Term Life Insurance

Term life insurance is for temporary needs

  • for short-term needs such as mortgage loans or other debt
    • can be a less expensive than insurance from your lender
  • coverage runs
    • for specific number of years (e.g., 1, 5, 10 or 20)
    • to a specific age (e.g., 65)

Note: Term To 100 is a form of permanent insurance.

Note: Be wary of mortgage life insurance from a lender. There are drawbacks with this form of term insurance.


  • low cost because death is unlikely during the coverage period
  • usually renewable and convertible to permanent insurance without evidence of insurability (e.g., until age 65 or 70)


  • rates become increasingly expensive
    • e.g., Term 10 rates increase sharply every 10 years
  • instead of renewing, you can buy a new policy but this requires evidence of insurability
  • coverage expires before most deaths occurs (e.g., by age 65-80) —> death benefit never paid
    • your needs may continue
  • if premium payment missed — even if unintentional — coverage soon lapses (usually after 30-31 days)
    • the insurer benefits because you pay premiums but no benefits are paid
  • you lose the opportunity for tax-free investment growth (like an RRSP)
    • only available with permanent insurance
  • your protection is impaired with mortgage life insurance, which is designed to protect the lender (creditor) rather than you (borrower)

Client Profile

Term insurance may be a good choice if you

  • have a short term financial obligation
    • e.g., mortgage or other loan
  • required by lender as a condition of borrowing
    • assign policy so the lender is the beneficiary for the amount of the loan
  • creditor protection for a limited length of time
  • consider permanent insurance too expensive
  • need the most coverage for the lowest price
  • have no need for estate planning
  • disciplined enough to "buy term and invest the difference"

Types of Term

There are three main types of term life insurance

  1. re-entry
    • at renewal, premiums are lower with proof of good health; otherwise charged guaranteed rates
  2. renewable
    • at renewal, premiums are higher, but there is no need for proof of health
  3. renewable and convertible
    • like renewable and can convert to permanent insurance

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