“Ryan, what’s the best way to pay off my mortgage if I die too soon?”

Arguably, that is one of the most common questions I get as an insurance advisor. The short answer – use term life insurance to pay off any mortgages and/ or short-term debts. Please keep in mind I am keeping this post basic and high-level.

What are included – personal & business?

• Mortgages (home, rental properties, cottage, etc.)
• Loans (vehicle, other, etc.)
• Lines of credit
• Credit card
  

Why term?
Because these debts are, typically, considered to have a specific endpoint in the future, where the debt is completely paid off. Yes, it’s true, I realize sometimes individuals may choose to not pay off the debt and continue to keep life insurance in place.

How many years does term insurance last?
You choose the number of years. The most common term lengths are 10yrs, 20yrs, 30yrs. Some insurance companies (not all), allow you to choose a specific term length (ex. 23yrs). For example, if you have a 20yr mortgage, you may want a 20yr term life insurance policy.

Is it affordable?
Term insurance is considered to be the most affordable type of life insurance. I once had a colleague explain it to me saying, it was like boxed wine – it’s cheap and does the trick.

Note: Age plays a role in insurance premiums. It is important to note premiums for a 30yr old are much lower than someone who is 60yrs old.

Do my premiums change?
Your premiums remain the same for the period you choose. Ex.) 10yr term means your premiums are the same for 10 years.

Premiums for a 30yr term will be higher than a 10yr term because you are guaranteeing the premiums for a longer period of time.

What happens when my term ends? Does my coverage end?
Your coverage keeps going. Most policies will automatically renew for another period of the same. For example, if you had a 20yr term, it will automatically renew for another 20yrs. There is no need to reapply, or qualify medically. The difference – your new renewal premiums will be much higher than your initial premiums because you are older / closer to your own expiration.

Note: your age will play a factor in how many times your term coverage can renew – most policies will only keep renewing until age 80-90 (depends on the company) because that is how the policy contracts are designed. Remember, they are generally intended to payoff short-term debts and to replace income. We’ll get into the replacement income part in another post; today, we are just focusing on short-term debts.

Can I cancel my term life insurance anytime?
Yes, you can cancel anytime. You are not locked-in. There is no penalty to cancel.

Are there any additional benefits to term life insurance?
Yes, most term life insurance policies have a built-in option that allows you to switch/ change your term coverage into permanent life insurance without the need to reapply, or qualify medically. This is incredibly important/ valuable; especially, if you have a negative change in health, where you may not be able to medically qualify for life insurance.

What is permanent life insurance?
We will get into that in another post. The main, important thing to remember is, if you want life insurance to last your entire lifetime, you want some level of permanent life insurance.

I trust that gave you an insight into term life insurance – what it’s used for and how it works. Contact me with any questions, always happy to help out.

Ryan
ryan@rlsinsurance.ca
IG: @rlsinsurance