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Term life insurance gives you coverage for a fixed period. You can choose the length and coverage amount and even have the option to renew or convert it to a permanent policy.
If you pass while the policy is active, your beneficiary will get a lump sum equal to the coverage amount. The amount they get is known as a “death benefit” or a life insurance payout.
The meaning of term life insurance is as follows: a type of life insurance policy that is temporary. Coverage lasts for the specific period you decide on at the time of application.
Term is the best type of policy to cover your family's temporary financial obligations and responsibilities (i.e. while you pay off the mortgage or have childcare costs).
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.
Term life insurance works as 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 need term life insurance while your loved ones rely on you and your financial obligations are temporary. This includes things like:
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).
Term life insurance costs start at $22.44 per month with PolicyMe for a non-smoking woman aged 40, for $500,000 in coverage over 15 years.
The cost of term life insurance in Canada depends on your age, gender, smoking status and health.
The first three things determine your rate. Your health will determine if this rate will go up. Here are some sample quotes for a term life insurance policy:
Why is PolicyMe some of the most affordable term life insurance in Canada?
We're on a mission to make it easier to get life insurance at rates lower than the market – up to 20 per cent less than competitors on average, without compromising on quality.
In Canada, term life insurance rates are calculated based on coverage amount, policy length and personal characteristics.
Let's explore these factors. Prices will be based on industry average rates for a 35-year-old man (non-smoker, $500,000 in coverage, 20-year term where applicable).
The coverage amount is the sum your loved ones get if you pass during the policy term. A $1,000,000 policy means that if something happens to you, they get 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.
Policy length refers to the amount of years your policy will cover you for starting from the age when you purchased it. You'll pay more each month if your coverage extends into your later years.
Why? You're more likely to pass between the ages of 20 to 50 than between 20 to 30, because more years are accounted for in the term. The chance of passing increases by 30 per cent once you reach the 40 to 75 range, finds a Statistics Canada study.
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:
For many Canadians, these will be the expenses they have to cover until their kids have grown up and their mortgage is paid off. Your needs may differ based on your family's specific circumstances.
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 includes things like:
Term life insurance is a good idea for the average Canadian family since it provides affordable and customizable coverage to secure their loved ones' financial future.
Here are some reasons that you might consider term a good idea:
Ultimately, term life insurance is worth considering, especially if you have people that rely on you financially.
If denied coverage, you can apply with one of the many companies that offer no medical life insurance.
Here are a few examples of why people have chosen terms to protect their families.
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."
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.
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 from Winquote: