How to Buy Term Life Insurance for the First Time
The best term life insurance policy in Canada is the one that’s “best for you.” That may sound obvious, but it’s typically not how people shop for coverage.
Buying the best family term life insurance policy is one of the easiest ways to provide financial security for yourself and your loved ones. You know exactly what you’re getting for your money, and what to expect if something happens to you.
Unlike many of the investment decisions you’ll make in your lifetime, this one has nothing to do with interest rates or the ups and downs of the markets. It’s a simple decision you can make with the help of knowledgeable advisors who have helped thousands of people buy term life insurance for the first time.
What is term life insurance?
Life insurance is a contract between you and an insurance provider – one that guarantees to pay a lump sum of money to your loved ones in the event of your death. Depending on your life stage and financial situation, the money could be used to:
- Pay off student loans, credit card debt, and other expenses
- Invest more for retirement
- Pay down the mortgage
- Replace income and take some time off to grieve
- Top up education savings plans for the kids or grandkids
- Buy a vacation property
Term life insurance is sold in lengths of time called “terms” that range from 10 to 30 years. Insurance providers offer a variety of terms because people’s needs change over time. This allows advisors to match you with the best solution for your needs.
What are the most common types of term life insurance?
Let’s take a closer look at the three most common types of term life insurance, who typically chooses a particular term, and why.
| Type of term life insurance | Who typically purchases this type of coverage | Why people choose this option |
|---|---|---|
| Term 10 | People with debts they expect to pay off in 10 years or less, or those who are within 10 years of retirement. | This policy gives them the flexibility to reassess their needs after 10 years, at which point they can choose to: (1) renew their term, (2) convert to a longer term or to permanent insurance, or (3) cancel coverage. |
| Term 20 | People with debt, such as a mortgage that will be paid off in less than 20 years, families with young children, or those who expect to earn income for another two decades. | This policy can provide enough money to cover the mortgage or pay for child-rearing expenses. After 20 years, they still have the option to renew, convert, or cancel. |
| Term 30 | People with a mortgage of at least 25 years and who have a lifetime of earning potential. | This policy can make up for decades of lost income or pay off the mortgage, making it a great alternative to mortgage insurance. They can also renew, convert, or cancel after a 30-year term. |
Your situation is unique but an experienced advisor can help you determine when to buy term life insurance, how much you might need, and why.
When to buy term life insurance
Understanding what life insurance is for can help you decide when you should buy term life insurance. So, first things first: Life insurance is something you buy to protect other people. In the event of your death, the money your loved ones receive is going to make up for the money you no longer earn.
If you have decades of earning potential ahead of you, or your family needs your income to pay off the mortgage and invest for the future, your life insurance policy can help to fill that financial gap.
This is why many people first buy term life insurance when they take on big financial responsibilities, such as getting married, buying a home, or having children.
It pays to start early
Life insurance is least expensive when you’re young and at your healthiest. Why? Because the risk of becoming ill, disabled, or dying increases with age. So the best time to get approved for coverage is always sooner than later.
For example, the chart below shows the difference in cost for a 20-year term life insurance policy purchased at age 30 and the added cost of waiting 10 more years for both a female non-smoker and smoker1. As you can see, certain lifestyle choices (in this case, smoking) can also increase the cost of a life insurance policy.
Age 30 | Age 40 | Age 30 | Age 40 |
|
|---|---|---|---|---|
| Coverage Amount | ||||
| Monthly Payment - Term 10 | ||||
| Monthly Payment - Term 20 | ||||
Here are more advantages to getting started now
If you’re ready to buy your first term life insurance policy, there are even more advantages to getting coverage sooner than later.
1. Lock in coverage
As you get older, changes to your health could make it more difficult and more expensive to obtain coverage. In extreme circumstances, you could even be denied life insurance coverage if you don’t have an existing policy in place.
2. Guarantee your right to renew
Once you’re insured, you have the right to renew your life insurance coverage and you cannot be denied due to changes to your health — but keep in mind the cost of coverage goes up with age. This is an important consideration because you will likely have greater assets and more financial responsibility as you get older.
3. Convert to a longer-term policy or a whole life policy without a medical exam
Whole life insurance is a form of permanent coverage that never expires. Insurance experts may recommend this option when you need additional layers of asset protection or an “outside of the bank” investment tool. Your insurance advisor can help you decide if this option is right for you.
How much term life insurance should you buy?
The best way to find the right answer for you and your family is by talking to a Serenia Life advisor. In the meantime, estimate your needs with our Life Insurance Calculator.
How to buy your first term life insurance policy
For most first-time buyers of term life insurance, the process is quick and easy, with no need for a medical exam. You can start your application online2 by answering a few simple questions:
- What is your date of birth?
- Are you a smoker?
- Do you want coverage for 10, 20, or 30 years?
- Would you like additional coverage, such as disability insurance?
- Are you comfortable paying monthly, quarterly, or annually?
Once your application is received, we’ll set up a quick 15-minute call to get a little more information by asking you some questions, like the following:
- Your short- and long-term financial goals
- Your life insurance needs (for yourself and/or your family)
- Your age and smoking status
This is also your opportunity to ask your own questions about term life insurance and how it fits into your financial plan. If, after speaking with your advisor, you decide you’d like to move forward with an application for term life insurance, be prepared to answer some more specific questions about your health. This helps the advisor determine if you are eligible for term life coverage. You will be asked to share details, like:
- Any medications you are currently taking
- Any medical conditions
- Any pending medical tests
- Any hospitalizations or surgeries you have had
- Your current height and weight
- Your family’s health history (including the onset of any conditions for your parents and siblings)
- The name and address of your family physician
- (If you are applying for any Child Benefit), the child’s accurate height and weight
Once the advisor has collected the information they need and submitted an application on your behalf, your application will be evaluated by an underwriting professional. Depending on the information you provided on your application form, you may be asked to do a “tele-interview,” where a health professional calls you on the phone to discuss your health in a bit more detail. This is a common enough step in the process, and should not be a point of concern.
Why should you choose Serenia Life for term life insurance?
As a member-based organization that’s been around for nearly 100 years, we encourage kindness by sharing our profits through community outreach, fundraising, and unique member benefits that help Canadians support their family, their community, and the causes they care about. The more we grow, the more we can give.
We provide members with access to a growing collection of member benefits that make a positive impact on their lives and the lives of others.
Benefits, such as:
- $1,000 post-secondary scholarships
- $250 seed funding towards fundraising events
- Free digital wills (value: $189), or money towards drafting/upating a will through a lawyer
- and much more!
- View a full list of our member benefits.
Together we continue to make a difference.
Let us help
Buying term life insurance for the first time is easy when you work with your Serenia Life advisor. We’re here to answer your questions, personalize your coverage, and stay with you over the years to make any adjustments for all of life’s big events.
If you’re uncertain about the best way to insure your mortgage balance, or you want guidance on how to construct a more comprehensive insurance plan, we can help. The experts at Serenia Life will take all the time you need to help you make the right decision for today and for the future.
Frequently Asked Questions
Can I buy a life insurance policy for a family member?
Yes, in Canada you can purchase a life insurance policy for a spouse, child, or grandchild. In order to purchase a life insurance policy for someone else, you need to have “insurable interest” in their lives. When it comes to purchasing life insurance for a child or grandchild, the policy owner must first have their own life insurance policy.
If you are interested in purchasing life insurance for a parent, you will need to meet certain conditions and they will need to have knowledge that you are doing so.
Why is term life insurance important for parents?
Because parents have little ones that depend on them, it is important to have coverage in place until children leave home. Term life insurance provides peace of mind during a time in life when expenses are high. If a parent whose family relies on their income to pay for expenses, like groceries, the mortgage, and education costs, were to die unexpectedly, a term life insurance policy would replace that lost income.
What if I need to extend my coverage later?
As long as you extend before the term of your policy has expired, you can renew your term, or convert to a longer term or permanent policy – without having to undergo a medical exam.
Is it better to purchase term life or whole life insurance?
This is dependent on your financial goals and your budget. If you have short- or medium-term debts or many years of mortgage payments ahead of you, term 10, term 20, or term 30 life insurance may be a better option. If you are looking for a lifetime of protection with an investment component that can grow over time, whole life insurance may be preferable. For those on a tight budget, keep in mind that term life is more affordable than whole life. Always speak to an insurance advisor before making a final decision.
What does “purchasing term life and investing the difference” mean?
Individuals who have a certain amount of expendable income to invest each month can purchase an affordable term life product with a portion of that money, while placing the remainder in an investment of their choice.
What happens if you die before the term is up?
If you die before the term is up, the amount of coverage you signed up for (a.k.a., the death benefit) will be given to your beneficiaries in a lump sum, tax free.
Can you cash out a term life insurance policy?
You cannot “cash out” a term life insurance policy, because unlike a whole life policy, there is no potential for growth and therefore no money to withdraw. You can, however, cancel a term life insurance policy. But this means you would lose coverage, and your loved ones would not be financially protected in the event of your death. The only benefit to cancelling a term life policy is saving on the associated payments. Therefore, cancelling a term policy is not recommended unless you can no longer afford this expense.
This blog post contains general information only. Because each person’s situation is unique, it is always best to speak with a qualified professional to better understand your needs.
1 Illustration only, as of January 2024. Based on life insurance rates for female age 30 and 40, smoker and non-smoker for term 10 and term 20 life insurance for $250,000 in coverage. All numbers in CDN $.
2 Online quotes only apply to residents of Ontario, Manitoba, Saskatchewan, Alberta, and BC
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