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10 year term life insurance is the most affordable life insurance product available in Canada and is very commonly purchased by many Canadians of all ages.
In This Article
- Understanding 10 Year Term Life Insurance
- Who is 10 Year Term Designed For?
- Benefits of 10 Year Term Life Insurance
- Drawbacks of 10 Year Term Life Insurance
- How Much Does 10 Year Term Cost?
- Alternatives to 10 Year Term Life Insurance
- Top Companies for 10 Year Term Life Insurance
- Examples of 10 Year Term Life Insurance
- Renewable Option
- Convertible Option
- Summary
Understanding 10 Year Term Life Insurance
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, 10 year term life insurance is a life insurance product that has premiums (the cost of the policy) that are level for a period of 10 years. The death benefit (the coverage amount) is also level for ten years. At the end of the 10 years, the insurance policy typically renews automatically at higher premiums (higher cost), again level for another 10 years. This process can continue until the expiration date of the policy which can be anywhere for 75-85 years of age (depending on the life insurance company).
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, every 10 years you will see a jump in price. It is very rare to see consumers pay the high renewal costs every 10 years as it is cheaper to re-apply for a new policy to get lower rates.
Who Is 10 Year Term Life Insurance Designed For?
In reality, 10 year term life insurance is designed for almost everyone because of its affordability and simplicity.
It is most commonly purchased by families in their 20’s, 30’s, 40’s and 50’s looking for life insurance protection for approximately 10 years to cover such things as an outstanding mortgage debt, short term debt (student loans, credit card debt, lines of credit, loans, etc.). or until their children and/or spouse are self-sufficient financially.
It is also purchased quite often because it is the most affordable type of life insurance available in Canada. As you increase the length of a term life insurance policy (e.g. 20 years), the price of the policy premiums will also increase. Since 10 year term life insurance is the shortest term length available it has the lowest policy premiums. 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.
10 year term life insurance is also 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 10 Year Term Life Insurance
- It is the most affordable life insurance product available to purchase in Canada.
- It provides the peace of mind (at the lowest possible cost) 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 10 years.
- They are very customizable which allows you to ensure that it suits the needs of you and your family.
- Most life insurance companies allow you to switch from a 10 year term policy to a 20 year term policy in the first five years of the policy with no additional health questions or medical examinations. This would allow you to get coverage in place with affordable premiums and gives you the option to lock your premiums in for 20 years within the first five years of the policy with ease.
- Most life insurance companies offer a renewable option within the policy.
- Most life insurance companies offer a conversion option within the policy.
- There are many life insurance companies that sell 10 year term life insurance with no medical examination required.
Drawbacks of 10 Year Term Life Insurance
- The premiums (the cost) of a 10 year term life insurance policy are level for 10 years. Most Canadians need life insurance coverage for more than 10 years so you will have to revisit your options every 10 years. This results in being subjected to higher life insurance costs throughout your life. It is a short term life insurance product.
- At the end of the 10 years you have the ability to continue your policy again for another 10 years but the increase in cost is quite high (typically around four times your original premium).
How Much Does 10 Year Term Life Insurance Cost?
At the end of the day, the cost of a 10 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 10 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 10 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 | |
| $500K | $22.32 | $17.64 | $29.25 | $20.52 | $67.91 | $48.47 |
| $1M | $37.71 | $27.81 | $36.63 | $128.79 | $128.79 | $89.91 |
*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 10 Year Term Life Insurance
Even though 10 year term life insurance is the most affordable life insurance product in Canada, there are still alternative options to consider depending on your situation and needs.
Many Canadian consumers require life insurance coverage for more than 10 years so they should look at longer term lengths such as a 20 year term life insurance policy or 30 year term life insurance policy. 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 10 Year Term Life Insurance
For the most part, 10 year term life insurance is very straight forward. It has level premiums and level coverage for 10 years. So why would we care which company we buy from? Should we just choose the lowest priced quote? Yes and no.
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.
Some life insurance companies that we recommend (but not limited to) purchasing term life insurance from are:
- Manulife (Manufacturers Life Insurance Company)
- Industrial Alliance
- RBC Insurance (Royal Bank of Canada)
- Sun Life
- Canada Life
- Wawanesa Insurance
- Empire Life
- BMO Insurance (Bank of Montreal)
Examples of 10 Year Term Life Insurance
A 10 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 10 years. The policy will also have the same coverage amount of $500,000 for the length of the term (10 years).
At the end of the 10 years the life insurance company will offer you insurance for another 10 years 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 every 10 years are if you look at your policy contract.
Renewable Option
Most life insurance companies in Canada have a feature available called “renewable” or “renewability” where they allow you to continue your 10 year term policy after the initial 10 years.
At the end of the initial 10 years, the insurance policy typically renews automatically at higher premiums (higher cost), again level for another 10 years. This process can continue until the expiration date of the policy which is typically between ages 75 and 85 (depends on the company).
The reason the premiums are higher after the first 10 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 10 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 20 year term life insurance policy costs more than a 10 year term life insurance policy. We recommend contacting us to determine what policy is right for you.
Convertible Option
Most 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 10 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.
Summary
10 year term life insurance is a great, simple and affordable type of life insurance that should be considered when reviewing your options for life insurance. It provides the lowest possible premium with the highest amount of coverage.
If you only need life insurance for a small period of time and are working within a budget, a 10 year term life insurance policy may be the right option for you. Please contact us or request a quote if you have any additional questions.
