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20 Year Term Insurance Might Save You Thousands of Dollars

While there are many different types of life insurance in Canada, the correct type of insurance will be determined by your personal needs and financial position in life.

This blog concentrates only on the cost of 10 and 20 year term insurance, and the difference can be huge.

Term insurance is a policy which provides a death benefit for a predetermined amount of coverage. The death benefit is guaranteed in a standard policy and the premium is locked in for the period of the term, 10 years or 20 years, depending on the policy.

For a 10 year term plan, your premiums will remain the same for 10 years. After that, a policy can renew (no medical required) and your premium increases to a new premium which is listed in the policy. This way there are no surprises.

If you do not want to continue with the policy, simply stop paying premiums and the policy will lapse. Continue paying the premium and you may keep the policy until the policy expires at age 75, for example. The likelihood of keeping a term policy in force until the end is small because the premium gets so large, that many people cannot afford to keep it; but it’s your choice.

To illustrate premiums for a 10 year term policy, we will look at one company. Every company is a little different, but this one is very competitive. Assume a healthy non-smoker male, at age 40 buys $1,000,000 policy. For this company, the premium begins at $55.80 per month. Then, in 10 years it increases to $430.20 per month at age 50. Further at age 60, the premium increases to $1,064.70. At age 70 the premium is $3,184.20 to age 75, then the policy lapses. Remember these are all monthly premiums.

For females the premiums are lower. In the same example above for a 40 years old female non-smoker, the premium begins at $42.30 per month. Then in 10 years it increases to $272.70 per month at age 50. Further at age 60, the premium increases to $727.20. At age 70 the premium is $2,158.20 to age 75, then the policy lapses. Remember these are all monthly premiums.

If you know in the beginning that you do not want to keep the policy beyond 20 years, a 20 year term offers some advantages. For example, given the same male above, a 20 year term will cost $100.80 per month for 20 years straight. If you add up the premiums paid in the 10 year term through 20 years, you will have paid $58,320.00 in total. Adding up the 20 year term premiums through the 20 years, the total would be $24,192.00. Looking at cost only, the 20 year term premium savings are $34,128.00.

For a female, the cost savings after 20 years with 20 year term would be $19,656.00.

There is more to consider than premium; however, for those wanting term to solve a particular problem, long term cost should be considered. If you have an old 10 year term policy and you are insurable the savings are likely to be greater!

If you are in Nova Scotia and would like some insurance advice, please contact Corry Collins:
corry@maritimewealth.com
902-444-7000

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