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15 Year Term Life Insurance

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Understanding 15 Year Term Life Insurance

15 year term life insurance is one of the most affordable types of life insurance available to purchase in Canada (10 year term is the most affordable).  It is not commonly purchased by Canadians as 10 and 20 year term life insurance policies tend to be the most popular. Only select life insurance companies in Canada offer 15 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, 15 year term life insurance is a life insurance product that has premiums (the cost of the policy) that are level for a period of 15 years. The death benefit (the coverage amount) is also level for fifteen years. At the end of the 15 years, the insurance policy typically renews automatically at higher premiums (higher cost), again level for another 15 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 15 years you will see a jump in price. It is very rare to see consumers pay the high renewal costs every 15 years as it is cheaper to re-apply for a new policy to get lower rates.

Who Is 15 Year Term Life Insurance Designed For?

In reality, 15 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 15 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. 10 year term life insurance is the shortest term length available to purchase. You used to be able to purchase a 5 year term (which would have lower premiums/cost compared to a 10 or 15 year term) but life insurance companies stopped offering them.

15 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 15 Year Term Life Insurance

  • 15 year term life insurance is one of the most affordable life insurance products available to purchase in Canada.
  • It provides the peace of mind (at an affordable 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 15 years.
  • 15 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 many life insurance companies that term life insurance with no medical examination required.

Drawbacks of 15 Year Term Life Insurance

  • The premiums (the cost) of a 15 year term life insurance policy are level for 15 years. Most Canadians need life insurance coverage for more than 15 years so you will have to revisit your options every 15 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 15 years you have the ability to continue your policy again for another 15 years but the increase in cost is quite high (typically around four times your original premium).

How Much Does 15 Year Term Life Insurance Cost?

At the end of the day, the cost of a 15 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 15 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 15 year term life insurance. All prices are monthly and based on health, non smokers.

 Male – Age 30Female – Age 30Male – Age 40Female – Age 40Male – Age 50Female – Age 50
$500K$27.72$21.24$38.79$29.12$100.98$66.60
$1M$47.61$37.89$69.66$50.31$193.14$126.09

*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 15 Year Term Life Insurance

Even though 15 year term life insurance is the one of 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 15 years so they should look at longer term lengths such as a 20 year term life insurance policy, 25 year term life insurance and 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 15 Year Term Life Insurance

For the most part, 15 year term life insurance is very straight forward. It has level premiums and level coverage for 15 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.

Not all life insurance companies offer 15 year term life insurance. Some life insurance companies that we recommend (but not limited to) purchasing 15 term life insurance from are…

  • Industrial Alliance
  • RBC Insurance (Royal Bank of Canada)
  • Wawanesa Insurance
  • BMO Insurance (Bank of Montreal)

Examples of 15 Year Term Life Insurance

A 15 year term life insurance policy for $1,000,000 will have the same premium (cost of the policy) for the length of the term. In this case the length of the term is 15 years. The policy will also have the same coverage amount of $1,000,000 for the length of the term (15 years).

At the end of the 15 years the life insurance company will offer you insurance for another 15 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 15 years are if you look at your policy contract.

Renewable Option

Most term life insurance companies in Canada have a feature available called “renewable” or “renewability” where they allow you to continue your 15 year term policy after the initial 15 years.

At the end of the initial 15 years, the insurance policy typically renews automatically at higher premiums (higher cost), again level for another 15 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 15 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 15 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 15 year term life insurance policy. We recommend contacting us to determine what policy is right for you.

Convertible Option

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 15 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

15 year term life insurance is a great, affordable solution for many Canadians. You may find that having life insurance for 10 years is not long enough and 20 years is too long. A 15 year term fits the needs of many consumers for family and debt protection. We are here to help with your research or purchase of term life insurance. Please feel free to contact us to discuss your options further.

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