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A Message from our Affinity Partner Canada Life: What is term life insurance?

December 09, 2014

Well, for starters, the idea behind term life insurance is that you may only need life insurance protection for a certain period of time. As your dependents become more self-sufficient and your debts and financial obligations slowly reduce over time, those you leave behind should eventually be able to manage financially with minimal additional support.

That is why term life insurance is often referred to as “pure protection” insurance. You are only paying for the amount you require, for the period of time needed. There is no investment component associated with the insurance, only insurance coverage that you can cancel when you no longer need it. The end result of this structure is that most people can purchase relatively large coverage amounts at a relatively low cost.

If you shop around, you will see that there are different “terms” available (e.g. 5 year term, 10 year term). What’s the difference? The “term” refers to how long you pay the same price for the coverage. Say, if you are 36 years old and pay $12.00 a month initially, you will be paying $12.00 a month until you enter into the next age-band (whether that is a 5 or 10 year age-band). Once you have finished that term, the price will rise and you will pay that new premium until the next age-band increase. Some term life plans will allow you to lock in your initial rate for a period of time even if you are close to entering a higher age-band at the time of enrolling.

So why does the price increase for the same amount of coverage as you get older? Because this is “pure” insurance coverage, the cost of coverage will increase as the likelihood of payout increases – and as you get older, the risk of your death increases. One way to manage this increase in cost is to reduce your coverage level over time as your debts are paid down and there is money saved for your dependents. The beauty of term life insurance is you can decrease or even cancel your coverage at anytime. It is very flexible while allowing for significant coverage when you and your family are the most financially vulnerable. And should you take on more debt or have more people relying on you financially, you can always apply for more coverage to top up the amount of insurance you have.

To learn more, call Canada Life at 1-800-387-0649 or visit them online. As our chosen provider for life insurance, Canada Life has term life insurance, at group rates, for all Sheridan alumni and their spouses. No matter where you are in your decision on getting life insurance, whether it is for the first time or purchasing additional coverage, Canada Life is available to help.

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