You should buy term life insurance if you have loved ones who are financially dependent on you.
If you answered yes to any of these, you should probably get term life insurance. But every situation is unique. So below we’ve explained why you’d need term insurance and how to make an informed decision that’s right for you.
You should choose term life insurance because it’s affordable and offers flexible coverage to suit the needs of people at different stages of their lives. Below are some key facts about term life insurance to give you a better picture of what it offers.
Want to see how much term life insurance might cost you? Get a no-commitment quote. You might be pleasantly surprised!
Term life insurance is worth it if you get the right kind of policy for you.
The point of the term life insurance is to give you protection if and when you need it.
So, you should get a term policy for the years your family will need financial support if you passed away.
That way, if you pass away after the policy expires, you can count on your family being financially secure on their own and not needing your help.
If you’re worried that term life insurance isn’t worth it because there’s no cash return if you outlive your policy, think of it like car insurance. You pay monthly premiums and if you ever get into an accident, you know your insurance can help. But if you never get into an accident, you don’t get the money back. The same goes for term life insurance.
If you’re worried that term life insurance is too expensive for you, keep in mind that according to research by LIMRA, an industry leader in research and education in the financial space, people tend to overestimate the cost of term life insurance.
In reality, your monthly premiums can cost you less than your cellphone bill! PolicyMe offers some of the most affordable rates in Canada.
To choose what term life insurance you should buy, think about your family’s current financial situation and how you expect that to change over the years. Your policy length should be as long as your family needs your financial support.
Once your family is financially independent, they won’t need your insurance. For example; once the kids are grown up or the mortgage is paid off. Or, you can renew your policy but will have to pay higher premiums.
So choose a term that makes sense for you and your loved ones.
If you have a mortgage and you know you and your partner still be paying that off for the next 20 years, you’ll want to consider a term policy that is at least 20 years long. This way, if you pass away within the term, your partner can still afford to pay the mortgage with your death benefit.
You should buy term life insurance when you need it or expect to need it. Like if you already have family members who are financially dependent on you, now is a good time to buy life insurance. Or, if you’re planning to have a family and want to prepare, now is a good time for you to lock in your rate.
When it comes to buying term life insurance, the sooner you do it, the better. This is because the younger you are, the cheaper your monthly premiums will be.
As you get older, the chance of developing health conditions also goes up, which will increase your monthly premium. But if you lock in your rate now, you won’t have to worry about increases as long as your policy is active.
You probably shouldn't buy term life insurance if you’re single and don’t have any children, you probably don’t need life insurance.
Why? Because no one is relying on your income for financial stability, which defeats the purpose of the main advantages of life insurance.
There are absolutely exceptions to this "rule", like if your aging parents rely on you for financial support, if you've taken a mortgage out with a friend, etc.
If you're unsure whether you need life insurance or not, you can try our free life insurance calculator and find out in a few clicks. We'll even tell you if you shouldn't buy life insurance.
The other scenario in which you might not need to buy a term life insurance policy is if you need permanent life insurance. Term life insurance is to protect your family from financial burdens that are temporary (like childcare, mortgage, etc.).
Permanent, or whole life insurance, can be a reasonable choice for people who have high incomes and are looking for some of the tax-deferred benefits of life insurance.
The average Canadian family does not fit in this category. If you buy a permanent life insurance policy, your insurer will have to pay a guaranteed, lump sum. And how do insurers account for this guaranteed payout? By making it much more expensive than term coverage (it can cost 5-10x more).
Term life insurance is like a financial security blanket that protects you and your loved ones when you need it most. With term life insurance, you can get the coverage amount you need and feel confident that your family will be comfortable if you pass away during your policy term.
And if you buy a policy that’s the right length for you, then when you no longer need term life insurance, you won’t have to worry about paying monthly premiums. This way, no matter what happens, you and your family can feel financially secure.
The main disadvantage of term life insurance is that it doesn’t have any cash value after it expires.
But financial experts tend to recommend investing in other means before using a life insurance policy. This is because it's an inefficient way to build capital. We tend to say "get a term life insurance policy (which can be 5-10x cheaper than a permanent or universal policy) and invest the rest.
And the fact that its temporary also means you won’t have to pay premiums for the rest of your life. So a key part of buying term life insurance is deciding what term length and coverage amount will help your family feel secure if you passed away.
You do not necessarily lose with term life insurance, especially compared to other life insurance types. Because premiums for whole life insurance are more expensive and must be paid until you pass away, you’re actually more likely to save money with a term life insurance policy.