Term life insurance is a type of life insurance that lasts for a set period of time. As explained further below, you choose the length of your term insurance coverage based on your financial security needs.
In the event of your death, a fixed tax-free amount is sent to the people you name (your beneficiaries). Unlike permanent life insurance, the amount of a term life insurance policy does not vary. In fact, it remains fixed for the entire term of the policy, regardless of the term chosen in your contract.
In addition, most term life insurance policies are automatically renewable. However, before you automatically renew your term life insurance, there are many factors to consider and you should ask yourself the following question : Am I healthy enough? If so, contact your insurance company or advisor to make the best decision for you.
Convertible term life insurance
Also, a very important feature of term life insurance is that most policies can be converted to permanent life policy as a permanent coverage for the duration of the contract.
In short, with a more affordable coverage, you can save more money with term life insurance. This is why it is the preferred choice for most people.
To find out how much life insurance you need, you can calculate your needs here.
First, here are some important things about term life insurance.
Because it covers your loved ones for a limited period of time, term life insurance is less expensive than permanent life insurance. It's a temporary solution that allows you to provide financial security while your loved ones are still depending on you.
The price of your life insurance will depend on several factors:
If you're wondering when to buy your life insurance and what coverage to get, make sure you understand how your age affects the price of your insurance premiums based on the length of coverage you want.
To choose the right coverage for you, ask yourself these questions
Since a mortgage is the most expensive debt for most people, it's a good idea to protect yourself with insurance that will last at least as long as your mortgage.
In addition, the amount of insurance should be sufficient to cover the amount of your assets minus your debts.
There are two types of life insurance that you will need to choose from: term and permanent.
While term insurance only lasts for a set period of time, permanent insurance will always remain in effect as long as the insurance premium is paid.
In addition, permanent life insurance has a cash value, a monetary value that will fluctuate over time based on an interest rate. For this reason, permanent insurance generally costs 6 to 10 times more than term insurance. Permanent life insurance is of particular interest to people who want to cover their funeral expenses or just leave a legacy for their loved ones.
If you are like most people, term life insurance will work best for you. However, permanent life insurance will benefit people with more complex financial situations or estate planning needs.
The best insurance company for you is the one that best suits your needs.
The insurance company needs to calculate your needs in order to find coverage that will work for you.
If price is the determining factor for most people, you should also make sure that the company offers the customer service you expect and that they offer their services online, over the phone or in person, depending on your preference. Finally, to avoid an unpleasant surprise, be sure that the insurance policy you choose does not contain a clause that discriminates against a particular feature of your file.
See below our comparative table of the different insurance companies we deal with and our article, published on our website, on the best insurance companies.
As mentioned earlier, term insurance is the simplest type of insurance to understand. However, simplicity does not mean lack of flexibility. Of course, there are plenty of other life insurance options, but let's stick to term life options:
As mentioned above, term insurance differs in that it is active for a period of time only. Generally speaking, this period can be anywhere from 10 to 30 years depending on what you choose.
During this period, you will pay a monthly or annual insurance premium until you reach the end of the period determined with your insurer. These premiums may stay the same, go up, or sometimes even go down.
Of course, it can be scary to be without life insurance. That's because you've put this coverage in place to avoid embarrassing the people who rely on you financially.
However, your reality will likely have changed by the time your insurance ends. Ideally, you will have finished paying your mortgage, your children will be independent, your debts will have been reimbursed and you will have put money aside in a pension fund.
There is little reason to continue paying for life insurance when financial instability is no longer a part of your life.
If so, you will no longer be covered by your insurance and you will stop paying your monthly or annual premiums.
Still want to be covered by life insurance? You can either purchase a new term policy or convert your term life insurance policy to permanent life insurance. Note that your second term life insurance premium will be more expensive than your first.
If you had a return of premium clause in your policy, the insurance premiums paid during your term insurance coverage will be refunded.
If you die while covered by your term insurance, the insurance proceeds will be sent to your beneficiaries, tax-free. In effect, the insurance amount paid to the named individuals is a tax-free amount of money that can be paid out in a variety of ways.
While most people prefer to have the money transferred at once, it is possible to receive it, for example, in recurring payments over a specific period of time. The death benefit amount can grow in value through interest, but the amount earned in interest is taxable.
Note that insurance policies will not pay out a death benefit in certain cases such as fraud or suicide.
Some permanent insurance policies have a cash value. This is a feature that allows the amount of insurance to increase in value over time. Term insurance does not, which keeps this type of life insurance affordable.
As mentioned earlier in the article, the length of term insurance is up to you. It varies, in most cases, between 10 years, 20 years and 30 years and will generally last until you reach age 65. However, the legal age limit for term insurance is 85.
It is important to understand that term insurance provides protection for temporary debts such as a mortgage, car lease or other loans. So it's not the kind of insurance we look for in retirement, obviously.