Term 40 life insurance offers longer-lasting coverage than typical 10- or 20-year policies, but when does it make sense for Canadian policyholders? This extended coverage addresses specific long-range financial obligations, but understanding whether it fits your situation requires looking beyond basic premium comparisons.
What is 40-Year Term Life Insurance?
40-year term life insurance (Term 40) is a type of term life insurance policy that guarantees your premium rate and death benefit for 40 years, making it well-suited to long-term needs spanning 30+ years.
Term 40 life insurance works similarly to other term lengths, just with an extended protection well into typical retirement ages, potentially to 75 or 85, depending on your age at purchase.
- The policyholder pays annual or monthly premiums to maintain coverage.
- The death benefit stays consistent over the 40-year term.
- At year 40, coverage ends unless you exercise renewal options, which come with dramatically higher premiums reflecting your advanced age.
- Many policies allow people to convert to permanent life insurance.
Term 40 is rare in Canada; only a handful of Canadian insurers offer 40-year terms: Industrial Alliance, RBC Insurance, Canada Life, Empire Life, and Beneva (primarily in Quebec). This limited market exists because most insurance needs don’t genuinely span 40 years.
Who Might Benefit from a 40-Year Term Policy?
The honest answer: very few people. Term 40 is a niche product, but it can be the right tool in the following specific situations:
Later-Life Mortgages with Extended Amortizations
If you buy your first home at 40 with a 30-year mortgage, you’re making payments until age 70. Term 40 purchased at 40 extends to age 80, covering the entire mortgage plus an additional 10 years. However, most Canadians buy homes in their late 20s or early 30s, making Term 25 or Term 30 sufficient.
Special Needs Dependents
Parents of children with special needs who will require lifelong financial support, or individuals who have children later in life (e.g., after age 45), may need coverage that lasts well into their own retirement. Term 40 provides affordable long-range coverage, though permanent insurance often works better for actual lifetime needs.
Securing Long-Term Business Agreements
Business partnerships often involve long-term financial commitments that are formalized in a buy-sell agreement. This agreement dictates how the surviving partners buy out a deceased partner’s share of the business.
For example, two doctors open a clinic at age 35. They plan to work together until they retire at 70 and sign a buy-sell agreement. Term 40 covers that entire partnership period without renewal uncertainty.
High-Net-Worth Tax Planning
Estate values over $10 million might face liquidity issues at death if assets are tied up in real estate or businesses. Term 40 provides a guaranteed death benefit for 40 years to cover final tax bills, though, again, permanent insurance usually makes more sense for wealthy estates.
When Term 40 Life Insurance Does Not Make Sense?
While Term 40 serves specific needs, it comes with significant drawbacks that make other options more practical and cost-effective for most people.
- Higher Cost: Significantly more expensive than Term 10, 20, or 30 policies. You pay a premium for the extended guarantee.
- Potential for Wasted Premiums: If your financial needs decrease after 25 years, you might be overpaying for coverage you no longer require.
- Limited Availability: Not all insurers offer it, which restricts your choices.
- False Sense of Lifetime Coverage: It’s still a term policy. It ends, and renewals are prohibitively expensive for most people.
Because of these disadvantages, consider shorter terms or other policy types in these common situations:
If Your Mortgage Will Be Paid Before the Term Ends
The most common reason for life insurance is to cover a mortgage and provide income replacement while children are young. A 40-year term often extends far beyond this period of need.
For example, you buy a house at age 32 with a 25-year mortgage. You will be mortgage-free at 57. A 40-year term would run until you are 72, forcing you to pay for 15 years of coverage you may not need. A Term 25 policy would align perfectly with your mortgage.
If You’re Buying Primarily for Final Expenses
Needs like funeral costs, outstanding personal bills, and minor end-of-life medical expenses exist regardless of when you die. A term policy that expires is not the ideal tool for this permanent need.
If You Expect Your Coverage Needs to Decrease
Children become financially independent, mortgages get paid down, and retirement savings accumulate. For most people, the need for a large amount of life insurance is highest in their 30s and 40s and diminishes significantly by their 60s. A more flexible strategy, such as “term-layering” (buying multiple policies with different term lengths), allows your coverage to decrease as your financial responsibilities do.
Questions To Ask Before Deciding
Before committing to a 40-year term, have an honest discussion with yourself and your advisor. Consider these critical questions:
- How long will your mortgage, debts, income needs or business risks realistically last? Does that timeline genuinely approach 40 years?
- Does your budget support the higher premium? A 40-year term is only effective if you can afford to keep it. If the high cost puts you at risk of lapsing the policy, it provides no security at all.
- Is the long-term premium guarantee worth the higher cost? Compare the premium for a Term 40 policy against a Term 30 policy. Is the peace of mind from that extra 10 years of guaranteed coverage worth the significantly higher annual cost?
- How will your coverage needs change over time? Does the stability of guaranteed premiums for 40 years align with your financial plan?
- Have you considered the alternatives? Have you fully explored how a 30-year term, layered term policies, or a permanent insurance policy might better fit your long-term financial plan?
If you answered yes to some or all of these questions, Term 40 insurance may suit both your finances and longevity risks.
How Much Does 40-Year Term Life Insurance Cost?
For Canadians, premiums on Term 40 insurance depend on various factors:
- Age: Rates rise steadily with age
- Gender: Women typically pay less than men for the same coverage (both are healthy applicants)
- Health: Good health reduces premiums. Medical issues or pre-existing health conditions increase costs.
- Smoking: Smoker rates are much higher than non-smoker rates, often 100% to 300%.
- Coverage Amount: More coverage means higher premiums.
Here are sample Term 40 rates for a 30-year-old non-smoking male in excellent health:
| Coverage Amount | Monthly Premium |
|---|---|
| $250,000 | $41.25 |
| $500,000 | $73.08 |
| $1,000,000 | $141.30 |
Rates remain consistent for the entire 40-year term. However, renewal premiums after year 40 have become exponentially more expensive.
Leading Term 40 Insurance Providers in Canada
Only select Canadian life insurers offer Term 40 insurance. Notable options include:
- Industrial Alliance – Term 40 coverage via “Pick-a-Term” policies from 10 to 40 years. Renewable annually to age 85.
- RBC Life Insurance – Term 40 plans with renewable and convertible options. Strong policy features.
- Canada Life – Known for flexible Term 40 offerings with renewal terms extending to age 85.
- Beneva – Term 40 guaranteed renewable to age 75. Limited availability outside Quebec.
- Empire Life – Term 40 coverage with standard renewal and conversion provisions.
Sticking with large, established life insurers in Canada ensures a secure Term 40 purchase. Checking policy renewal and conversion terms is also advised.
Tips for Purchasing Term 40 Insurance in Canada
Follow these best practices when shopping for Term 40 life insurance:
- Compare rates from at least 3-4 top insurers to find the best premiums
- Inquire about renewability and conversion options on the policy
- Calculate the right coverage amount using a needs analysis tool
- Avoid overbuying coverage for longer than truly necessary
- Get quotes annually to ensure rates remain competitive
- Work with an experienced independent broker who can access all Term 40 carriers
- Ask about any special discounts that may apply to reduce premiums
- Learn when renewal rates kick in and how much policies can cost to maintain
- Discuss converting to permanent insurance before health changes later in life
Planning for Term 40 leads to the best policy at the lowest rates.
Summary: Is Term 40 Life Insurance Worth It?
Term 40 works for specific long-range scenarios but isn’t ideal for all Canadians. Understanding the advantages and limitations is key. Term 40 only makes sense if you actually require coverage for most or all of the 40-year term. It becomes expensive otherwise.
The prime benefit is ensuring a high-probability need, such as a mortgage or income lasting 30+ years. However, if your goal is simply to maximize coverage for the dollar over a shorter horizon, cheaper 10-, 15-, or 20-year terms work better.
So, weigh your budget, timeline, and risk exposures first. Term 40 insurance value depends wholly on aligning with long-range liabilities.
FAQs about Term 40 Life Insurance
What are the renewal options on term 40 life insurance?
Most term 40 policies allow the policyholder to continue renewing the coverage annually past the 40-year term, up to a certain age like 75, 80 or 85. Premiums increase drastically at renewal since no health evaluation occurs.
At what age should you buy term 40 insurance?
Ideally, it's between ages 25 and 40. Buying earlier means lower premiums. After 50, term 40 rates become prohibitively expensive for most buyers.
Is term 40 life insurance a good idea?
If you have a long-term need extending near or into retirement, term 40 offers an affordable way to cover that need. But it isn't the best fit for those with shorter 5, 10 or 20-year insurance needs.
Is term 40 life insurance expensive?
Compared to terms 10, 20 or 30, term 40 costs more due to the longer coverage period. But it remains far cheaper than permanent forms of life insurance.
Can term 40 life insurance be renewed?
Yes, most term 40 policies feature guaranteed renewability to an advanced age like 75, 80 or 85. However, renewal premiums are much higher than the original premiums.
Why choose term 40 over term 20 life insurance in Canada?
You may choose term 40 over term 20 if you need life insurance coverage for a longer period, such as to cover a 30+ year mortgage or provide income replacement closer to retirement age. The longer-term means higher premiums.
Do all term 40 life insurance policies in Canada offer conversion options?
Most, but not all, term 40 policies in Canada allow you to convert to permanent life insurance within the 40-year term without medical underwriting. Be sure to ask an insurer or agent if this option exists.
What are the health requirements for qualifying for term 40 insurance in Canada?
Insurers have varying health requirements, but you typically need to be in good overall health with no major illness. Health issues may mean higher premiums or declination. Smokers also pay higher rates.
Is term 40 life insurance renewable after age 85 in Canada?
Term 40 life insurance expires at the end of the term, which is typically around age 85 in Canada. Some insurers allow renewing annually after this point. Renewal costs will be much higher.
Are term 40 premiums higher for women in Canada?
No, premium rates for term 40 life insurance are generally 10-20% lower for women than men of the same age and health status when applying in Canada.
What medical tests are required for term 40 insurance in Canada?
Insurers usually require a paramed exam (blood/urine sample, vitals) and perhaps an ECG test if you are older or have health issues. No tests are needed for simplified issue term 40 policies.
Can term 40 life insurance rates increase?
No, term 40 insurance offers level premiums that are locked in for the entire 40-year term. Rates can only increase if you renew the policy after the initial term expires.
What is the difference between term 40 and whole life insurance?
Term 40 insurance provides temporary coverage for 40 years. Whole Life provides permanent, lifelong coverage as long as premiums are paid. Term 40 is also cheaper than whole life.
Are term 40 insurance premiums tax deductible in Canada?
No, term 40 life insurance premiums are not tax deductible in Canada, unlike some permanent forms of life insurance.
Can I get term 40 life insurance with pre-existing health conditions in Canada?
Yes, you may be able to qualify for term 40 insurance with certain health conditions, but will likely pay higher premiums depending on the severity.
How do I determine how much term 40 coverage to get in Canada?
Do a needs analysis to calculate expenses your family/dependents would face without your income. Also, consider outstanding debts to cover.
Can smokers get term 40 life insurance in Canada?
Yes, smokers can qualify but will pay significantly higher premiums - as much as 2-3 times higher than non-smoker rates.
What can disqualify me from term 40 life insurance in Canada?
Major untreated health conditions like cancer, heart disease, or mental illness can disqualify you from term 40 insurance. Hazardous hobbies or careers can also impact eligibility.
How long do I have to review a term 40 policy after receiving it in Canada?
In most provinces, you get 10-30 days from the issue date to review a new term 40 policy and cancel with full refund if not satisfied.
If my health declines, can I still convert my term 40 to permanent coverage?
Yes, the conversion option on term 40 policies allows you to convert to permanent insurance with no medical underwriting needed.
