Basic Types of Term Life Insurance Policies in Canada

Basic Types of Term Life Insurance Policies

Term Life Insurance: A Quick Overview

Term life insurance in Canada is the most affordable and straightforward life insurance model. In a quick snapshot, term life insurance can be explained as a life insurance policy that covers a policyholder for a set period of time. This period often ranges from 10 to 30 years, depending on individual needs.

Term life insurance comes in a variety of policy models, each with its own benefits and potential drawbacks depending on the individual policyholder. Having an understanding of each type and knowing what benefits come with the different types of term insurance will help prospective policyholders choose the right coverage.

Guaranteed Level Term Life Insurance

Guaranteed level life insurance is the most common term life insurance policy in Canada. This type of term insurance offers policyholders guaranteed premiums and death benefits for a specified term. When getting guaranteed level term life insurance quotes, it is important to give the contract a thorough readthrough to gain a full understanding of any renewal requirements.

Return of Premium

A return of premium policy relies on the policyholder making payments to the insurer during the period of coverage. If these payments are continuously met throughout the period, the insurer returns the premiums once the term reaches its end. Compared to other types of term life insurance, the premium rates for return of premium policies are typically higher.

Annual Renewable

Unlike other types of term life insurance that renew after 10 or 20 years, annual renewable models provide short-term life insurance that renew every year for a set length of time. This type of insurance is ideal for those needing short-term coverage. An important element of this type of term life insurance policyholders in Canada need take into consideration is the increase of premiums with each renewal.

Decreasing

Decreasing term life insurance provides coverage with a death benefit that declines with each year. Premiums remain level throughout the duration of the policy. Decreasing term life insurance rates are often far less expensive than permanent policies with similar coverage; however, policyholders need to be aware that coverage offered through this model decreases overtime. 

Modified

Modified life insurance rates provide lower premiums during the first three to five years, but after subsequent years these premiums climb higher than a standard policy. This policy offers lower term insurance rates for those needing to focus their financial spending on other areas such as a mortgage or paying off debt and believe they will be in a better position to pay higher premiums down the road. 

Convertible

Convertible term life insurance offers flexibility by allowing policyholders to change a term insurance policy into a whole or universal policy without the need for an additional health qualification process. This type of policy can benefit those who are unable to afford a permanent life insurance policy at the time of signing but believe they will be able to afford a higher costing permanent policy in the future. The key benefit of this policy model is the removal of the health qualification process to obtain a permanent life insurance plan. After an initial review to quality for the convertible term life insurance, policyholders can convert their insurance to a permanent plan later without having to worry about failing an additional health qualification exam down the road.

Term Life Insurance to Fit Your Needs

Sorting through life insurance policies and juggling different term insurance quotes can be overwhelming. Taking the time to assess one’s options is necessary for ensuring safeguards are in place for a policyholder and their family. When receiving any type of term life insurance quote, it is important that policyholders determine if the coverage amount and time period meets their needs. Assessing one’s financial needs and mapping out what an insurance policy needs to provide in order to protect against financial troubles is the first step to finding the right insurance policy.