Term Insurance Types
In Canada insurance law is available as a part of a general statute that contains most of the common laws and this law regulated the conduct of insurance agents and the insurers within the province. Term insurance is an insurance which runs for a particular period and matures at the end of the period. It is one of the basic types of life insurance and it covers the death of the person during the term covered by the insurance company. Term insurance does not include savings, mortgage value, cash values and benefits at the time of retirement. It has the lowest premium available and is least expensive for the insured. The cover is available for the insured during that term. Unlike permanent life insurance term insurance is not an investment and only 1% of the term insurance is claimed. Term insurance in Canada is basically divided into the following; firstly on the basis of the period of insurance and secondly on the health of the insured and thirdly on the pay premiums involved.
Period Of Term InsuranceThe period of insurance is a very important division. The term insurance is available to people in the age of 18 to 65. The monthly or the annual premium is the lowest for term insurance plans and they do not increase during the term. For example if you have taken a ten year term insurance the amount you have to pay as your first instalment will be the amount you have to pay as your last instalment. Term insurance can be renewed at the end of the period or it can be changed into a permanent plan (full life insurance). Normally 5 or 10 year term plans are available for people above the age of 65. The other plans are for people below 65 years of age. Today many insurance companies offer policies that can be purchased online directly without bothering an agent and without a medical test and by answering a few easy yes or no questions about the insured’s health.
• 5 year guarantee plan
• 10 year guarantee plan
• 15 year guarantee plan
• 20 year guarantee plan
• 30 year guarantee plan
• Term to 65 guaranteed
• Term to 75 guaranteed
• Whole life guaranteed life pay
• Term to 100 guaranteed
Health
In case of classification by health there is the non medical plan wherein the applicants are not required to go through the medical tests. Under preferred plans applicants are divided based on health ( the present condition, hereditary diseases, previous occurrence of major disease), gender, lifestyle ( food habits, travelling, kind of work done, night shifts, use of alcohol) and overall tobacco use (smoker, non smoker). The premium and plus insurance types are also listed in most websites and sold be most agents. The most commonly available plans are classified into the following: -
• Regular
• Preferred
Pay Premiums
The pay premiums start at $25000 on a normal term insurance policy. There are policies to choose according to the individuals need. There are premiums available for $15 per month which is one of the lowest in the insurance industry. Most of the premiums are available with 100% tax free benefits and can be deducted in the insured tax returns.
• Annual
• Monthly
Canada Life, AXA, Equitable Life, Manulife, Industrial Alliance, Reliable Life, AIG Life, Standard Life, Transamerica Life, IAP Life, Empire Life, Western Life, Unity Life and RBC Insurance are some of the companies and corporates offering term life policies in Canada.
Annual Life Renewable Term
Annual renewable term life is the most simple of the term plans available with the insurance companies. This cover is available for 365 days exactly. For example the annual renewable term covers only death and the death should have occurred within the time period, if the death of the insured occurs after the year even after one day there is no compensation available for the insured’s family. In case of annual renewable term life insurance the insured must go through a medical test at the end of each year then the annual premium is fixed. The premium paid is the probability of death of the insured plus a profit percentage for the insurance company. If at the end of the year the insured feels that there is no need for this insurance then the policy can be surrendered at the end of the period. There is no necessity to take it to the next year. It is also called yearly renewable policy the premium is paid for one year and calculations are done for a year but it is not cost effective. The chances of a person dying in the next year are usually low and the purchase of the insurance is done not for one year but for annually renewable term policies. The premium is usually paid for a year and is continued for 20 or 30 years or sometimes even life long and the maximum time allowed is up to the age of 95. In case of ART the premium is a little higher than what is the premium for an annual coverage, but it is likely to have more benefits for the amount paid as premium.
A level term insurance policy is a life insurance policy which has got a fixed face value and increasing premiums. It is more popular than the annual renewable term policy where premium paid is the same every year unless reviewed. The level term life insurance takes into account the time value of money. So the rates are averaged and you start paying a very low amount and the amount increases as the years increase. It is available for periods of 10 to 30 years. The longer the term of insurance then the premium paid is higher. Moreover in this case older people above the age of 60 ends up paying very high premiums since the years are averaged and the premium is fixed accordingly.
Term insurance is not beneficial to many since the payout in this category is only one percent. That is the main reason that premiums are very low in case of term insurance policies both in annual renewable life term and also level term life insurance policies. Most term insurance policies have the conversion option. In this case at the end of the term the insurance can be changed to permanent insurance policy. So that cash benefit remains with the insured. The main advantage is that a person who has started as term insurance with a young family with inexpensive premiums will now after the maturity convert the policy and enjoys the benefits of permanent policy with the tax savings as the cash flow increases. The policy can be converted even if the health condition of the policy holder has deteriorated during the term of insurance. This privilege to convert will be available to the policy holder during a particular time period with in which the option to convert should be exercised. A term life insurance calculator is available in many websites to calculate your financial needs and fix a policy accordingly. Always study all your options very carefully and then make your final decision regarding your insurance policy.