Term Life Insurance offers cost-effective way to cover short-term needs: provide an ongoing income to maintain the family's current lifestyle, pay off mortgage or debts and provide money for children's education, smooth transition by providing temporary financial support to supplement the family income, when one spouse dies.

Under this form of life insurance, the insurance company promises to pay the death benefit if the insured dies within the the period specified in the policy.  It’s pure protection with no cash value: when the policy expires or if you cancel, you get nothing  - no cash back, no more life insurance protection.

Renewable Contract. Insurance companies issue Term Life Insurance policies with different terms but the most common policies are Т10 и Т20. This means that premiums are guaranteed low during first 10 or 20 years (T10 and T20 respectively). For example,  when buying T10, the insured pays the minimum premiums, which are guaranteed for 10 years. Then the policy will continue to be in force, but the premiums will grow up to the next guaranteed level, since the insured is older and statistically more likely to die (Illustration). So, the premiums are renewed each 10 (or 20) years, and this contract is called renewable. Term Life Insurance policies usually expire when the insured turns 75-80 years of age(depending on the insurance company).

Premiums (Rates). Cost of insurance is not high and depends on the insured's age, sex, health, smoker/non-smoker, and the sum insured (amount of coverage). Men pay more than women, and rates for smokers are higher than for non-smokers, which results from more favourable statistics for women and non-smokers.

Example.  Alexander, non-smoker, 40 years of age, can purchase a life insurance contract T10 with coverage $250,000 for as low as $25,56 per month. In 10 years the contract will be renewed and the premiums will rise. He will be offered to pay $128.25 or to cancel the policy. If he is in good health at that time he can terminate the current policy and buy a new T10. If it happened today he would have paid for the new contract $47,88 per month during the next 10 years. If his health becomes worse he would have three options:

1. to pay the higher premiums as per the contract,

2. to reduce the coverage and pay less,

3. to convert the term life insurance policy to a Permanent (Whole) Life Insurance policy or Universal Life Insurance policy.

Term and premiums (rates).  The longer term of the life insurance contract the higher premiums payable to the insurance company. In the example above, if Alexander purchased T20 with coverage $250,000, the premiums would be $37.80  per month guaranteed during first 20 years and then they would significantly rise  (see Illustration).

Preferred Rates. Some companies offer different levels of premiums depending on the insured's health, lifestyle and family history: usually, three levels for non-smokers and two levels for smokers. So, in our example, Alexander could purchase Т10 with coverage $250,000 for $19.35, $22,50 or $25.56 per month depending on his state of health. However, medical evidence is required  to categorize the insured into the appropriate premium level.

Conversion. Usually, Term Life Insurance contracts may be converted to Permanent Life Insurance contracts (Whole life, T100, Participating whole life, Universal life insurance) without any additional medical evidence of insurability (no medical tests and examination). The insured can convert the policy regardless of his or her state of health at the time of conversion, even if he or she is no longer insurable. This option is available until the insured turns 65-70 years old (depending on the plan and company). Such policies are called convertible. The premium payable under the new (converted) policy issued under a conversion option will be based on his or her attained age at the time of conversion.

As the insured can complete the conversion without providing medical evidence of insurability this option is very important. For example, you can start your insurance plan from an cheap term life insurance and adapt the plan to your insurance needs later on without regard to your health.

Rider. Term Life Insurance may be issued as an additional benefit (rider) to another insurance contract, for example, Permanent Life Insurance, Critical Illness Insurance. In this way insurance companies offer the possibility to add additional benefits to personalize the insured's term or permanent insurance coverages.

For example, you have a whole life insurance contract with $100,000 of coverage and cash value, which grows gradually in your policy. You considered it's enough when started investing in your policy, but now you have purchased a home and have taken a mortgage of $250,000. To protect your investment in your home you can buy additional T10 or T20 term life insurance rider to your whole life policy. This rider will provide the coverage $150,000-$200,000 during the next 10 or 20 years respectively until the mortgage is almost paid up. It may be more economical and affordable way than purchasing a separate additional insurance contract or increasing the coverage of the whole life policy.

Group Life Insurance coverage. Group Insurance Benefits Plans, which cover the employees of one employer, include Term Life Insurance with limited coverage usually equal  to 2-3 annual incomes of the employee. The coverage terminates as soon as the employee quits the company (finds another job, retires).  These plans have many advantages but  usually they offer very limited life insurance protection, which can be canceled regardless of your wish.

Some banks and companies offer Group Life Insurance for the public. But before purchasing this insurance,  compare cost of insurance as well as insurance terms and conditions offered by insurance companies with those from banks and different companies. Neither banks nor different companies can issue insurance policies: they are the owners of the group insurance policy and you can be a member of this policy.  As you are not the owner of the policy, it is not your asset and your coverage may be terminated whether you want it or not.

You can choose a contract from the Canada's top insurance companies: Manulife Financial, AIG Life of Canada, Equitable Life of Canada, RBC Insurance, Standard Life, Industrial Alliance, Canada Life and others.

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