Term life insurance is an agreement between an individual (the insured) and an insurance company (the insurer), in which the insurer agrees to pay a lump-sum benefit to the beneficiaries or the estate of the insured in the event of the insured’s death.
This agreement takes effect over a pre-agreed period of time, called a term, after which the contract may be converted, renewed, or left to expire.
Term Life Insurance is an important tool in protecting your family, dependents, or business associates against the financial loss and hardship that they would face without you around to support them. The death benefit from a life insurance policy is paid tax-free, so it can be used to protect against large debts and can act as an effective form of income replacement.
The most common way Term Life Insurance is used is to protect the balance of a mortgage so families can continue to own a home if the primary breadwinner of the home should die. It can also be used to build financial legacies, allocate estates as part of inheritance, and insure key member of a business. The uses of Term Life Insurance are as vast as the needs of the individuals who hold it.
Term Life Insurance has become the most popular form of life insurance in Canada because it is the cheapest way to get insured on the market. It also allows the flexibility to plan your coverage around your financial obligations.
The ease and affordability of Term Life Insurance make it easy for any individual or family to incorporate it as part of a sound financial strategy. The guaranteed renewability of this type of insurance also allows you to retain insurability even into your retirement years, when health might make getting insured difficult for many people.
Yes! New developments in the life insurance industry have seen the rise of something called No Medical Life Insurance, life insurance that you can qualify for without needing to subject yourself to a medical exam, doctor’s visits, or blood tests.
To qualify for this type of insurance, all you need to do is answer a few yes or no health questions. Because of the ease of qualifying, these types of insurance policies can be issued very quickly, with short waiting periods.
Once your term expires, you have a few options available to you. You can renew your term at adjusted rates, determined by your current age. You may also, up to a certain age, convert your policy to a permanent policy which stays in force for life. You may also let your coverage lapse without renewing if you feel you no longer need coverage.
Many individuals have life insurance coverage through their employer. However, these insurance policies are not portable. If you lose your job or your work situation changes for any reason, you may no longer be covered. Owning a policy independently of your work benefit program ensures your coverage will remain with you no matter what happens.
Many mortgage lenders offer a form of life insurance that offers to repay the remaining balance on your mortgage on your home should you pass away. This is a form of life insurance, but it isn’t always the best option as compared to owning a Term Life Insurance policy.
Mortgage insurance only pays the remaining balance on your mortgage and nothing else. This means that, unlike Term Life Insurance, it actually decreases in value the longer you own it; while you continue to pay the same amount. This amount is also not paid to your family, but your mortgage lender alone.
Owning your own life insurance policy is a more effective way to ensure your family’s needs are met, as the benefit can be used however they choose. It also ensures that they can cover most than just payments on the home. This alone makes independently owning life insurance a safer, more reliable, and above all cheaper way to protect your home.