Term Life Insurance Explained
Understand how term life insurance works, who needs it, and how to choose the right coverage amount and term length in Canada.
- Term life provides coverage for a specific period (10, 20, or 30 years)
- Most affordable type of life insurance
- No cash value—pure protection
- Ideal for temporary needs like mortgages and raising children
Term life insurance is the simplest and most affordable form of life insurance. It provides a death benefit to your beneficiaries if you pass away during the coverage period.
How Term Life Works
You pay a premium for a set term (usually 10, 20, or 30 years). If you die during that term, your beneficiaries receive the death benefit. If you outlive the term, coverage ends with no payout.
A 35-year-old non-smoker might pay $30-50/month for $500,000 of 20-year term coverage.
Who Needs Term Life?
- Parents with young children: Replace income until kids are independent
- Homeowners with mortgages: Pay off the home if you die
- Business owners: Key person insurance or buy-sell funding
- Those with debts: Prevent debt burden on family
Term Lengths
- 10-year term: Lowest cost, good for short-term needs
- 20-year term: Most popular, covers child-rearing years
- 30-year term: Maximum coverage period, higher premiums
How Much Coverage?
Common methods to calculate coverage needs:
10-12x your annual income. For a $75,000 salary, that is $750,000-$900,000 in coverage.
Also consider:
- Outstanding debts (mortgage, loans)
- Future education costs for children
- Spouse's earning potential
- Existing savings and investments
What Happens at Term End?
When your term expires:
- Renewal: Continue coverage at much higher rates
- Conversion: Convert to permanent insurance without medical exam
- Lapse: Let coverage end if no longer needed
Look for policies with conversion options. This gives flexibility if your health changes.
Get a Quote
Tax Punjabi can connect you with insurance professionals for personalized quotes. Contact us!