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Term 20 Life Insurance in Canada

Term 20 Life Insurance in Canada
Term 20 Life Insurance in Canada

Term life insurance provides financial protection for a period called the “term.” Term 20 life insurance is a popular policy that offers coverage for 20 years. This article will explore what Term 20 insurance is, who it’s best for, how it works, its pros and cons, costs, top providers, and tips for buying the right policy.

For Canadians seeking temporary and affordable life insurance, Term 20 is a compelling option. It can effectively secure coverage for significant financial obligations that typically span about 20 years. Continue reading to gain a comprehensive understanding that will empower you to make an informed decision.

What is Term 20 Life Insurance?

Term 20 life insurance provides guaranteed death benefit coverage for a 20-year term. As long as you pay the premiums, your beneficiaries will receive a tax-free lump sum payout if you pass away within the 20-year coverage period.

Term 20 policies offer level premiums that are locked in for the entire 20-year term. This means your premium payments will not increase for the duration of the policy. Once the term expires, coverage ends unless the policy is renewed for an additional term.

How Term 20 Life Insurance Works

With Term 20 insurance, if the insured individual dies within the 20 year term, the death benefit is paid out to their named beneficiaries. If the insured survives the full 20 year term, the coverage simply ends without payment.

These policies are purely for protection purposes and do not build up cash value. The main benefit is providing an affordable death benefit to protect loved ones in case of premature death.

Term 20 insurance is often convertible to permanent life insurance without a medical exam if your needs change down the road. Converting term policies allows you to continue lifelong coverage.

Pros and Cons of Term 20 Life Insurance

Pros and Cons of Term 20 Life Insurance
Pros and Cons of Term 20 Life Insurance

Pros:

  • Lower premiums than permanent life insurance
  • Premiums are guaranteed not to increase for 20 years
  • Can convert to permanent insurance later if needed
  • Large death benefit protection for temporary needs
  • Simple to understand with no investment component

Cons:

  • No cash value accumulation
  • Risk of much higher rates at renewal after 20 years
  • Coverage expires after 20 year term ends
  • Usually, no return of premium if you outlive the term

Who is Term 20 Life Insurance Best For?

Young Families

Term 20 life insurance is well-suited for young families with new mortgages, young children, and other major financial obligations lasting around 20 years. It provides affordable protection during your high-need years.

Debt Repayment

If you have debts you want to pay off in the next 20 years, like mortgages, student loans, or business loans, Term 20 life insurance can cover your obligations in case of premature death.

Primary Breadwinners

For primary income earners supporting families, Term 20 policies provide essential protection for lost income. Your loved ones can maintain their quality of life if you pass away unexpectedly.

Short or Medium-Term Needs

If you need life insurance for shorter or medium-length priorities like funding college savings or paying off a 20-year mortgage, Term 20 aligns well with these temporary needs.

How Does Term 20 Life Insurance Work?

Applying for Coverage

The application process involves filling out a life insurance quote form, speaking with an agent, and going through medical underwriting. Your age, health, lifestyle and other attributes determine approval and premiums.

Paying Premiums

Once approved, you pay ongoing premiums monthly, quarterly or annually to keep the death benefit active. As long as premiums are paid, coverage continues uninterrupted for 20 years.

Death Benefit Payout

If you pass away while covered, the tax-free lump sum death benefit is paid directly to your designated beneficiaries. They can use funds to cover funeral costs, daily expenses, outstanding debts and more.

End of Term

At the end of 20 years, coverage expires, and your obligations end. You won’t receive any premium refunds if you outlive the 20-year term. You can reapply for a new term policy if you still need coverage.

Converting Your Policy

Many Term 20 policies allow you to convert to permanent insurance, like whole life or universal life, before the term expires. Converting continues protection without new underwriting.

Term 20 Life Insurance Costs in Canada

Term 20 Life Insurance Costs in Canada
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Term 20 Life Insurance Costs in Canada

Term 20 premiums vary based on:

  • Age: Premiums increase as you age. Insuring earlier saves money.
  • Health: Poor health means higher premiums.
  • Gender: Women often have lower rates due to longer life expectancies.
  • Lifestyle: Dangerous hobbies or high risk occupations raise rates.
  • Coverage amount: More coverage means higher premiums.

Here are some sample Term 20 monthly premiums from leading Canadian insurers:

AgeGenderSmoker StatusCoverage AmountSample Monthly Premium
30MaleNon-smoker$500,000$31
30FemaleNon-smoker$500,000$23
45MaleNon-smoker$500,000$66
45FemaleNon-smoker$500,000$50

Exact Term 20 rates depend on your specific situation. Getting quotes from multiple insurers ensures you find the best deal. Expect to pay $30 to $50 monthly for $500,000 in coverage, depending on your profile.

Comparing Top Term 20 Life Insurance Products in Canada

Here is an overview of Term 20 life insurance products from leading Canadian life insurers:

CompanyTerm 20 Product NameTerm Lengths AvailableConversion to Permanent Coverage?Living Benefits
Sun LifeSunTerm Plus10-30 yearsYesYes
Canada LifeTerm Life Insurance10-25 yearsYesYes
RBC InsuranceRBC Term 2010-30 yearsYesYes
ManulifeManuTerm Basic 2010-30 yearsYesYes
ivariTerm Life 2010-30 yearsYesYes
BMOTerm Life 2010-30 yearsYesYes

When comparing term life insurers, look for competitive rates, flexibility to convert to permanent coverage, highly rated financial strength, range of policy lengths, and value-added options and riders.

Who Needs Term 20 Life Insurance?

Who Needs Term 20 Life Insurance?
Who Needs Term 20 Life Insurance?

Here are some common demographics and situations where Term 20 life insurance is recommended:

  • Young Families: New parents need protection for newborns and coverage to pay the mortgage. Term 20 aligns well with raising life insurance for kids.
  • Major Debt Obligations: If you have debts you plan to pay off in around 20 years, like mortgages or business loans, Term 20 provides essential protection.
  • Middle-Aged Parents: Parents aging into their 40s-50s who still have kids living at home can benefit from Term 20 during this financially intensive period.
  • Temporary Needs: If you require coverage for more temporary needs like paying college tuition or funding a major purchase, Term 20 can provide short/medium-term protection.
  • Primary Income Earners: Households relying on a single income need protection in case of lost wages. Term 20 gives families time to adjust finances if the breadwinner passes away unexpectedly.
  • Newlyweds: Newly married couples just starting out often face major financial commitments over the next 20 years. Term 20 coverage provides protection as they build lives together.

Read more: Common Reasons Canadians Buy Term Life Insurance

Tips for Purchasing Term 20 Life Insurance

Follow these tips when shopping for Term 20 life insurance:

  • Compare Rates – Get quotes from at least 3-5 different insurance providers to find the best deal. Rates can vary widely between insurers.
  • Lock In Young, Healthy Rates – Insure early in life to lock in low premiums based on your youth and good health. Rates increase as you age.
  • Consider Your Specific Needs – Pick a term length that aligns with your needs. Term 20 is great for mortgages, young kids, and other ~20-year commitments.
  • Pick Reputable Insurers – Choose established insurers with strong financial ratings so you can depend on them to pay future claims. Avoid unknown or weak companies.
  • Understand Exclusions – Know what circumstances can invalidate your policy so you don’t jeopardize your coverage unknowingly.
  • Add Optional Riders – Riders that cover critical illness, disability, and waiver of premium can enhance your policy. Just consider the costs.
  • Comparison Shop – Work with an independent insurance broker who can compare many policies and get you the optimal one for your situation.

Read more : Tips for Buying the Right Term Life Policy in Canada

Alternatives to Term 20 Life Insurance

Here are some alternatives worth considering:

Term 10 or Term 30

If your needs are shorter or longer term, policies like Term 10 Life Insurance or Term 30 Life Insurance may suit you better than Term 20 Life Insurance.

Additionally, there are other term lengths to consider like Term 25, Term 40, Term 65. Read our in-depth guides comparing the costs, pros and cons, and best uses for Term 25 Life Insurance, Term 40 Life Insurance, Term to Age 65 Life Insurance.

Decreasing Term Insurance

If you want coverage to decrease as your debts decline, this option reduces the payout amount over time.

Permanent Life Insurance

For lifelong protection, whole life insurance or universal life insurance offers permanent coverage with cash value. Premiums are higher than the term but remain fixed.

Group Life Insurance

Check if your employer provides group life insurance as part of your benefits. Rates are lower due to group buying power.

Mortgage Life Insurance

Specialized mortgage protection pays off your home loan balance if you pass away before it’s paid off.

Converting Your Term 20 Life Insurance Policy

Many insurers allow you to convert your Term 20 life insurance to permanent insurance, such as whole life or universal life, before the 20-year term expires.

Benefits of converting:

  • Locks in lifelong coverage as you age
  • Avoids higher premiums later on
  • No medical exam is required to convert
  • Cash value accumulation starts.

Downsides of converting:

  • Permanent insurance costs more
  • You lose term insurance’s lower cost
  • Benefits like cash value take time to grow

Talk to your insurer or advisor about whether converting your term policy aligns with your insurance needs and financial situation.

Read more: What is permanent life insurance?

Where To Buy Term 20 Life Insurance

You can purchase Term 20 life insurance through:

  • Insurance Company Direct – Go directly to insurance company websites like Sunlife or Canada Life to get quotes and apply online.
  • Independent Insurance Brokers – Independent brokers can objectively shop rates across multiple insurance companies for you.
  • Insurance Marketplaces – Platforms like PolicyMe and Insurance Direct Canada allow you to compare quotes from top insurers in one place.
  • Banks and Financial Institutions – Many banks like TD Bank and CIBC offer term life insurance to their clients.
  • Independent Agents – Agents who work for you rather than one company can find great term insurance rates from numerous providers.

Working with an independent broker or agent is recommended to get objective advice and access to a wide range of policies.

Making a Term 20 Life Insurance Claim

If an insured individual passes away during the 20-year term, beneficiaries should:

  • Notify the Insurance Company – Promptly contact the insurer to start the claims process after the death. There is usually a time limit for sending in the claim.
  • Complete Required Paperwork – Fill out the insurer’s claim forms fully and accurately. Provide your contact details, policy number, deceased’s information, and details surrounding the death.
  • Submit Supporting Documentation – Supply a certified copy of the death certificate and any other documentation the insurer requires to validate the claim and confirm beneficiaries.
  • Provide Proof of Death/Cause – The insurer may ask for additional proof regarding the cause and circumstances of death, depending on the situation.

Once satisfied with the claim information, the insurance company will pay out the tax-free death benefit to the designated beneficiaries based on the policy contract.

Conclusion

For Canadians seeking temporary, budget-friendly life insurance, Term 20 policies are an excellent option. They provide affordable protection for 20 years to cover obligations like mortgages, raising kids, and paying off major debts.

Term 20 life insurance gives peace of mind, knowing your loved ones will be taken care of financially if you pass away unexpectedly during your working years. While more suitable for shorter-term needs than lifelong protection, Term 20 gives you time to build permanent coverage later.

If you need medium-term coverage, get Term 20 quotes from top insurers to find competitively priced protection for around 20 years. Just remember to convert to permanent insurance afterwards if you still need lifelong coverage.

Next Steps

Ready to explore Term 20 life insurance quotes? Here are some helpful next steps:

  • Use our online quoting tool to compare rates from top insurers instantly.
  • Contact Life Buzz to speak with one of our licensed insurance advisors to discuss your specific needs.
  • Book a consultation with an independent broker in your area to review your options.

Make sure you take the time to understand this popular form of coverage so you can secure the appropriate policy to protect your loved ones. With the right Term 20 life insurance plan, you can have peace of mind that your family is protected financially for the next 20 years.

Frequently Asked Questions

What is the difference between Term 10, Term 20, and Term 30 insurance?

The numbers refer to the length of the term in years. Term 10 provides coverage for ten years, Term 20 for 20 years, and Term 30 for 30 years. Pick the term that aligns with your needs.

What happens when my Term 20 policy expires?

Once the 20-year term ends, your coverage expires as well. You can either purchase a new term policy or look into converting to permanent insurance if you still require coverage.

Is Term 20 life insurance renewable?

Yes, most insurers will allow you to renew your Term 20 policy for an additional term. However, renewal rates will be much higher than your original rates.

Can I convert my Term 20 policy to permanent insurance?

Many Term 20 policies allow you to convert to permanent insurance, like whole life or universal life, before your term expires. Converting continues lifelong protection.

How do I determine the right coverage amount for Term 20 insurance?

Factors like income replacement needs, outstanding debts, and future financial obligations help determine the right term life insurance amount for your situation.

Article Sources:

For insight into our steadfast commitment to delivering accurate, transparent, and unbiased reporting, please examine the Editorial Policy on Lifebuzz.ca. It’s this dedication that has earned us the distinction of being the leading trusted authority on life insurance news in Canada.

  1. What is 20-year term life insurance? – https://www.canadalife.com/
  2. Term 20 Life Insurance | Quotes, Rates, Expert Tips – https://lsminsurance.ca/
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Written by Ben Nguyen

Ben Nguyen is an award-winning insurance expert and industry veteran with over 20 years of experience. He is the chairman and director of IDC Insurance Direct Canada Inc., one of Canada's leading online insurance brokerages.

Ben is renowned for his extensive knowledge of life, health, disability, and travel insurance products. He is the prolific author of over 1,000 educational articles published on LifeBuzz, BestInsuranceOnline, and InsuranceDirectCanada. His articles provide Canadians with advice on making smart insurance decisions.

With a Bachelor's degree in Actuarial Science and a Fellow of the Canadian Institute of Actuaries (FCIA) designation, Ben is frequently interviewed by media as an insurance industry spokesperson.

He has received numerous honors including the Insurance Council of Canada’s Pivotal Leadership Award, the Canadian Insurance Hall of Fame induction, and the President’s Medal from the Canadian Institute of Actuaries.

Ben continues to shape the vision and strategy of IDC Insurance Direct as chairman. He is dedicated to advancing the insurance industry through his insightful leadership.

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