What is term life insurance?
Term life insurance is a type of life insurance that lasts for a specific period of time, which can be a fixed number of years or until you reach a certain age. You pay a level premium to the insurance company until the expiry of the term. In return, your beneficiaries are entitled to receive a tax-free, lump-sum death benefit if you die within the term of the policy. Once the term ends, your coverage also expires and you can stop paying premiums. The term in term life insurance refers to the exact time period you are covered. Some typical terms are: 10-year term 20-year term 30-year term Until age 65 Additionally, some insurance providers let you pick your own term between 5 and 40 years that best suits your needs. These are all examples of level term policies where the death benefit and monthly premium remain the same through your chosen term. Lastly, there are specific term policies for unique applications: Annual Renewable Term: A short-term life insurance policy that locks in your premiums for one year and can be optionally renewed at the end of each year. Sometimes referred to as Yearly Renewable Term. Decreasing Term Policies: A form of term life insurance where the death benefit decreases in later years of the policy. How does term life insurance work? Term life insurance is a contract between you (the individual being insured) and a life insurance company (the insurance provider you choose). The insurance company agrees to make a lump sum, tax-free payment to a beneficiary should you (the insured individual) die during the entire term of the policy. Life insurance providers use detailed statistics and actuarial models in the application process to determine the premiums for this coverage. Premiums are the monthly or annual fees you pay to ensure your policy is in force. Insurance companies use this data to assess life expectancy and the likelihood they will have to pay out the full death benefit. If the likelihood is higher, the premium rates are higher. If the likelihood of a payout to your beneficiaries is lower, the premiums are lower (or you may even qualify for preferred rates). A beneficiary is a person (or people) the policyholder chooses to receive their death benefit. While they are typically a spouse, partner, or children, the beneficiary can be anyone you choose, including charities or trusts. In some cases you may need to go through a medical exam to qualify for your term life insurance policy, but there are no-medical insurance options for those who wish to skip medical underwriting. Unlike other types of life insurance, term policies hold no cash value or savings component. This is one of the reasons why term life insurance is one of the most cost-effective insurance plans for Canadians. Learn more about how term life insurance works
What is whole life insurance?
Whole life insurance is a type of permanent insurance that offers coverage for your entire life. As long as premiums are paid, the insurance company pays out a tax-free death benefit to your beneficiary, when you pass away. Unlike term life insurance, whole life policies do not have an expiry date. That means you get lifelong coverage. The premiums (the money you pay) for whole life policies are guaranteed and stay the same over your entire life. Whole life insurance policies also have a savings or investment component. A part of the premiums you pay are invested by the insurance company and the investment returns are available for you to use as cash value. The accumulation of cash value from a whole life policy can be used to supplement your retirement income, pay for children’s education, or for any other purposes you may want to use it for. What is the catch with whole life insurance? There is no catch or gotcha with whole life insurance in Canada. While there are lower-cost alternatives for financial protection, whole life insurance delivers great value as the death benefit is guaranteed. Because of this guaranteed payout, whole life policies are often used for estate planning and covering funeral expenses. What are the advantages of whole life insurance? Whole life insurance has many advantages. It provides you with guaranteed, lifelong protection and a death benefit for those you leave behind to cover end-of-life expenses or outstanding loans. Additionally, your policy accrues a cash surrender value that you can access while the policy is in force (or borrow against) after a certain number of years. Lastly, the premiums stay level, so you can budget your monthly insurance premiums accurately for the life of the policy. Are there disadvantages of whole life insurance? One disadvantage of whole life insurance is the elevated premiums. Because this type of insurance protects you for your entire life and retains a cash value, the premiums you pay for coverage are much higher than other types of life insurance.
Life Insurance
At Next Steps Planning Inc., we understand that life insurance can be a daunting topic, which is why we strive to provide clear and informative resources to help you navigate your options.
Our articles dive deep into what life insurance covers and why obtaining it is essential for securing your family's future.
As your dedicated Insurance Advisor, I am here to guide you through the process, answer any questions you may have, and tailor a plan that meets your needs.
Reach out today for personalized support.
Do you have enough life, disability and illness insurance? Find out before you need it
Most young people engage with insurance only when legally required—auto, tenant or home insurance.
Typical advice for saving on these types includes shopping around, bundling with other kinds of insurance, and raising your deductible to lower premium payments.
You can also ask for discounts, according to the Insurance Bureau of Canada: if you are mortgage-free, claims-free, or have upgraded your home against fire and flooding, you can likely get a better deal on your home insurance.
For drivers, installing a theft deterrent or a usage-based insurance app which tracks your driving habits can reduce your auto premiums. Keeping a clean driving record is also key, the bureau advises. Your broker or insurer can help find savings within your policy.
Non-mandatory insurance is a lesser-known game, however.
Which type of life insurance is best?
A little bit of knowledge can make a daunting task a whole lot easier to start—and that’s certainly true when it comes to life insurance in Canada. It’s a subject most people know little about until they actually decide to buy a policy, so we’re here to offer a little guidance on choosing the one that makes sense for you and your family.
The Importance of Reviewing and Updating Your Life Insurance Coverage as Your Family Grows
Buying a life insurance policy goes a long way toward protecting the people you care about. But the world doesn’t stand still. The amount that seemed sufficient five years ago may not be enough now, especially as your family grows and your situation changes. Reviewing and modifying your coverage regularly ensures your family’s financial safety net evolves alongside your life’s biggest changes.
Can Your DNA Change How Much You Pay for Life Insurance?
If you’ve taken a genetic test, life insurance companies can access that data either through your medical record, through data providers who buy it from at-home DNA test providers, or by requesting it from you. Insurers can use the results of that test to determine whether or not to offer you coverage and for how much. The data helps them statistically predict the likelihood that you’ll develop a medical issue that could shorten your life expectancy.
Other Insurance Services
Travel Medical Insurance
Travel with confidence knowing you have comprehensive Travel Insurance protection wherever you go.
Financial Planning Tools and Calculators
Access our range of tools and calculators to help you plan for your financial future, calculate insurance needs, and make informed decisions.
Estate Planning
The Will Companion serves as a one-stop place to keep essential information for ongoing reference, as well as emergenices, providing an immediate and lasting benefit - a sense of control over your financial and personal affairs.
Investment Planning
Investment planning is essential for building long-term financial security. It helps individuals identify financial goals, manage risk effectively, and allocate resources wisely to grow wealth over time. With a structured investment plan, people can make informed decisions, stay disciplined during market changes, and improve their chances of achieving milestones such as retirement, education funding, or financial independence.
Philanthropic Planning
Philanthropic planning helps individuals give with purpose and impact. It aligns charitable goals with personal values and financial capacity, ensuring that giving is intentional, tax‑efficient, and sustainable over time. With a thoughtful philanthropic plan, donors can support the causes they care about most while creating a meaningful and lasting legacy.
Risk Management
Risk management is essential for protecting financial stability and long‑term goals. It involves identifying potential risks, evaluating their impact, and putting strategies in place—such as insurance, diversification, and contingency planning—to reduce uncertainty. A strong risk management plan helps individuals safeguard their wealth, income, and lifestyle against unexpected events.