Term Life is the most common type of life insurance. Generally inexpensive, at least in the beginning, it meets specific temporary or short term needs.
It's therefore important that the product you choose be the right one for your coverage needs.
What to Look For in Term Life Insurance
How Is Term Life sold?
Term Life is sold on its own or combined with other kinds of life and health insurance coverage. It's also possible to get Term Life coverage via a Universal Life product and enjoy more advantages and flexibility at the same time. To learn more about Universal Life, consult What to Look For in Universal Life Insurance.
If you would like to learn more about Term Life coverage, click on I'm Shopping for a Product.
Coverage
Minimum and maximum ages and coverage
Minimums and maximums vary from product to product and company to company on
- the amount of insurance coverage you can purchase and
- the age of insured person. (Insurers use two main ways to determine age: some use the age of the insured person at their last birthday and others use their age at their closest birthday.)
Term
The term is the duration of the temporary insurance coverage. The terms most frequently offered on the market are 1, 5, 10, and 20 years.
Renewable
Renewable means you can renew your insurance coverage at the end of each term for another one. This can be repeated up to a certain age, at which time the coverage will cease. You should verify
- whether you have the right to renew and, if so,
- whether you can renew without having to prove you're in good health and
- the age up to which coverage can be renewed.
Convertible
Convertible means you have the right to convert Term Life coverage into permanent coverage that will cover you for as long as you live without having to prove you're in good health. You should thus check
- whether you have the right to convert and, if so, up to what age, and
- whether permanent coverage premiums are preset and guaranteed for life.
Insuring other people
Perhaps you want more people, like your spouse or even your business partners, to be insured by Term Life. You may require the flexibility of the following options, so make sure they are available if needed:
- Each person can be insured individually, yet under the same Term Life policy
- Each person can be insured jointly with the others on a first-to-die or last-to-die basis
Premiums
Guaranteed premium
What exactly does a guaranteed premium mean? To determine if your premium is guaranteed, answer the following:
- Are Term premiums fixed and locked in for the duration of the chosen term?
- Will it be the same each time the term is renewed? Note that with Term Life, the premium rises with each renewal to reflect the insured person's age at the time of renewal.
- Do you already know what premiums will be payable upon each renewal? Do you know whether they're guaranteed?
Preferred rate
Some companies may also offer discounts on premiums because of the insured person's good physical condition and good overall health. If you think you're in good health, it's important to find out whether the company offers preferred rates. You may pay less.
Payment terms
Insurers offer a variety of premium payment methods:
- Can the payments be made on a monthly, quarterly, semi-annual or annual basis? It's important to compare premiums with the same frequency because one policy may be more competitive than another at one frequency, but not at a different frequency.
- Can you make your payments by preauthorized bank withdrawals, credit card, cheque, etc.?
How to compare premiums
When you're comparing Term costs, you should check for the above features. Some are automatically included in the price or available for a surcharge.
The same company may also offer different premiums depending on the sex of the person insured, their health, whether they're a smoker or a nonsmoker, how risky their occupation is, etc.
A set fee reflecting administration costs for your insurance policy is also usually included in your total premium.
Special features and additional benefits
- Companies sometimes offer special features. One of the most common is the accelerated Benefit or Living Benefit, which is payment of a portion of the insurance amount when an insured person is diagnosed with a serious illness and has only a certain time left to live.
- Companies may offer several additional benefits besides Term Life Insurance. To get an idea of what they can provide, consult What to Look For in Additional Benefits.
Also in your Insurance Shopping Guide