How does term life insurance coverage work?
Canada Life - Jun 01, 2021
Term life insurance pays out a set coverage amount, called a death benefit, if you – the person who’s insured – die during a specific length of time
With most products, there are pre-set lengths of time, called terms, for your life insurance. If you die during your term, the people you choose – also referred to as a beneficiaries – will receive a tax-free payout. When you set up your policy, you choose how much that lump sum will be. The regular payments that you pay into the policy, called premiums, stay the same over that time.
How do payments work?
Your premiums depend on the coverage amount, term length and factors such as age, health, gender and occupation.
These payments stay the same over your chosen term. When the term is up, the policy will renew automatically on a yearly basis until its ultimate expiry date, unless you cancel it. Or, if your needs change, you may be able to change it to a longer term or permanent coverage.
There are 2 main types of coverage to consider, depending on whether you’re insuring just 1 person or 2.
- Single-life coverage pays the death benefit on the death of the insured person
- Joint first-to-die coverage pays the death benefit on the death of the first insured person to die
You also have the option to add other custom features, called additional benefits or riders, that are not part of the base insurance. Some examples include:
- Guaranteed insurability: Allows you to purchase additional insurance on specified option dates without answering more health questions
- Child term life: Allows you to purchase increasing term life insurance coverage on your children under one policy.
- Accidental death benefit: Provides additional coverage if your death is caused by an accident, with specific restrictions.
New to the market is Canada Life’s My TermTM product which offers a completely customizable option so you can choose a term tailored to help meet your specific needs. That can be any term length from 5 years to 50 years, up to age 85.
For example, if you have a mortgage that takes 22 years to pay off, and you only need coverage for that amount of time, then you can choose that exact term.
If you’re interested in learning more about this product, I’m here to help. Call me today to talk about which term insurance option is best for you.