Term Life Insurance discounts and questions
The plain version of life insurance: a fixed death benefit for a set number of years at a premium that does not change, and nothing paid if you outlive it. It buys the largest benefit per dollar during the years a family depends on an income, which is why it is what we usually recommend.
Discounts carriers commonly offer
- Preferred plus class
- Strong labs, a healthy weight, no family history of early heart disease or cancer, and a clean driving record put an applicant in the lowest class.
- Non-tobacco
- No nicotine use for the carrier's look-back, confirmed by the lab test; some carriers now rate occasional cigar use as non-tobacco.
- Right-sizing the term
- Ten years less term on a policy bought in your thirties reduces the premium substantially; two laddered policies often cost less than one long one.
- Band pricing
- Carriers price per thousand of benefit in bands, and the rate per thousand drops at each band; a face amount just over a band can cost less than one just under it.
- Annual premium
- Paying once a year avoids the loading carriers add for monthly billing.
- Shopping the application
- The same applicant is placed in different classes by different carriers; an informal pre-screen before the formal application finds the one that treats a given condition most favourably.
Questions people ask
What happens at the end of the term?
Coverage ends unless you renew, and renewal is annual at the premium for your age then, which rises each year and quickly becomes unaffordable by design. Options before the end: convert part or all to a permanent policy during the conversion window, apply for a new term policy if your health still qualifies, or let it lapse because the need has passed, which for most people is the intended outcome.
Can I get my money back if I never claim?
Only with a return-of-premium rider, and you pay for it. Plain term is like auto insurance: the premium buys the coverage for the year, and the fact that no claim was paid means the year went well. The alternative, permanent insurance, returns value but at a premium several times higher for the same benefit.
How long a term should I buy?
Count the years until the last dependant is independent and the mortgage is manageable on one income, and buy that. Suppose the youngest child is five and the mortgage has twenty-five years to run: a twenty-year policy covers the child, and a second smaller policy or a thirty-year term covers the loan. The analysis lays those out with premiums for each.
Should I convert my term policy?
Convert if you have developed a condition that would make new coverage expensive or unavailable and you still need coverage past the term, or if a permanent need has appeared: a dependant who will never be independent, an estate that will owe tax. Convert only the amount you need for life, which is usually a fraction of the term amount.
Can I have more than one term policy?
Yes, and laddering is a standard approach. A large policy to the children's independence plus a smaller one to retirement matches the coverage to the declining need and costs less than one large policy for the longer term. Carriers will ask about total coverage in force to check that the amount is justified by income.
What if I stop paying?
The policy lapses after the grace period and coverage ends; there is no value to surrender. Most carriers allow reinstatement within a period if you pay the missed premiums and answer health questions, and some allow it without questions inside a short window. A missed payment is not a reason to give up a policy bought years ago at a younger age.