If the policy is renewable, it usually continues at a higher premium until you cancel it or reach the age limit in the contract. If you let it end, coverage stops and nothing is paid out.
Term Life Insurance
Term Life Insurance in Canada, Explained
Coverage for a set number of years, with a premium that usually stays level for the term. Here is how terms, renewal and conversion work, and when term may not be the right fit.
How It Works
What is term life insurance and how does it work?
Term life insurance pays a lump sum to the people you name if you die during a set period. If you outlive the term, nothing is paid out.
You choose the amount and the length of the term, and premiums usually stay level for that term. The death benefit is generally tax-free to your beneficiaries, who can use it for income, the mortgage, education or anything else.
Term has no cash value. You can't borrow against it, and you get nothing back if you cancel. That is part of why it generally costs less to start than whole life insurance.
At a glance
- Coverage for a set periodCommonly 10, 20 or 30 years
- Level premiumUsually fixed for the initial term
- Generally tax-free benefitPaid to the beneficiaries you name
- No cash valueNothing back if you cancel or the term ends
Choosing a Length
How long should my term be: 10, 20 or 30 years?
Match the term to the date the need ends. Canadian insurers commonly offer 10, 20 and 30 year terms, and some offer other lengths.
| Term 10 | Term 20 | Term 30 | |
|---|---|---|---|
| Starting premium | Least of the three | Higher than Term 10 | Highest of the three |
| Often used for | Shorter debts, or a tight budget today | A mortgage, or raising children | A new, long mortgage or very young children |
| Watch for | Renewal comes soon, possibly while you still need coverage | Renewal may come as your needs shrink, so review it first | Some 30 year plans end instead of renewing |
Some people layer policies, such as a 20 year policy for the mortgage plus a 10 year policy for a shorter debt, so coverage drops as needs drop. Not sure of the amount? Start with our guide to how much life insurance you need.
Renewal
What happens when my term ends?
On most renewable policies, coverage continues automatically with no new health questions, but the premium goes up. If you no longer need it, you can let it end.
Renewal premiums are usually set out in your contract when you buy. Many policies then renew every year at a rising premium; others renew for another full term. Renewal stops at an age named in the contract, often 80 or 85, and some plans do not renew at all.
Conversion
Can I convert term to permanent coverage?
Many term policies can be converted to permanent coverage, in whole or in part, without proof of good health. Not every policy has this right, and it has a deadline.
Deadlines vary: some plans stop at 60 and others run into the 70s. The new premium is generally based on your age at conversion and is usually higher. This right matters most if your health changes, because you can keep coverage you might not qualify for again.
What Drives the Cost
What affects the price of term life insurance?
A few personal factors drive every quote, and insurers weigh them differently, which is why we compare several.
Age and sex
Rates are set by your age when you apply, so the same coverage costs less the earlier you start.
Health and family history
Medical history, medications, height and weight. Larger amounts may need a short paramedical exam or blood test.
Smoking and vaping
Nicotine use in the past 12 months generally means smoker rates, which are considerably higher.
Amount and length
More coverage costs more, and longer level terms start at a higher premium.
Riders
Add-ons such as critical illness coverage or waiver of premium raise the premium but can close real gaps.
Term or Permanent
Should I choose term or permanent life insurance?
Term usually fits needs that end, like a mortgage or raising children. Permanent coverage fits needs that last, like the tax on an estate. Many people use a mix.
| Term | Permanent | |
|---|---|---|
| How long it lasts | A set period or to a set age | Your whole life, while the policy stays in force |
| Premium | Lower to start, then rises at renewal | Higher to start. Level on whole life, flexible within limits on universal life |
| Cash value | None | Usually builds over time |
| Common uses | Income, mortgage, education, debts | Estate tax, final expenses, a gift to family or charity |
Is It Right for You?
Who term life insurance fits
Term suits people who need a lot of coverage for a known stretch of years.
- Young familiesReplacing income while children depend on you
- HomeownersA policy you own for the mortgage. See lender coverage vs your own term policy
- Tighter budgetsMore coverage for the premium today, with the option to convert later if your policy allows it
When term may not fit
- A need that lasts for lifeFinal expenses or estate tax can outlast the term
- Keeping it into your 70s or 80sRenewal premiums can become hard to carry
- Wanting cash valueTerm has none
- Corporate surplusOwners may look at corporate-owned life insurance instead, with their accountant
Common Questions
Questions about term life insurance
No. Term has no cash value, so you get nothing back if you outlive it or cancel it.
On most renewable policies, yes. Renewal is usually automatic, with no new health questions, at the premium set out in your contract. It can be worth comparing a new policy before you renew, but that means new health questions.
A death benefit paid to a named beneficiary is generally tax-free. Your accountant can confirm the treatment, especially if a corporation owns the policy.
Usually, yes. Life insurance generally comes with a free look period, usually 10 days, when you can cancel and get your premium back. Check your policy for the exact terms.
Group life is often one or two times salary and usually ends when you leave the job or retire. It's a good start, but many families need more. See how much life insurance you need.
We work with clients across Burlington, Oakville, Milton, Mississauga and Hamilton. Many first conversations start with a call to 289.339.8100.
Related Guides
Strategies that often work together
Whole Life Insurance
Lifetime coverage with cash value, and how it compares with term and universal life.
Read the guideHow Much Life Insurance Do I Need?
A clear method for working out your coverage, with an illustrated example.
Read the guideMortgage Life Insurance
Lender coverage compared with a term policy you own.
Read the guideThis information is general in nature and is not tax, legal, accounting, insurance or investment advice. It is based on current Canadian tax legislation, which can change. Any strategy should be designed and reviewed with your accountant and legal advisors based on your circumstances. Premiums, renewal and conversion rights vary by insurer and policy; the policy contract governs.
Term life insurance in Burlington, Oakville, Milton, Mississauga and Hamilton
Get a Quote
Find out what term coverage would cost you
A short call and a few health questions are enough for real numbers.
Prefer to talk? Call 289.339.8100
Thanks, your message has been received. We will review it and follow up with clear next steps. No pressure, no confusing insurance jargon.