The Downsides Of Purchasing Term Life Insurance In Canada

One of the main reasons I started this blog revolved around FINANCIAL SECURITY. In my younger years, I sought financial security, and Term Insurance was the first form of financial security I encountered.

At the time I didn’t know much about Permanent Life Insurance, and to be frank I didn’t care, prominent term insurance providers like Primerica, were top of mind for me, when I thought about Life Insurance, and that’s all I knew. Dave Ramsey, also cam to my attention, as he also imagined term life insurance as the better option for his clients, that wanted to get out of debt.

For Dave Ramsey, his focus is to help people get out of debt, so for Dave, he didn’t see much value in Permanent Life Insurance products. Although helping people to get out of debt and teaching people to invest is a noble goal, the reader of this post should be aware that when it comes to Life Insurance, one size DOES NOT fit all.

For example if someone is 63 years old, ln Ontario Canada, is Term Life Insurance, really the best fit for them? Term life Insurance is TEMPORARY life insurance, and the SOLVENCY of the entire life Insurance industry revolves around actuarial science.

If the math doesn’t add up the life insurance industry as whole will not survive and governments can not do what Life Insurance does, primarily because if not every citizen contributes the same amount of money to the tax system, meaning that at death, if the government were to play the role of life insurer, it would certainly find itself insolvent quickly.

 

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Most undeveloped nations DO NOT have a robust life insurance industry, in Canada, we have a variety of life insurance products, and our life insurance industry in Canada is INSURED by Assuris(Assuris.ca), thus giving the strength of life insurance contracts in Canada more strength, security and stability.

Term Life Insurance is wonderful, Canada will always need Term Life Insurance, but it’s not the only Life insurance product in the Canadian marketplace for a reason. Unlike Whole Life and Universal Life Insurance, Term Life Insurance does have an expiry date.

You’ll also notice the older you get, the more expensive term life insurance gets and the amount the insurance company is willing to cover you for, decreases drastically.

Universal and Whole Life Insurance, are not simply more expensive in the earlier years to “rip people off” they’re more expensive, because the Insurance company is taking on a lot more risk.

 

Whole and Universal Life Insurance, are PERMENENT life insurance contracts, and with Whole Life the premium/payment is FIXED for your whole life. As long as you make your payments, the insurance is GUARANTEED to payout a death benefit, this is NOT true with Term Life Insurance, with Term Life Insurance, there’s a good chance that you will OUT LIVE your term insurance contract.

If you opt to purchase life insurance with an insurer who doesn’t offer any permanent life insurance, you’ll have to start the life insurance process all over, with a different company at a VERY expensive price.

Sure Whole and Universal Life Insurance are more expensive, but there’s a FINANCIAL reason behind it. So before you fall for the buy Term, invest the difference in mutual funds, schtick, consider comprehending the downsides to Term Life Insurance.

Term life insurance is a popular insurance choice in Canada, known for its straightforward coverage and affordability. However, it’s important for Canadian consumers to understand the potential drawbacks of term life insurance. This article explores the downsides to help individuals make well-informed insurance decisions.

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Contact Romone: (416) 705-0892
You can also use the contact form for more information.

1. Limited Coverage Period

• Temporary Nature: Term life insurance only provides coverage for a specific period, usually between 5 to 30 years. If the policyholder outlives the term, the policy expires without any death benefit.
• Lack of Permanence: Unlike permanent life insurance options available in Canada, term life doesn’t offer lifetime coverage, which can be a concern for those looking for long-term stability.

2. No Cash Value Accumulation

• Pure Protection Only: Term life insurance in Canada is designed solely for protection and does not accumulate any cash value, unlike permanent life policies such as whole life or universal life.
• Absence of Investment Component: Policyholders cannot use term life insurance as an investment or asset-building tool, which is a feature in some other types of life insurance.

3. Rising Premiums on Renewal

• Increased Costs at Renewal: When renewing a term life insurance policy in Canada, premiums typically increase based on the age and possibly the health of the policyholder at the time of renewal.
• Potential Unaffordability: For seniors or those with health issues, these higher premiums can become cost-prohibitive, leading to discontinuation of the policy.

4. No Payout If Term Is Outlived

• Lack of Return: If the insured individual outlives the term, the premiums paid do not result in any benefit or return, which can be seen as a lost financial opportunity.

5. Inflexibility to Life Changes

• Fixed Coverage: Term life policies in Canada usually offer limited flexibility to modify coverage in response to life changes such as increased family responsibilities or financial obligations.
• No Loan Options: Unlike some permanent policies, term life insurance does not allow the policyholder to take out a loan against the policy.

6. Limited Utility for Estate Planning

• Not Ideal for Estate Planning: Due to its temporary nature and absence of a cash component, term life insurance is often not suitable for complex estate planning, a consideration for some Canadian families.

While term life insurance is an excellent choice for many Canadians due to its simplicity and initial affordability, it’s important to consider its limitations. The lack of permanent coverage, rising premiums with age, and absence of cash value or investment opportunities are significant drawbacks for certain individuals and financial planning strategies.

Canadians should assess their long-term needs and consult with insurance professionals to choose the best type of life insurance for their unique circumstances.

Call or text Romone for more information

Contact Romone: (416) 705-0892
You can also use the contact form for more information.