Published July 2020
Choosing life insurance can seem daunting. It has, after all, the reputation of being the decathlon of adulthood – that thing you buy when you have the family, the house, the kids, the whole shebang. But in fact, term life insurance is a really smart financial tool that makes a lot of sense for people at a lot of different life stages. And it’s not nearly as confusing as you might think. Especially once you know a few basics.
What is term life insurance?
Term life insurance is a financial tool you can purchase which provides your loved ones with a tax-free cash benefit to replace lost income in the event of your passing. Just think of it as a financial safety net that you deposit money into over time, that will help protect your loved ones and your assets when you no longer can.
To understand term life insurance, you’ll need to understand some of the lingo. Your life insurance policy is the agreement, or contract, between you and your insurer. The term is the length of time you purchase the coverage for, for instance, 5, 10 or 20 years. In exchange for coverage, you agree to pay your insurer a fee, or premium. You’ll select a beneficiary to receive the tax-free lump-sum benefit provided by your insurer upon your passing.
What amount should you buy? It’s not a one-size-fits-all thing, though it’s generally recommended that you buy 7 times your salary1 to replace lost income. You’ll need to consider things like your assets, debts, goals and the everyday needs of your family. A Licensed Insurance Advisor can help you come up with the magic number.
Who should get term life insurance?
68% of Canadian households own life insurance, and the average amount of coverage is $200,000.2 The Canadian life insurance industry has been growing over the past 5 years. CAA and Manulife, one of Canada’s leading insurance companies, have been partnering together to offer CAA members special rates on Term Life Insurance for over 20 years.
Who should buy term life insurance?
- Anyone, married or single, who owns a home
- People who are starting a family or plan to
- Families with children
- Anyone with a family member who depends on them financially
- Anyone caring for an aging parent or family member
- People approaching retirement
- People who want to leave something for a charity or foundation
Why get term life insurance?
People buy term life insurance for a lot of different reasons. Here are three popular ones.
- To replace lost income. If a primary wage earner were to pass away, money from term life insurance can help the family pay the bills and maintain a standard of living.
- To pay off a mortgage. Paying off a home can take up to 30 years. Money from life insurance could help your family pay off the mortgage.
- To cover final expenses. Even a simple funeral can cost thousands of dollars, and the last thing you would want to leave your loved ones with is your final expenses.
When to get term life insurance?
It’s never too early to get term life insurance. When you are younger and in good health you have access to the best rates. Your rates don’t go up over the duration of your term, so if that’s 20 years, you’re locked in at that same low rate for the duration. Shorter terms may cost less, but rates can increase when it’s time to renew.
Many of life’s major milestones can tell you when it’s time for term life insurance. For instance, if you’re getting married, you’ve had a change in marital status, you’re buying a home, starting a family or retirement is getting closer.
Where to get term life insurance?
When you make the decision to protect your loved ones, the company you choose is everything. CAA has been partnering with Manulife for over 20 years to help CAA members across Canada affordably protect their loved ones. It’s available in a range of terms and coverage amounts to suit all families and budgets.