A Guide to 20-year Term Life Insurance in Canada

Term life insurance plays a crucial role in protecting your family’s financial future in the event of your death during the policy term. In Canada, 20-year term life insurance is one of the most preferred term insurance options because it provides financial protection to your beneficiaries at affordable premiums.

In this guide, we explain why 20-year term life insurance is a popular choice in Canada, who should consider it, how much it costs, and what happens when the policy expires.

What is a 20-year term life insurance policy?

A 20-year term life insurance policy provides financial protection for a fixed period of 20 years.

Here’s how it typically works:

John, a 35-year-old parent living in Ontario, purchases a $500,000 life insurance policy with a 20-year term. He has a 5-year-old son and a spouse who depends on his income.

If John dies in an accident at 49, the insurer will pay a $500,000 tax-free death benefit to his beneficiaries. This payout can help the family cover financial obligations such as debts, mortgage payments, children’s education, or daily living expenses, ensuring that dependents remain financially supported if something unexpected happens.

If John lives beyond the 20-year term and reaches age 55, the policy will typically renew automatically, unless he chooses to terminate the coverage or convert the policy to permanent life insurance.

If he continues with the renewed policy, he usually won’t need new medical underwriting; however, additional documentation may be required if he decides to increase the coverage amount at the time of renewal. The key point to keep in mind is that the premium for the renewed policy will be significantly higher, as it will be based on his age at the time of renewal.

Who should consider a 20-year term life insurance policy?

A 20-year term life insurance policy may be suitable for the following individuals:

1. Parents with young kids between 10-12 years: Parents who want the coverage to last until their children become financially independent
2. Homeowners with ongoing mortgages: Term 20 aligns well when there are 15-20 years left on the mortgage
3. Mid-career professionals: Individuals in their 30s or early 40s who want coverage during the years when they carry the greatest financial responsibility for their family and are typically at the height of their earning potential
4. People seeking protection at affordable rates: Term 20 offers lower premiums than Term 30 because the coverage period is shorter

Comparing 20-year term with other term lengths

In Canada, insurers offer several term lengths such as 10-year, 20-year, and 30-year. The right choice depends on your financial obligations.

Cost of 20-year term life insurance in Canada

The cost of a 20-year term life insurance policy in Canada depends on the policyholder’s age, health status, occupation, smoking profile, and gender. In the table below, we have illustrated the cost of a 20-year term based on different ages and coverage amounts.

20-year term life insurance cost for $500k coverage

The table below shows how age affects the rates for $500k coverage term insurance coverage for a non-smoker:

20-year term life insurance cost for $750k coverage

The table below shows how age affects the rates for $750k coverage term insurance coverage for a non-smoker:

20-year term life insurance cost for $1M coverage

The table below shows how age affects the rates for $1M coverage term insurance coverage for a non-smoker:

What happens when a 20-year term life insurance policy expires?

A 20-year term life insurance policy reaches the end of its coverage period after 20 years. At that point, the policyholder typically has several options, depending on the insurer and the policy terms:

• Renew the policy: Many insurers in Canada allow the policy to automatically renew on a yearly basis after the initial term ends. However, the premiums at renewal will be higher because they are based on the policyholder’s age at the time of renewal
• Convert to permanent life insurance: A few insurers also offer the option to convert the 20-year term life insurance policy to a permanent life insurance policy. This conversion is often available without any new medical tests, which is beneficial if your health has changed over time
• Let the coverage end: If coverage is no longer needed, the policyholder can choose not to renew or convert the policy. In this case, the coverage ends, and no death benefit will be payable once the policy expires

Tips to choose the best 20-year term life insurance policy

Here are some tips to help you choose the right 20-year term life insurance policy:

• Choose the right coverage amount: Based on expenses like your child’s education, mortgage, final expenses, and income replacement, choose a coverage amount that best aligns with your long-term protection needs
• Compare across insurers: Different insurers in Canada offer varying premiums, riders, and conversion options. Comparing these features can help you find a policy that offers the best protection for your needs
• Apply early: You should apply for a 20-year term policy when you are young and healthy. This is because younger applicants typically qualify for lower rates due to their lower insurance risk
• Consult with advisors: Get in touch with our licensed advisors at PolicyAdvisor who will help you get the most affordable rates for your 20–year term life insurance policy. Schedule a call now!

Is 20-year term life insurance worth it in Canada?

Yes, a 20-year term life insurance policy is worth it in Canada for those who want affordable protection. It is ideal for homeowners with a mortgage, young parents who have kids below 5 years old, and sole breadwinners.

How much does a 20-year term life insurance policy cost?

The cost of a 20-year term life insurance policy depends on factors like the policyholder’s age, gender, occupation, and health status. Younger and healthier applicants typically pay lower premiums than older applicants or those with medical conditions.

For example, the average monthly cost of a 20-year term life insurance policy with $500,000 in coverage for a 30-year-old non-smoking male is approximately $28.80. For a 30-year-old non-smoking female, the monthly premium is typically lower, around $19.80, as women generally have longer life expectancies.

Can you renew a 20-year term life insurance policy?

Yes, many insurance companies in Canada offer the automatic renewal of your 20-year term life insurance policy. Renewal usually allows policyholders to extend coverage without a new medical exam. However, premiums for a renewed policy will increase because they are based on the insured’s age at renewal.

What happens if you outlive a 20-year term life policy?

If you outlive a 20-year term life insurance policy, the coverage will end after 20 years. There will be no payment of the death benefit, but depending on your insurer, you can choose to renew the existing policy, convert it to a permanent life insurance policy, or purchase a new term life insurance policy.

Can a 20-year term policy be converted to permanent life insurance?

Yes, many insurers in Canada allow policyholders to convert their term life insurance policy to a permanent life insurance policy. This option is often available without additional medical underwriting. The option to convert is ideal for those who want longer coverage or whose health has changed.

Should I buy a 20-year or 30-year term insurance policy in Canada?

The choice between a 20-year and a 30-year term life insurance policy depends on how long you expect your financial responsibilities to last. You should choose a term length that covers the period when your dependents rely most on your income or when major debts are still outstanding.