew your coverage for another term even if your health has deteriorated.
When considering purchasing a term policy, make sure that it can be converted to a permanent policy without having to re-apply and prove you are still in good health. This convertibility feature can be extremely valuable if you decide you want to keep your term insurance past the specified termination date.
You may find that a combination of different types of insurance may be required to provide the financial security you want for yourself and your family. This is where an independent advisor can help in designing a comprehensive insurance program.