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What is term life insurance?
Matt Hands, VP, Insurance
A term policy is a life insurance product that guarantees a death benefit payout to a stated beneficiary during a specific period of time, typically ranging between five to thirty years. So if you pass away during the set term, your loved ones can use this money for whatever they wish – including paying off the mortgage, replacing your income, and financing their education, When you purchase a standard term insurance policy, your coverage amount and premiums are locked in for the entire length of the plan.
When the term expires, you'll usually have the option to either renew our policy for a higher cost, or you can let your coverage expire. Some policies also let you convert the term life insurance to permanent life insurance (such as whole life insurance or universal life insurance), typically between one and five years before the term ends.
When you bind your term life policy, you choose the term length (also known as how long you want to be covered for), as well as your coverage amount (also known as how much you want your beneficiary to receive after you die). Only if you die within the term does your life insurance company pay out the death benefit.
When to buy term life insurance
Term life insurance is best for those who have a temporary need for coverage. This temporary need can extend for many years – here are a few situations in which this type of policy could come in handy.
Mortgage
Children
Retirement
Education
Recent Canadian term life insurance quotes
Check out these recent quotes from across the Canadian market – last updated in January 2025. To see how much you could be paying for a policy tailored to your unique situation, take advantage of our free comparison tool today.
- $20/month
20-year term policy with $500,000 coverage
for a 30-year-old, non-smoking female in Montreal, QC
- $41/month
10-year term policy with $1,000,000 coverage
for a 37-year-old, non-smoking male in Toronto, ON
- $57/month
15-year term policy with $500,000 coverage
for a 50-year-old, non-smoking male in Calgary, AB
Find your best term life insurance quote in Canada today.
We're here to help you find the best term life insurance policy to suit your personal needs. Compare term policy quotes from one of our licensed brokers today to find the cheapest rate.
Types of term life insurance in Canada
Term life insurance is a relatively simple product when compared to other types of life insurance, but it's still important to learn about the options you have when shopping around for your policy. Here's a brief overview of three popular types of term insurance in Canada.Â
Level term insurance
Yearly renewable term insurance
Decreasing term insurance
Term life vs. whole life insurance – what's the difference?
The overwhelming decision for many Canadians when shopping for life insurance is choosing between term life and whole life coverage. Here, we cover the main differences between the two, so you can choose the one that best suits your needs.
|
Feature |
Term life insurance |
Whole life insurance |
|---|---|---|
|
Coverage period |
Term life insurance only covers you during the fixed term you choose – be it five years, ten years, or thirty. |
Whole life insurance covers you for an entire lifetime – from the policy start date until the day you pass. |
|
Coverage needs |
Term policies are well-suited if you only need financial protection for a specific period (e.g. mortgage debt). |
Whole life insurance is recommended if you have a lifetime need for coverage (e.g. estate planning). |
|
Death benefit |
Your death benefit is the set amount purchased – it'll also only be paid out if you pass away during the term. |
Your death benefit is usually also fixed to a certain amount, but it can change it some cases – it's also guaranteed to pay out after you pass. |
|
Cash value |
Term life insurance policies don't accumulate in cash value, so you won't be growing a reserve. |
Whole life plans can accumulate in cash value, so you can access funds during your lifetime. |
|
Withdrawals |
You can't withdraw from a term life insurance policy during your lifetime. |
With whole life insurance, you're generally able to withdraw or borrow against your cash value reserve. |
|
Cost |
Term life is generally much more affordable than whole life – that's because you might not need a payout. |
Whole life insurance policies are eventually paid out, so expect to pay much more for this coverage. |
How to choose your insurance term length
So how long should your term life insurance last? While plans typically range between five to thirty years, the right term for yourself will depend on your personal needs – here are a few factors you should consider.
Age & retirement
Mortgage & debt
Children
Cost
Common term life insurance coverage additions
Most providers also allow you to purchase extended coverage (or life insurance riders) to protect you against special circumstances. And while you can add these to your term life policy, you may also be able to purchase some of these as standalone policies. Here are a few common additions you can ask your broker about.
Critical illness insurance
Critical illness insurance can be purchased as a rider or a standalone policy. It is exactly what it sounds like – if you're diagnosed with an approved critical illness, your insurer will pay out a lump sum to cover the financial burdens involved.
more about critical illness insuranceDisability insurance
Like critical illness, you can purchase disability coverage as either an add-on or a standalone policy. This type of insurance ensures you'll be financially covered in the event you become disabled and unable to work, acting as an income replacement.
more about disability insuranceChildren's insurance rider
Life insurance for your child can typically be purchased as a rider, on top of your term life insurance policy. This is generally a much cheaper option to ensure your child also has coverage, instead of purchasing them a standalone policy of their own.
more about life insurance for childrenAccidental death insurance
Accidental death insurance can also be purchased on its own or as a rider. As a standalone, the benefit will only be paid out for cases of accidental death. As an add-on, your beneficiaries will receive an increased benefit in cases of accidental death.
more about accidental death insurance
How much term life insurance do I need?
One of the most important decisions you need to make when purchasing life insurance is the coverage amount on your policy. To determine the right number, there are three different factors you should consider – your family situation, your debts, and your income. Read our blog to learn how to calculate your term coverage needs.
read blogHow much does term life insurance cost in Canada?
While the cost of term life insurance depends on various individualized factors, most Canadians have opted for around $500,000 in coverage, while many life insurance brokers are now recommending upwards of $1 million in coverage due to the changing economic landscape and rising cost of living - the average cost for term life insurance in Canada currently is for approximately a half of million in coverage and industry wide data has it around $34 per month ($408 annually).
Here is an example of how term life insurance prices can vary by gender and age - assuming a 20-year term with $500,000 in coverage for a non-smoker with no pre-existing medical conditions.
| Age | Sex | Term | Coverage | Cost |
|---|---|---|---|---|
| 20 | Male | 20-year | $500,000 | $29 monthly |
| 20 | Female | 20-year | $500,000 | $19 monthly |
| 30 | Male | 20-year | $500,000 | $30 monthly |
| 30 | Female | 20-year | $500,000 | $20 monthly |
| 40 | Male | 20-year | $500,000 | $44 monthly |
| 40 | Female | 20-year | $500,000 | $33 monthly |
| 50 | Male | 20-year | $500,000 | $121 monthly |
| 50 | Female | 20-year | $500,000 | $81 monthly |
It's clear to see that the older you get the more expensive term insurance becomes. This is due to the increased health risk factors that come with aging. There is also a slight difference in pricing for males vs females due to gender based statistics used as part of the rating calculation. Generally, men are seen as a higher risk as they age.
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Request your free term life insurance quotes today, and find out which carrier offers the most affordable policy options to meet your personal coverage needs.
What factors affect term life insurance rates?
Generally speaking, the more risk you bring as a policyholder, the more expensive your insurance will be – here are some of the factors insurers look at to determine your term life premium.
Age
The older you are, the more expensive your term life insurance will be – that's why it's often a good idea to bind policies early.
Gender
Statistically speaking, the life expectancy for females is longer than the expectancy for males, so your term life rates will reflect this.
Health
Pre-existing conditions, family medical complications, and habits such as smoking and excessive drinking lead to higher premiums.
Lifestyle
Participating in high-risk activities on a regular basis, such as skydiving, can lead to higher term life insurance premiums.
Job
If you work in a high-risk industry, such as roofing or logging, you may need to pay more for your term policy.
Policy type
More coverage and longer terms result in higher term life premiums – you'll need to pay more for the additional peace of mind.
What happens at the end of my term life insurance period?
Oftentimes, the death benefit of a term life insurance policy won't be paid out – this is because the coverage can expire if you don't pass away during the set period. If you want to extend your policy term, you can look into renewable and convertible life insurance.
A convertible life insurance policy gives you the option to convert your term policy into a permanent policy. The primary benefit of having a convertible policy is that you won’t have to pass a medical exam to get permanent coverage. So if you’re diagnosed with a serious illness while you have an active convertible term life plan in place, you can still get permanent coverage that may not otherwise be available to you.
For more insight on your various options, check out our blog – What to do when your term life insurance expires.
What are the benefits of term life insurance?
Even though term life insurance is only a temporary coverage solution, there are many benefits to opting for this type of product. Here, we cover a few advantages of selecting a term policy, including its simplicity, flexibility, affordability, and more.
Simplicity
Term life policies tend to be much more easy to understand than permanent life policies. You choose a set death benefit, along with a set term period.
Long-term flexibility
With term life insurance, you generally have options to convert the plan (to permanent life insurance) or renew it when expiration nears.
Level premiums
In a standard term life insurance policy, your premium won't change within the entire term duration – you won't need to worry about a rate increase due to health status or old age.
Affordability
A term life insurance policy is much cheaper than a whole life one – this is because your insurer may not need to payout the death benefit.
Tax-free benefit
Like all types of life insurance, term life benefits are tax-free. Your beneficiaries won't need to pay taxes on the lump sum amount.
Peace of mind
This also goes for other life insurance products, but a term life policy can provide you with peace of mind while you need it. It's nice knowing your kids will be covered while they're still growing up.