How Long Should My Term Life Insurance Policy Be?
Choosing how long you need life insurance can feel overwhelming. You might wonder if you should get a 10-year policy, a 20-year one, or something longer. It’s a decision that affects your family’s financial security, so getting it right matters.
Most Canadians opt for a 20-year term when they buy life insurance, according to research from the Life Insurance Marketing and Research Association (LIMRA). But term life insurance policies come in various lengths, typically ranging from 5 to 30 years. This gives you flexibility to match your coverage to your specific situation.
The challenge is figuring out what works for your circumstances. Here’s what you need to know: term life insurance pays out a death benefit if you pass away during a specific time period. You can choose coverage for a fixed period, like 10 or 20 years, or until you reach a certain age, such as 65. While 10 and 20-year terms are most common, some insurance companies offer customised terms to fit your needs.
When should you stop your life insurance coverage? That depends on your individual circumstances and where you are in life. The good news is that many policies offer renewal options, so you can extend your coverage without going through another medical exam.
We’ll walk you through how to choose the right term length for your situation, helping you make a confident decision about protecting your loved ones.
Understanding Term Life Insurance Lengths
Canadian insurers offer standardised term lengths, though your options vary depending on the company. Most offer 10, 15, 20, and 30-year terms, while some extend choices from 5 to 40 years or even up to 50 years.
Your term length determines exactly how long your coverage stays active. If you buy a 20-year policy, you’re protected for the next two decades. Once that period ends, your previous premium rates are no longer guaranteed.
You’ll encounter several types of term policies. Level-premium insurance is the most common – your monthly payment stays the same throughout the policy’s duration. With yearly renewable term (YRT) policies, you can renew annually without proving you’re still insurable, but your premiums go up as you age. Decreasing term policies keep your premiums fixed but reduce the death benefit over time according to a set schedule.
Term life insurance only protects you during the specified period.
Your coverage ends when you pass away, when you cancel the policy in writing, or if you stop paying premiums. When your term expires, you typically have three options: renew your coverage, convert to permanent insurance, or let the policy end.
The beauty of term life insurance is its simplicity. You pay your premiums, and if something happens to you during the term, your beneficiaries receive the death benefit. If you outlive the term, the policy ends and you’ve successfully protected your family during the years they needed it most.
Key Factors That Influence Your Term Length
Several personal factors will help you determine the right term length for your situation. Think of it as matching your insurance to your life – what you owe, who depends on you, and where you are in life all matter.
Your financial obligations often drive the decision. If you have 15 years left on your mortgage, you might choose a 20-year term to ensure your family can keep the house if something happens to you. Many people align their coverage with their biggest debts – it gives them peace of mind knowing those obligations are covered.
Consider your family responsibilities too. Do you have young children who will need support until they’re financially independent? You’ll want coverage that lasts until they finish school and start their careers. Some parents even factor in university costs when deciding on their term length.
How much coverage you need depends on your dependents and their specific needs. Experts often recommend coverage that equals 7 to 10 times your annual income, but your circumstances might call for more or less.
Your age and health play a significant role in both your options and costs. If you’re young and healthy, locking in a longer term now means lower premiums throughout the policy. Premiums increase as you get older, so getting coverage early works in your favour.
Where you are in life also matters. Newlyweds with a new 30-year mortgage might want that full 30-year term for protection. But if you’re approaching retirement, you might only need coverage until your spouse qualifies for pension benefits.
Your budget is a practical consideration you can’t ignore. If you cannot afford as much life insurance as you’d like, buying the option that fits your budget will still be worth it. It’s better to provide your family with some financial support rather than leave them with nothing.
Choosing the Right Term for Your Life Stage
Your life insurance term should match where you are in life right now. As your circumstances change, so do your insurance needs.
If you’re approaching retirement, a shorter term of 5-10 years might work well. The same goes if you’ve nearly paid off your mortgage or your children are close to financial independence. Shorter terms offer flexibility when you’re not sure what your future holds or when you need coverage for specific debts like car loans.
Parents with young children often find that 15-20 year terms suit their situation. This gives you protection until your children can support themselves financially. These mid-length terms also work if you’re already several years into your mortgage payments.
Longer 30-year terms benefit younger families and new homeowners with lengthy mortgages. If you’re in your twenties or thirties, locking in a 30-year policy lets you secure lower rates while you’re healthy. This works particularly well for young professionals during their peak earning years.
Your needs will change over time, though. When major life events happen—marriage, having children, buying a home, or changing careers—it’s worth reviewing your policy. The good news is that many policies offer renewal or conversion options, giving you flexibility as your life evolves.
Consider your current obligations and how long they’ll last. How many years until your mortgage is paid off? When will your children be financially independent? These questions help you determine the right term length for your situation.
Conclusion
Choosing the right term length for your life insurance doesn’t have to be complicated. Yes, there are several factors to consider, but most come down to answering a simple question: how long do your loved ones need financial protection?
Your mortgage, your children’s ages, your health, and your budget all play a role in this decision. The good news is that you have options, whether you need coverage for 5 years or 30 years.
Remember that your insurance needs will change as your life changes. Getting married, having children, buying a home, or changing careers are all good reasons to review your policy. Many insurers offer renewal and conversion options, so you’re not locked into your original choice forever.
The most important thing is getting some coverage in place. If you can’t afford as much life insurance as you’d like, buying the option that fits your budget will still be worth it. It’s better to provide your family with some financial support rather than leave them with nothing.
With the right term life insurance policy, you’ll have peace of mind knowing your family is protected during your most important years.
At Maple Bay, we understand that choosing life insurance can feel overwhelming. That’s why we work with you to find the right policy for your specific situation. We have access to policies from different insurance companies, so we can help you find the best coverage at a price that fits your budget.
When you’re ready to explore your life insurance options, contact the team at Maple Bay Insurance. Let us help you find the right term length and coverage amount to protect what matters most to you.