In This Article
- Understanding 40 Year Term Life Insurance
- Who is 40 Year Term Designed For?
- Benefits of 40 Year Term Life Insurance
- Drawbacks of 40 Year Term Life Insurance
- How Much Does 40 Year Term Cost?
- Alternatives to 40 Year Term Life Insurance
- Top Companies for 40 Year Term Life Insurance
- Examples of 40 Year Term Life Insurance
- Renewable Option
- Convertible Option
Understanding 40 Year Term Life Insurance
40 year term life insurance is a type of term life insurance available in Canada. It is not a very commonly purchased life insurance policy because the cost is quite high because of the long-term length. 40 year term life insurance cannot be purchased after the age of 85 because it expires at age 85.
Term life insurance is a type of life insurance which provides a fixed amount of coverage for a fixed amount of years. In this case, 40 year term life insurance is a life insurance product that has premiums (the cost of the policy) that are level for a period of 40 years. The death benefit (the coverage amount) is also level for fourty years. At the end of the 40 years, the insurance policy typically renews automatically at higher premiums (higher cost) but may sometimes expire depending on the age of the insured. These policies expire at age 85 for most life insurance companies.
We have created a graph to help illustrate the increases in premium cost while you have your policy. If you keep your policy long term, at the end of the 40 years you will see a jump in price. It is very rare to see consumers pay the high renewal costs at the end of the 40 years as it is cheaper to re-apply for a new policy to get lower rates if life insurance is still needed.
Who Is 40 Year Term Life Insurance Designed For?
40 year term life insurance is designed for Canadians who are looking for term life insurance for a longer period of time than the average consumer. It is the highest priced term life insurance policy available because of the length of the term.
It is most commonly purchased by families in their 20’s, 30’s and 40’s for life insurance protection for approximately 40 years to cover such things as an outstanding mortgage debt or until their children and/or spouse are self-sufficient financially. It can also be used to provide life insurance coverage until the insured is close to retirement age.
As you increase the length of a term life insurance policy, the price of the policy premiums will also increase. 40 year term fits well for Canadians who need life insurance coverage for a long period of time. 10 year term is the shortest term length available to purchase currently. You used to be able to purchase a 5 year term (which would have lower premiums/cost compared to a 10 year term) but life insurance companies stopped offering them.
Although most business owners would purchase a shorter term length to keep costs lower- 40 year term life insurance can also be used by business owners who are looking to cover outstanding debt of their business or protect themselves in the event that a key employee(s) passes away.
Benefits of 40 Year Term Life Insurance
- 40 year term life insurance offers life insurance protection for a long duration of time.
- It provides the peace of mind knowing that your beneficiaries will receive a lump sum amount, tax free in the event of your death.
- The rates (cost of the policy) are guaranteed to be level (or fixed) for the length of the policy term which in this case is 40 years.
- 40 year term life insurance policies are very customizable which allows you to ensure that it suits the needs of you and your family.
- Most life insurance companies offer a renewable option within the policy.
- Most life insurance companies offer a conversion option within the policy.
- There are life insurance companies that sell term life insurance with no medical examination required.
Drawbacks of 40 Year Term Life Insurance
- The cost of a 40 year term life insurance policy can be quite expensive depending on the age of the applicant.
- The premiums (the cost) of a 40 year term life insurance policy are level for 40 years which could potentially be longer than what the applicant requires. A longer term length results in a higher premium. Always make sure that you are not overpaying for your life insurance coverage. You should try to match the length of the term you are buying with the amount of years that you require life insurance coverage.
- At the end of the 40 years you have the ability to continue your policy but the increase in cost is quite high (typically around 4x your original premium- possibly higher).
How Much Does 40 Year Term Life Insurance Cost?
At the end of the day, the cost of a 40 year term life insurance policy is dependent on the health of the person applying. If you are in very good health you can qualify for discounted rates (preferred rates), but most Canadians end up qualifying for standard rates. There are also other factors which come into play when determining the price of 40 year term life insurance such as weight, smoking, lifestyle habits, medications, etc. We have put together some sample quotes from RBC Insurance below to give you an idea of the cost of 40 year term life insurance. All prices are monthly and based on health, non smokers.
|Male – Age 30||Female – Age 30||Male – Age 40||Female – Age 40||Male – Age 50||Female – Age 50|
*Rates are monthly and based on standard health, non smoker from RBC Life Insurance Company.
**Rates were quoted June 2020 and are not guaranteed. Final rates are determined after an application has been submitted.
Alternatives to 40 Year Term Life Insurance
Even though 40 year term life insurance can be a great fit for many Canadians, there are still other life insurance options to consider depending on your situation and needs. It is definitely not a popular option as most Canadians require life insurance for 10-25 years so a 40 year term is not needed.
The cost for a 40 year term is going to be higher than shorter term lengths so it may be worthwhile to see what other options are available to help decide what life insurance product is right for you before you purchase. Your goal should be to try to match the length of the term with the amount of years that you require life insurance for.
If you feel that you require life insurance for your entire life to cover things such as funeral expenses or estate costs than you should consider permanent life insurance options such as whole life insurance, universal life insurance or term to 100 life insurance.
Top Companies for 40 Year Term Life Insurance
Life insurance companies are actually rated by a company called AM Best Company. This company reviews life insurance companies’ financial strength, ability to pay claims, history, credibility, etc. to help consumers understand which life insurance companies are the strongest.
We recommend dealing with term life insurance companies that have at least an ‘A’ rating and include the option to renew and convert your term life insurance policy. We also recommend purchasing term life insurance from a life insurance company that has quality permanent life insurance products in the event that you ever choose to convert your term life insurance policy to a permanent life insurance policy.
There are only three life insurance companies in Canada who offer 40 year term life insurance so your options are reduced. These life insurance companies are,
- Industrial Alliance
- RBC Insurance (Royal Bank of Canada)
- SSQ Insurance
Examples of 40 Year Term Life Insurance
A 40 year term life insurance policy for $500,000 will have the same premium (cost of the policy) for the length of the term. In this case the length of the term is 40 years. The policy will also have the same coverage amount of $500,000 for the length of the term (40 years).
At the end of the 40 years the life insurance company will continue to offer you insurance at an increased price. This is called a renewal premium. The renewal premium is actually listed in your original policy contract so you can see what your renewal premiums are going to cost you if you refer back to your original policy contract.
Most term life insurance companies in Canada have a feature available called “renewable” or “renewability” where they allow you to continue your 40 year term policy after the initial 40 years.
At the end of the initial 40 years, the insurance policy typically renews automatically at higher premiums (higher cost). This process can continue until the expiration date of the policy which is typically between ages 75 and 85 (depends on the company). The cost is quite high so be sure to keep an eye on your policy renewal dates.
The reason the premiums are higher after the first 40 years is because the insurance company does not require any health questions or medical evidence (blood, urine, etc.). They are assuming that something has changed in your health which is why the policy premiums increase. If you are in good health and still need life insurance at the end of the 40 year term, you are usually better off applying for a new policy to get a lower premium and cancel your old policy after the new policy is in force.
The longer the length of the term, the higher the premiums will be. For example, a 40 year term life insurance policy is the longest term length available to purchase in Canada so it is the most expensive term life insurance policy. We recommend contacting us to determine what policy is right for you.
Most term life insurance companies in Canada also have a feature called “convertible” or “conversion” which means that the policy owner is allowed to convert (switch) their term life insurance policy to a permanent life insurance policy (whole life insurance, universal life insurance, term to 100 life insurance) without having to complete a medical exam or health questionnaire. You are just required to do something called a policy change where you complete some paperwork, select a permanent life insurance policy and pay premiums based on your age and smoking status at the time of converting.
This is a feature that can become very valuable depending on the circumstances of the insured person. If you purchased a 40 year term life insurance policy and were diagnosed with a health condition that made it so you were unable to ever purchase life insurance again because no insurance company would insure you, having a policy that had a conversion option would be beneficial because it would still allow you to buy a permanent life insurance policy.
The conversion option would allow you the ability to switch your term life insurance policy to a permanent life insurance regardless of your health. The life insurance has to offer you permanent life insurance at regular, standard rates. This would ensure that you have the ability to have lifelong insurance protection regardless of your health.
We recommend that you speak with one of our licensed brokers regarding these options because they can be quite hard to understand without a clear explanation related to your situation.
Although 40 year term life insurance is not commonly purchased, it can be suitable for unique situations where the consumer requires life insurance for an extended period of time. You may be wanting coverage to last past retirement and a 40 year term life insurance policy could potentially be a good option for this. Please reach out to one of our life insurance professionals if you have any questions.