What is Term Life Insurance? (2023 Guide for Canadians)

Peer reviewed by
Javade Williams
Certified Life Insurance Advisor
In This Article

Key takeaways:

  • Term life insurance provides coverage for a set period of time, generally between 10 and 30 years. 
  • It's more affordable and flexible, but has a predetermined time limit. 
  • Consider coverage amount, term length and cost when choosing a term policy. 
  • Compare policies and quotes to find the best term life insurance policy for your needs and budget.

What is term life insurance?

Term life insurance gives you coverage for a fixed period of time. You can choose the term length and coverage amount and even have the option to renew or convert it to a permanent policy. 

what is term life insurance?

If you pass away while the policy is in effect, your designated beneficiary will get a payout equal to the coverage amount. The amount the beneficiary gets is known as a “death benefit” or a life insurance payout.

Term is more flexible and affordable than whole life insurance and can be a good way to top up other coverage you may have through work benefits.

Term life insurance can provide families of all sizes with financial security during the most critical years of their life. 33% of Canadian parents have term life insurance, finds a recent PolicyMe survey.

Join the thousands of Canadian families with PolicyMe term coverage. 

PolicyMe has some of the most simple and affordable term life insurance policies on the market. And you can see your rate in just a few clicks below! 

Features of term life insurance, explained

There are two important decisions you need to make when getting a term policy: term length and coverage amount.

But there are definitely other things you should look out for before you choose a policy. Here are some key term life insurance features you should know, explained glossary-style:

Take note that every policy is different and will likely not offer everything listed here! And you may not need all these features to get a term policy that suits you best.

What is term life insurance used for?

Term life insurance is used for financial protection for your loved ones in the event of your passing. When you're in the market for term life insurance in Canada, there are two things you will need to consider:

You’re probably someone that has use for term life insurance if your loved ones rely on you and your financial obligations are temporary. This could include things like: if your spouse relies on your income, while your kids are young or your mortgage balance is still high.

If you’re retired or don’t have any financial dependents, you might not have any use for a term policy (or any life insurance coverage for that matter).

Types of term life insurance: 7 most common in Canada

We’ll define each type of term life insurance below so you can make an educated choice on your family’s financial safety net.

Here’s a comparison of industry standard rates for whole (a type of permanent coverage) and term policies, pulled from Winquote:

average cost for term vs whole life insurance in Canada
Prices are based on publicly-available rates as of February 2023. Terms and conditions may apply.

How much does term life insurance cost in Canada?

In Canada, term life insurance costs start at $18.40 per month on average or $13.16 per month from PolicyMe for:

  • A non-smoking man aged 35 
  • Coverage of $200,000 
  • For a 10-year term

The cost of term life insurance in Canada depends on your age, gender, smoking status and health. The first three factors determine your base rate. Your health status determines if this base rate will go up. 
Here are some sample quotes from different life insurance companies for a term life insurance policy:

a chart comparing the 6 best life insurance rates in Canada by age
Prices based on publicly-available rates as of February 2023. Terms and conditions may apply.

Why is PolicyMe some of the most affordable term life insurance in Canada?

We’re on a mission to make it easier for the average Canadian to get life insurance at rates lower than the market – up to 10-20% less than competitors on average.

How term life insurance rates are calculated in Canada

In Canada, term life insurance rates are calculated based on coverage amount, policy length and personal characteristics. 

Let's explore these factors a bit more:

1. Term life insurance rates: coverage amount

The coverage amount is the amount your beneficiaries receive if you pass away during the policy term. A $1,000,000 policy means that if something happens to you, your beneficiaries will receive a tax-free payment of $1,000,000.

The more coverage you buy, the more your beneficiaries get if you pass away during your term. But the higher the coverage amount, the higher your premiums will be. 

2. Term life insurance rates: policy length

Policy length refers to the duration of your coverage from your current age. You'll pay more each month if your coverage extends into your later years. 

Statistically, you're more likely to pass away between the ages of 20-50 than between 20-30, because more years are accounted for in the term. The chance of passing away increases by 30% once you reach the 40-75 range, according to a Statistics Canada study.

3. Term life insurance rates: personal characteristics

Personal characteristics refer to how risky you are to insure, which includes any factors that could increase the likelihood of passing away while holding the policy. 

These factors can impact your term life insurance rate:

  1. Age: As you age, insurance premiums increase due to the higher risk of health issues or death, making you a higher risk for insurance companies.
  2. Gender: Men pay higher premiums because they have a statistically shorter life expectancy than women.
  3. Health: If you have a pre-existing condition that increases your risk of dying early, you'll pay higher premiums. This could include diabetes, a heart condition, or a family history of illness.
  4. Risky hobbies: Anything that increases your chance of accidental death, like frequent skydiving or base jumping.‍
  5. Smoking status: In general, smokers are more likely to die earlier than non-smokers, so they pay higher premiums. 10% of Canadians said that they smoke cigarettes on a regular basis, in a recent Stats Can survey.

For many Canadians, these will typically be the expenses they have to cover until their kids have grown up and their mortgage balance is paid off. Your needs may differ based on your family's specific circumstances and personal preferences. 

How to pick a term length

Confused about what length of time to choose for your term life insurance policy? To pick the perfect term length consider your financial obligations. 

Then choose a term that matches that timeline. This could including things like:

  • Your mortgage
  • Your total debts
  • Childcare
  • Education/tuition
  • Any other expenses

You don't need to guess when it comes to your insurance. Our life insurance calculator can give you an idea of what your coverage may cost in just 5 minutes. 

Is term life insurance a good idea?

Term life insurance is a good idea for the average Canadian family since it provides an affordable and tailored way to secure your loved ones’ financial future. 

Here are some reasons that you might consider term a good idea: 

  • Affordability: Since the coverage is for a set time, premiums are typically more reasonable than you'd find with whole life policies. 
  • Flexibility: You can choose the coverage amount and term length that fit with your specific needs, no matter what stage of life you’re in. 
  • Simplicity: The policy terms are typically easy to understand, and beneficiaries can use the tax-free payout however they see fit. 

Ultimately, term life insurance is worth considering, especially if you have dependents who rely on you financially. But remember: any insurance you take out should be determined by your individual needs. 

If denied coverage, you can apply with one of the many companies that offer no medical life insurance.

Real-life example: term life insurance in Canada

Kaylee Giffin-Logan, wife, mom, and blogger at The Blondielocks, shares her story of getting life insurance in a blog post “It All Started with A Motorcycle”.

She admits it wasn't an easy decision to make, but she knew that protecting her family financially was the right thing to do.

A 30-year old, non-smoking woman can get a 10-year term policy with a $500,000 coverage amount for just $14.54 per month with PolicyMe.

That's the cost of one monthly takeout lunch, which is a small price to pay for protection and security.

Term life insurance use case examples

Here are a few other examples of why people have chosen terms to protect their families.

What happens after my term life policy expires?

Once your term life insurance policy expires, you can reapply for coverage. Keep in mind that term life insurance is designed to provide coverage for a specific period, so your insurance needs may change once the policy expires.

But make sure to read your policy closely to check whether you have automatic renewals or not! 

After your policy has ended, you have a few options to consider.

Can I extend my term life insurance coverage in Canada?

Yes, you can extend your term life insurance coverage in the first five years of your policy (with PolicyMe). But once those five years are up, or when you reach the end of your term, you will need to reapply. 

Once you look to renew, be prepared to pay higher premiums because your risk of passing away increases as you get older. 

Do you get your money back at the end of a term life insurance policy?

No, you don’t get any money back at the end of a term life insurance policy in Canada. Term life insurance policies will only pay out a death benefit to your beneficiaries if you pass away during the policy term. 

If you outlive your policy term, the coverage ends, and there is no cash value or payout.

What are some term life insurance alternatives?

Permanent life insurance can act as an alternative to your term life insurance coverage, depending on what specific needs you’re looking to fulfill with the policy. 

Here’s a breakdown of the main categories of permanent coverage:

  • Whole life insurance: Offers a guaranteed death benefit and a minimum rate of return on the cash value. Premiums are level, and the death benefit won't decrease.
  • Universal life insurance: Provides lifelong coverage and can build cash value. Policyholders can adjust their premiums, investment options and death benefit within certain limits. These policies are not a good idea for people who are risk averse. 

This is how these alternatives to term life insurance compare:

alternatives for term life insurance

To insure or not to insure, that's the question. In some cases, you may not even need insurance at all. So when is that? 

Next steps: what is term life insurance Canada

  1. Decide how much coverage you need by adding up the expenses you want to cover and subtracting assets your family can access if you pass away.
  2. Choose a term length that covers the number of years you want to provide coverage. 
  3. Use our life insurance calculator to see how much coverage you might need. We’ll even let you know if you don’t need life insurance! 
  4. Shop around and compare policies from different insurance providers. Look beyond price and consider specific policy features.
  5. Make a shortlist of insurers you're interested in and get quotes to compare.
  6. Apply to the one that fits your needs best. If you're denied, you can try another insurer. 
  7. When you’ve been approved, read your policy and sign on the dotted line! 

FAQ: What is term life insurance in Canada?

What is the maximum age for term life insurance in Canada?

Most term life insurance policies in Canada will offer coverage up to the age of 65.

PolicyMe actually allows you to sign up for term life coverage until the age of 75, with coverage lasting as long as age 85 (a 10 year policy).

If you’re 70 years old, you can buy a 10 or 15 year policy. If you’re 65, you can buy a 10, 15 or 20 year policy etc.

How much term life insurance coverage can you get? 

You can get term life insurance coverage for as little as five years or as much as 40 years depending on the insurance company and their policy offerings. But, just because you can get term life insurance for longer periods doesn’t mean you should. 

As mentioned above, consider the length of your family’s financial needs when deciding the length of your term life insurance to avoid paying more than you have to. 

In regards to the coverage amounts out there; it’ll vary depending on the company. But generally, amounts will start at $100,000 and max out at $10 million. 

What can you do with a term life insurance policy?

There are many things you can do with a term life insurance policy. 

As we share above, if you pass away during your term, your beneficiary will receive a lump sum payout equal to the coverage amount. The surviving loved one can use the payout for many things: including paying off debts, covering living expenses, or even investing in the future. 

Additionally, some term life insurance companies may offer a return of premium feature, where the policyholder can receive a refund of the premiums paid if they outlive the policy term.

Our Sources: 

Canadian Tobacco and Nicotine Survey, 2021. (2022, May 5). StatCan. Retrieved March 7, 2023, from https://www150.statcan.gc.ca/n1/en/daily-quotidien/220505/dq220505c-eng.pdf?st=ZqquHe1_

Giffin, K. (2021, September 1). It All Started with A Motorcycle. Our Journey to Buying Life Insurance | The Blondielocks | Life + Style. The Blondielocks | Life + Style. https://www.theblondielocks.com/it-all-started-with-a-motorcycle-our-journey-to-buying-life-insurance/

Ginter, E., & Simko, V. (2013). Women live longer than men. Bratislavske lekarske listy, 114(2), 45–49. https://doi.org/10.4149/bll_2013_011

Statistics Canada. Table 13-10-0394-01  Leading causes of death, total population, by age group

WinQuote®. (February, 2023). https://www.winquote.net/

Laura McKay

COO & Co-Founder

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