A Guide to Term Life Insurance in Canada
In this guide, you will learn more about term life insurance, how it can protect you and your family, and the advantages of working with a Serenia Life advisor to personalize your policy.
What is term life insurance?
Term life insurance provides coverage for a specified period, typically ranging from 10 to 30 years. It’s a popular way to provide income replacement and protect dependents for set periods of your life, such as when you buy a home, start a family, or enter your highest-earning years. Since it covers you for a portion of your life, it is more affordable than whole life insurance, a form of permanent life insurance that never expires.
In this guide, you will learn more about term life insurance, how it can protect you and your family, and the advantages of working with a Serenia Life advisor to personalize your policy.
What are the different types of term life insurance available in Canada?
Term life insurance, which is widely available through many providers in Canada, can be personalized to align with all kinds of financial goals, and the cost can be adjusted to fit your family’s budget. The first decision to make is how long you’ll need coverage for.
Life insurance is typically sold in terms of 10, 20 or 30 years. Here’s a quick way to decide which one might be right for you.
Term 10
A 10-year term life insurance policy is a good option when you have debts that will take 10 years or less to pay off, such as a car or student loan. It’s also a guaranteed way to cover short-term income needs in the event of your death. After 10 years, you have the option of re-evaluating your needs and either renewing the same coverage, or adding more.
Term 20
A 20-year term life insurance policy may be right for you if you have less than 20 years remaining on your mortgage, or if you wish to leave enough money to cover your children’s education or help with your loved ones’ retirement plans. You also have the flexibility to extend coverage to a longer term if needed.
Term 30
A 30-year term life insurance policy could be ideal if you bought a home with a mortgage amortization of more than 25 years. It’s a great alternative to traditional mortgage insurance because you own the policy and can name your loved ones as beneficiaries. Not to mention, term 30 life insurance can act as income replacement during your working years, with the flexibility to convert to permanent life insurance – life insurance that never expires unless you fail to make payments or decide to cancel it.
To learn more about why term life insurance is preferable to mortgage insurance, visit this article: Mortgage Life Insurance vs. Term Life Insurance.
See how term policies might differ based on someone’s age and life situation in the chart below.
| Life stage | How they chose life insurance |
|---|---|
| Sam is on his final approach to retirement | Sam and his partner are on track to retire well in 10 years. Their individual savings and defined-contribution pension plans should cover most of their income needs. They both chose 10-year term life insurance policies to fill the income gap created in the event of one partner’s death. This way, the assets in their retirement plan can stay invested and increase for another 10 years before their planned retirement date. |
| The Carters are at the mid-point in their careers and starting a family | The Carters plan to work for about two more decades, so in the event of either one’s death, they’d need replacement income. They also have mortgages on both their home and the family cottage. They each chose a 20-year term life insurance policy because they expect to be debt-free in 20 years, but right now, they need coverage that would make it possible to maintain their family’s lifestyle without having to sell a property or downsize. |
| Sarah is young, at the beginning of her career, and recently married. | Sarah expects to work for at least 30 years, so she has a lot of earning potential between now and retirement. She chose a 30-year term life insurance policy as an income replacement strategy. It helps that Sarah is young because coverage is generally much cheaper when you buy it early and have had no major medical diagnoses. |
Matching the length of a term life insurance policy to the time you need income protection is just one consideration. Learn more about how this affordable and flexible approach can work for you and your family in our article: What is Term Insurance and How Does It Work?
Term versus permanent life insurance
This article focuses more on term life insurance, however if you’d like to learn more about the difference between term life versus whole life insurance, visit this article to find out what’s right for you and your family.
How much does term life insurance cost?
Term life insurance is popular because it’s not as expensive as permanent life insurance. It costs less because many people outlive their policies and never collect the payout – which is not a bad thing if you’re aiming to live a good, long life. Outliving the need for term life insurance coverage often means that you’ve reached a stage in life when your savings may be able to provide all the income you need and you can stop paying for insurance.
On the other hand, all permanent life insurance policies, which includes the whole life coverage offered by Serenia Life Financial, will pay a death benefit when you die – even if you live well into your 100s. The choice is up to you.
Learn how to find the best term life insurance in Canada in these articles: How to Find the Best Term Life Insurance in Canada, or How Much is Term Life Insurance in Ontario?
What affects the cost of term life insurance?
The cost of term life insurance varies based on a combination of risk factors (i.e., things that make it more or less likely that you could die). The most common ones are age, health conditions, smoking, and risky lifestyle choices (e.g., skydiving and motorcycle racing) or occupations (e.g., reporter in a war zone).
For example, the charts below show the difference in cost for a 10- and 20-year term life insurance policy with $250,000 in coverage for a 30-year-old female smoker and non-smoker, as well as the added cost of waiting ten more years1. As you can see, certain lifestyle choices (in this case, smoking) can dramatically increase the cost of a life insurance policy.
Term policies purchased at age 30
| Female NON-SMOKER | Female SMOKER | |
|---|---|---|
| Coverage Amount | $250,000 | $250,000 |
| Monthly Payment - Term 10 | $10.80 | $17.78 |
| Monthly Payment - Term 20 | $13.95 | $27.23 |
Term policies purchased at age 40
| Female NON-SMOKER | Female SMOKER | |
|---|---|---|
| Coverage Amount | $250,000 | $250,000 |
| Monthly Payment - Term 10 | $14.40 | $32.18 |
| Monthly Payment - Term 20 | $20.70 | $55.58 |
How to decide if a term life insurance policy is right for you
Some online tools and calculators will help you estimate your needs, but keep in mind that life insurance can be personalized in a lot of ways. Constructing a policy on your own is fine, but it costs nothing to work with an experienced Serenia Life advisor who can offer guidance and help you get the best value.
8 steps to determining your term life insurance needs
Assess your financial situation
How much term life insurance you need and what you can afford to pay should be considered within the context of a larger, more holistic financial plan. If you’re not sure where to begin, a Serenia Life advisor can help you get started.
Calculate your coverage needs
Your financial situation often dictates why you need term life insurance and what role it will play in your plan to protect yourself, your family, and your wealth.
Understand the term length options
Once you know the amount of coverage you need, you can decide how long you want to keep it in place. The most common terms are 10, 20, and 30-years, but there are shorter and longer terms available as well.
Consider your age and health
Buying term life insurance when you are young and relatively healthy is typically the best way to enjoy less expensive payments and lock in your right to renew coverage throughout your life. The longer you delay the decision to purchase a policy, the greater the risk that you will have to pay a higher monthly cost, or be denied coverage altogether.
Evaluate your budget
Serenia Life advisors know that having term life insurance coverage is not your only financial priority. Financial planning is a juggling act that can be tough to master on your own, so don’t hesitate to get qualified, objective guidance when you need it.
Compare life insurance providers
There are lots of insurance providers out there. But they’re not all alike. If you were to die and your family had to make a life insurance claim, you’d want to know that their call was answered by people with experience and compassion. Not to mention, you’d also want to know that your insurance provider had a reputation for paying their claims in a timely manner. A little homework now could make a big difference when it matters most.
Seek professional advice
Insurance brokers and advisors know how to pair your needs with the right combination of term life insurance policy features. They can also help you identify insurance providers who are aligned with your values and provide support to your family now – and after you’re gone.
Review and update regularly
Over the term of your life insurance coverage, a lot can happen. You might start making more money, get married, have kids, buy a cottage, or start a business. Choosing a term life insurance policy that comes with built-in flexibility is something you’ll appreciate when the time comes to increase coverage or add the Child Term Benefit rider (i.e., coverage that gets added on to an insurance policy to provide additional payouts under specific circumstances) if you decide to grow your family.
If this is the first time that you’re purchasing term life insurance, this article may be helpful: How to buy term life insurance for the first time. You can also visit our life insurance calculator to estimate your needs.
Is term life insurance worth it?
On one hand, you get affordable financial protection on an as-needed basis, with the ability to renew coverage if you want to. On the other hand, term life insurance policies have no value when they expire, so it becomes important to renew or convert to a permanent policy when your term is up.
But here’s the thing: If you have family members that depend on your income, or if you’ve got many years left on your mortgage, the experts would all agree that the peace of mind is worth the expense.
The good news is, you don’t have to answer this question on your own. An advisor can help you determine if term life insurance is worth the cost within the context of all the other moving parts of your financial plan. It comes down to understanding your goals and priorities and then exploring insurance options and comparing providers.
Learn more about buying term life insurance for the first time.
Why should you choose Serenia Life for term life insurance?
As a member-based organization whose roots go back 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/updating 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
Life insurance is an important part of a financial plan that can protect your entire family and provide opportunities to create lifetime wealth. To get the best long-term value for your money, talk to an advisor about all the ways you can incorporate insurance planning into the things you already do to care for your loved ones.
Disclaimers
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 $.