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Your Guide to Insurance

June 27, 2023

What Is Term Insurance and How Does It Work?

Term life insurance is a type of life insurance that provides coverage for a specified period of time, typically ranging from 10 to 30 years. It is a popular option for those who have short-term debts, a mortgage to pay off, or a family that depends on their income – and who are looking to protect their loved ones financially in case of an unexpected death.

How Does Term Life Insurance Work?

It’s simply really. Term life insurance works like this:

  1. You make payments for a set number of years (i.e., the term – which is typically 10, 20, or 30 years).
  2. If you were to die during the term of your policy, your beneficiaries (i.e., the people you choose to receive your life insurance payment in the event of your death) will receive a death benefit (i.e., a payment made to designated family members or other loved ones).

The death benefit can be used to cover funeral costs, mortgage payments, outstanding debts, or cost-of-living expenses. It can also be used as income replacement in a two-salary household.

The payments you make for term life insurance are based on a variety of factors, including your age, health, gender, and lifestyle habits (e.g., are you a smoker?). The younger and healthier you are, the lower the cost will be.

When to Choose Different Types of Term Life Insurance

Three common life insurance terms include: term 10, term 20, and term 30. But how do you know when to choose which?

Term 10

Term 10 life insurance may be right for you if 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 passing. With this option, you have the flexibility to extend coverage to a longer term if needed.

Term 20

Term 20 life insurance may be right for you if you have less than 20 years on your mortgage, or if you wish to fund your children’s education. It also ensures your family’s income is protected until your children have left home. With this option, you have the flexibility to extend coverage to a longer term if needed.

Term 30

Term 30 life insurance may be right for you if you have bought a home with a mortgage amortization rate of 25+ years. This is a great alternative to traditional mortgage insurance – 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 insurance when you retire.

Do you need a medical exam for term life insurance?

In most cases, you will need a medical exam to qualify for term life insurance in Canada. The purpose of the medical exam is to assess your current health and any potential health risks that may affect your life expectancy. The exam typically includes measurements of your height, weight, blood pressure, and requires a blood or urine sample to check for any abnormalities.

However, some insurance companies offer “simplified issue” policies, which means that you may be able to get coverage without undergoing an in-person medical exam. These policies generally have lower coverage amounts and higher premiums than policies that require a medical exam. Serenia Life Financial, for example, no longer requires an in-person exam for most policies as of 2021 – which can save you a good deal of time and stress.

It’s important to note that the requirements for a medical exam may vary between insurance companies and policies. Your age, health history, and the amount of coverage you’re seeking may also affect whether a medical exam is required. It’s best to speak with a life insurance advisor to determine the specific requirements for the policy you’re interested in.

How much does term life insurance cost in Canada?

The cost of term life insurance varies based on several factors, including your age, gender, health, and lifestyle habits. Other factors that can impact the cost of your policy include the length of the term, the amount of the death benefit, and any additional optional benefits you choose to add to your policy.

To get an idea of how much term life insurance may cost you, it is important to seek out an advisor you trust so that they can shop around on your behalf. You can also use online tools, to calculate how much coverage you need and get a quote, to help estimate the cost of your policy based on your individual circumstances.

Where can you find term life insurance rates in Canada?

There are several ways to find rates for term life insurance in Canada. For example, you can start by contacting a life insurance agent who can provide you with quotes from multiple insurance providers. Or you can also search online for insurance companies that offer term life insurance and request a quote directly from their website.

When comparing rates, it is important to look beyond just the cost of the policy and consider factors such as the length of the term, the amount of the death benefit, and any additional features that may be included. You should also take the time to research the financial stability and reputation of the insurance provider you are considering.

Term Life Insurance through Serenia Life Financial

Term life insurance is a flexible and affordable option for those looking to protect their loved ones in case of the unexpected. By understanding how term life insurance works, the different types available, and how to find affordable rates in Canada, you can make an informed decision about which policy is right for you and your family.

If you’d like to learn more about term life insurance, or if you would like to speak with a knowledgeable advisor at Serenia Life, fill out this short form to get the ball rolling.

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