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.

Advantages

• 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)

Disadvantages

• 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