What is
Term Life Insurance?
How Term Life Insurance Works
Term life insurance is actually very straightforward and easy to understand once you take some time to learn how it works.
This is a type of life insurance that provides coverage for a specific number of years which is known as the term. The shortest term length available in Canada is 10 years. Typically, you will try to match the length of the term with how long you require life insurance.
If you pass away before the term comes due, the beneficiary of the policy (typically your spouse, children or estate) will receive a death benefit. The death benefit is paid out to the beneficiaries typically as a one-time, lump sum amount tax free. Many Canadians are unaware that life insurance is 100% tax free.
Benefits of Term Life Insurance
Term life insurance has many benefits which is the reason why it is the most popular type of life insurance in Canada.
- Affordability. It is the most affordable type of life insurance available in Canada. Rates are very competitive amongst most life insurance providers.
- Tax Free Benefit. Provides peace of mind knowing that your beneficiaries will receive a lump sum amount, tax-free in the event of your death.
- Guaranteed Rates. The rates (cost of the policy) are guaranteed to be level for the length of the policy term (e.g. 10 years, 20 years, 30 years, etc.).
- Customizable. Policies are very customizable which allows you to ensure that your policy suits the needs of you and your family.
- Flexibility. Most life insurance companies allow you to switch from a 10 year term policy to a 20 year term policy in the first five years of the policy.Other options are available as well.
- Renewable. The majority of life insurance companies offer a renewal option within the policy.
- Convertible. The majority of life insurance companies offer a conversion option within the policy.
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