Understanding term life insurance
If you’re looking for a flexible and affordable way to protect your financial security so it doesn’t burden your loved ones should you die unexpectedly, term life insurance could be a good option. Here’s what you need to know.
1. What is the difference between term and permanent life insurance?
Term life insurance provides a benefit in the event of the policyholder’s death, for a pre-set period or up to a specified age.
Unlike permanent insurance, the purpose of term life insurance is not to cover funeral expenses or leave an inheritance to your loved ones. In general, its purpose is to avoid burdening your loved ones with debt, like a mortgage or student loans.
2. What are the specifics of term life insurance?
- It is for short-term needs, like maintaining your children’s lifestyle, paying off debt or a mortgage, or protecting business owners or shareholders.
- It has a pre-set period and ends on the date indicated in the contract. The benefit is paid upon the policyholder’s death only if it occurs during the coverage period.
- More affordable and fixed for the entire coverage period.
- It can be renewed, although this may be at a higher cost.
- It can be converted to a permanent policy. However, here too, the cost may likely increase.
- It has no cash value because it doesn’t have a savings component, which means that you won’t recover any amount if you terminate the policy.
3. How to know if term life insurance is right for me?
It’s may be a good option when:
- You want to protect a special project over a specific period of time. This could be for example the purchase of a new home, starting a new business or paying your children’s student loans.
- You have a small life insurance budget because of other financial and immediate obligations.
- You want the option to renew or convert your term life insurance to permanent life insurance, without requiring evidence of insurability.
- You want a flexible life insurance product that you can make changes to when you need it (e.g., life insurance for your children, critical illness insurance, etc.).
To make a well-informed decision, speak to a financial advisor about all the life insurance options available. The advisor’s role is to help you find the product that’s best for you!
Note: This blog post is provided for information purposes only. It is not a substitute for professional legal, financial or fiscal advice. For advice specific to your personal situation, always speak with your advisor. SSQ Insurance cannot be held responsible for any decision made as a result of reading this blog post.