Today we’re going to look at different types of term life insurance. The most fundamental type of term life insurance would be a one year term life insurance policy where the premiums go up ever single year based on your age that year. So it’s this much today, next year when you’re a year older it’s a little bit higher and so on, again until eventually the premiums become unaffordable.
That type of life insurance isn’t readily available in Canada. It’s not a cost structure that’s palatable to most Canadians. They don’t want life insurance prices that go up every year.
So what the companies do is, they take those one year term premiums or one year term costs and they take a period of time lets say 10 years -it’s called a term. And they take the average cost of those premiums over that period of time which levels the premiums out over that term.
If we do that over 10 years so your premiums are level for 10 years, and then they go up, that’s a 10 year term. If we do the same thing over a period of time, lets say 20 years, so the premiums are level for 20 years and then they go up, that’s a 20 year term.
And there’s all different types of term, 5, 10, 15, 20, 25, 30 year term.
The best type of term insurance is a policy that has premiums that are level for the period of time that you need the life insurance for, after which point you don’t need the life insurance.