If you are researching which type of life insurance to purchase, you might be wondering what the difference between term life insurance and permanent (universal) life insurance are. This article is to briefly describe how a term policy works. If you have further questions regarding a term policy please feel free to contact us.

Term life insurance is typically the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time. The majority of term policies are purchased as either 10 year or 20 year terms. Basically what this means is that your coverage amount (e.g. $1,000,000) and premium costs are locked in for that duration of time (e.g. 10 years). Although 10 and 20 year term policies are most common, there are other year durations available as well.

Term life insurance policies are typically used to cover financial responsibilities of the insured life. This may include, but is not limited to, mortgage or any personal debt, providing income for a spouse and/or children, business debt, funds for university or college education, and funeral costs.

As an example, we will use a $1,000,000 10 Year Term Life Insurance Policy for a 40 year old male, non-smoker offered by Equitable Life Company.

For the first 10 years of the policy, the coverage amount will stay level at $1,000,000 and the premiums will be $55.97 per month. After the ten years, the insurance company will lock your rates in for another ten years at a very high cost with the same coverage amount. In this case, the monthly premium will be $55.97 for the first ten years and then increase to $475.20 per month for the next ten years.

As you can tell, the increase in price after ten years is substantial. The insurance company will offer you insurance after the first ten years with no medical and no matter what kind of health you are in. This is part of the reason for the large increase in price as they factor in that your health could change drastically in that ten year span.

If you are still in need of coverage after ten years and are in good health, most people replace their old policy with a new policy at much lower premiums compared to the renewal cost. Term insurance does not offer any return of premiums if you ever decide to cancel the policy.

It is advised that you review your insurance policies every two years at minimum to ensure that you have the appropriate policy and coverage amount in place for you and your family.

Contact us with any questions that you may have regarding new or existing term life insurance plans. We are here to work with you to ensure that you have the right coverage and policy in place for you and your family.

West Coast Life Insurance
Email – simon@westcoast-lifeinsurance.ca
Phone – 778-484-2683