Term insurance covers you for a specific period of time and has an expiry date. It is suitable for more temporary needs or expenses with a foreseeable end like your mortgage, putting your children through university, or business obligations like training your successor or buying out shares. Term insurance is usually purchased in terms of 10,20, or 30 years, or to age 60 or 65.
Keep your options open
If you start with a term policy, you may want to make sure it’s renewable or convertible into a permanent policy at a later date. That way, you have some flexibility to meet your changing life situation. Beware of On-Line offers that claim to have cheaper Term prices but have excluded these two very valuable features, which are important for future flexibility.
If you die within this time, your beneficiaries receive the death benefit. If the specified time period ends within your lifetime the coverage expires, there is no death benefit payment, and you cannot claim the premiums you already paid. Term policies:
- don’t include cash values, so you cannot borrow against the policy or receive cashback if you cancel the policy.
- may be renewable at a higher premium when they expire.
- usually have lower premiums than permanent policies. Premiums are set by the insurer for the length of the term and may increase if the term is renewed. It’s temporary coverage that lasts for a set period and automatically renews in most cases. The payments you make, called premiums, are set at an initial low cost and won’t change during that period with term insurance.
How does it work?
Choose the coverage amount and length you want.
Decide if you want your coverage for 10, 20 or 30 years or to age 65.
Customize your coverage with optional benefits.
Pay the monthly or annual premiums.
Your coverage automatically renews.
You can convert to longer-term or permanent life insurance without medical questions, within limits.
The people you choose receive a tax-free payment if you pass away while your policy is active.
Easy answer provided by FSCO (Financial Services Commission of Ontario)