Term Life Insurance

What is term insurance?

Under a term insurance policy, the insurance company promises to pay the sum insured if the insured dies within the period specified in the policy. If the insured is alive at the end of the period, the life insurance policy terminates on that date. However, most policies have a right to either renew or convert the policy.

Renewability and Convertibility

Term insurance usually includes the right of the life insured to renew the policy or covert the policy into a permanent insurance policy without having to prove evidence of insurability. Each time the life insured renews the policy the premiums will increase by the guaranteed premium rate schedule, which is written into the policy at the issue date. Not all term insurance is “renewable” and/or “convertible” These features are specified in the contract at the time of purchase.

Types of Term Insurance

Traditional Term – The most common type of term policy is identified by a specified period of time, such as 10-year term, 20-year term. At the end of the specified period, the coverage either terminates or is renewed if the contract is “renewable.” The premium normally stays level for the period specified but increases with each renewal. The policy will eventually expire at a certain age.

Decreasing Term – The amount of the policy benefit payable under a decreasing term policy decreases over the term of coverage. The policy’s death benefit begins as a set face amount and then decreases over the term of coverage according to a method that is described in the policy. Premiums however, do not decrease as the face amount decreases. The banks commonly use this type of insurance. Before using this product for mortgages, investigate the Term 10 or Term 20 products that are available. Most of these products are less expensive and their face amount does not decrease.

To read more about the difference between the traditional term and decreasing term read the following article.

Term to Age 100 – A common type of term insurance is called “term to Age 100.” The premiums are usually level for the life of the policy, but some policies allow you to pay the full premium in 10 or 20 years. No matter which method of payment used the insured is covered until death or age 100. The premiums are initially higher, but lower over the long term compared to the other term polices. Since the average person is not expected to live to 100, this type of term insurance is considered “permanent.” Terms to 100 plans usually do not have a cash surrender value.

Benefits and Riders

Accidental Death Benefit – Provides an additional amount of insurance for any Insured under the policy. This amount is only paid if the Insured dies as a result of an accident.

Critical Illness Riders – Various Critical Illness riders can be attached to Term 10 and Term 20 policies. There is a choice of either a Basic Critical Illness Rider or an Enhanced Critical Illness Rider. The Basic Rider will only cover the most significant conditions – Hart Attack, Stroke, Coronary Artery Bypass surgery and Cancer. (Different Illness may be covered depending on the insurance company) The Enhanced Rider will cover the Basic Critical Illnesses plus 16 additional conditions:

• Kidney Failure
• Major Organ transplant
• Blindness
• Loss of Speech
• Server Burns
• Motor Neuron Disease, Multiple Sclerosis
• Paralysis or Loss of Limbs
• Coma
• Deafness
• Alzheimer’s Disease
• Parkinson’s Disease
• Occupational HIV Infection
• Insulin
• Dependent Diabetes Mellitus
• Benign Brain Tumour
• Rheumatoid Arthritis

To find out about the definitions of these Illnesses visit the Critical Illness Section of our website

Children’s Protection Rider – Provides level insurance coverage to age 25 for each unmarried child covered. This rider expires at a child’s date of marriage or 25th birthday, whichever comes first. At such time, the Owner may convert the insurance on the life of that child to an insurance plan offered by the insurance company.

Owner Waiver of Premium – Waives the premium during the disability of the Owner, provided the disability occurs before the Owner is 60 years old.

Guaranteed Insurability Benefit – Provides an option to apply for a policy without the need to supply evidence of insurability. (Some restriction apply)
Different companies may offer different riders. Contact your insurance advisor and find out which riders would be of benefit to you.

For more information, please feel free to contact us.