How Term Life Insurance Works in Canada
If you’ve started researching life insurance in Canada, you’ve likely noticed one thing right away: term life insurance shows up everywhere.
That’s because term life is the most commonly used type of life insurance in Canada. It’s flexible, affordable, and designed to protect the years of life when financial responsibilities are highest.
Still, many Canadians are left wondering how it actually works—how pricing is set, what all the term options mean, and what happens later if life or health changes. This guide is meant to walk through all of that calmly and clearly.
What Is Term Life Insurance?
Term life insurance provides coverage for a set period of time, known as a term. If you pass away during that term, your insurance company pays a tax-free lump sum to your beneficiary.
If the term ends and you’re still living, the coverage simply expires unless you take action to renew or convert it.
Term life is commonly used to protect:
- Income while children are financially dependent
- Mortgages and other major debts
- Living expenses for a spouse or partner
- Financial stability during working years
It’s insurance designed for specific life stages, not forever. Canadians who want lifelong coverage instead often explore whole life insurance.
Common Term Lengths in Canada
In Canada, you’ll typically see the following term options:
- Term 10 – coverage for 10 years
- Term 20 – coverage for 20 years
- Term 25 or 30 – often chosen to align with a mortgage
- Term 40 – longer coverage, usually starting earlier in life
- To Age 65, 75, or 100 – coverage lasting to a specific age
Each option serves a slightly different purpose depending on age, family situation, and long-term planning goals.
What Is Term 40?
Term 40 provides coverage for 40 years from the start date. It’s most commonly used by:
- Younger adults locking in long-term protection early
- Families who want coverage through multiple life stages
- People who value rate stability over a longer horizon
Because of the extended length, Term 40 premiums are higher than shorter terms—but still often far more affordable than permanent insurance.
What Does “To Age 65, 75 or 100” Mean?
To Age 100 coverage lasts until your 100th birthday. In most cases:
- Premiums remain level until a certain age (often 85)
- After that point, the policy becomes paid-up, meaning no more premiums are required
- Coverage stays in force for life
This option sits in between term and permanent insurance, which is why many Canadians compare term and whole life insurance before deciding.
How Term Life Insurance Rates Are Set
Term life insurance pricing in Canada is based on risk at the time you apply and are set by each Insurer across the board. Insurers typically consider:
- Age
- Sex
- Smoking status
- Overall health
- Family medical history
- Lifestyle and occupational risks
Once approved, your rate is locked in for the entire term. That means:
- No increases due to aging
- No changes if your health declines
- Predictable, stable premiums
This rate certainty is one of term life’s biggest advantages. Keep in mind you may cancel Term Life plans in Canada with no penalties or fees, ever. This means you are never locked into a plan and can cancel it anytime if you no longer need or want it for any reason.
Medical vs No-Medical Term Life
There are two main underwriting paths:
Medically underwritten term life
- Lowest available rates
- Health questions and sometimes a medical exam
- Best long-term value for most Canadians
No-medical or simplified issue term life
- Faster approval
- Higher premiums
- Lower coverage limits
Both exist for a reason—the right option depends on health, timing, and urgency.
What Happens When the Term Ends?
When your term expires, you usually have three options:
- Let the policy end
- Renew the coverage (at a much higher rate)
- Convert the policy to permanent insurance
This is where understanding conversion becomes especially important. If you’d like a more detailed breakdown of renewal costs and conversion options, here’s a full guide on what happens when my term life insurance expires.
How Conversion Options Work in Canada
Most Canadian term life policies include a conversion privilege. This allows you to convert some or all of your term coverage into permanent insurance without new medical underwriting.
That means:
- No new health questions
- No medical exams
- Approval is guaranteed within the allowed timeframe
There are usually age limits for conversion (often between ages 65–75, depending on the insurer), and the cost is based on your age at conversion, not your health.
Conversion is often used when:
- Health changes make new insurance difficult
- Long-term or lifelong coverage becomes important later on
- Estate planning needs evolve
Even if you never plan to convert, having the option can be valuable.
How Much Term Life Insurance Do Canadians Typically Choose?
There’s no single right number, but coverage is often based on:
- Outstanding debts
- Income replacement (commonly 10–15× income)
- Childcare and education costs
- Ongoing household expenses
The goal isn’t to over-insure—it’s to create breathing room for the people you care about. If you’d like to compare available term life insurance plans and coverage amounts, you can review your options here.
A Final Thought
Term life insurance isn’t about predicting the future. It’s about creating stability during the years that matter most.
Understanding your options—whether that’s Term 20, Term 40, or coverage to age 100—lets you move forward without pressure and with confidence. And that’s exactly how insurance decisions should feel.
Structuring Term Coverage Properly
The right term length and coverage amount depend on your mortgage, income, and long-term responsibilities.
If you’d like help structuring coverage based on your situation, you’re welcome to book a conversation below.
👉 Book a Strategy Conversation
Related Guides
• Term vs Whole Life Insurance in Canada
• Whole Life Insurance in Canada (2025 Guide)