Compare the best term life insurance quotes for free.

There are two types of life insurance policies: term and permanent.

The difference can be compared to the difference between renting an apartment and buying a house.

With a term policy, you’re essentially renting your coverage for the duration of your policy. On the other hand, a permanent life policy is an asset you own.

Term life insurance is a contract that guarantees coverage for a set amount of years. Unless it’s renewed, you will lose your coverage. It provides just as much protection as a permanent policy, but it’s the cheaper option of the two.

These are the terms available: Term 10 (contract for 10 years); Term 15 (contract for 15 years); Term 20 (contract for 20 years); Term 30 (contract for 30 years); Term to 65 (contract for 65 years); Term to 70 (contract for 70 years); Term to 75 (contract for 75 years), and Term to 100 (contract for 100 years).

There are also more investing benefits with a permanent life policy and it has a cash value that you can draw down on before you die. It’s also more costly than term insurance.

Another big distinction between ‘term and perm’ is that premiums for permanent policies are always level, meaning the cost never changes.

With term insurance, you pay less when you’re young and more as you age.

When a Term 10 policy expires, your contract is automatically renewed for another 10 years, but at a higher rate. The same logic applies for Term 20 and Term 30 policies. (With Term 65 contracts and everything beyond, there's no option to renew.)

Why the higher rate? It’s simple. You’ve aged and are therefore at a higher risk of developing serious medical issues. The more risk you present, the more you pay.

If you die while your policy was still active, your beneficiaries will receive a tax-free, lump sum payment called a death benefit. Since you get to choose how big you want your death benefit to be, if you find you’re struggling to pay your monthly premium, you can opt to lower its dollar value. This can reduce your monthly bill.

Term life is pretty straightforward. Regardless of if you buy a term or permanent plan, if you die unexpectedly, you’ll leave your loved ones a tidy sum that’s also tax-free.

Term plans generally cost less than a permanent policy. And, because the cost is less prohibitive, you can buy it in your twenties and thirties (when many of us are still working to establish ourselves). If you buy life insurance when you’re young and healthy —and never let it lapse — the insurance company can’t take away the coverage amount it approved you for.

All in all, the simplicity of term life is what makes it appealing to the vast majority of Canadians. In fact, 60% of consumers with individual policies buy term life, according to the Canadian Life and Health Insurance Association.

When you apply for a mortgage, your lender will probably suggest buying mortgage insurance. A bank-created product, it takes care of your payments should you ever stop making them due to death.

We recommend giving mortgage insurance a hard pass. There are a few reasons for this.

Mortgage insurance exists only to protect the bank’s loan. On the other hand, you could get a term life policy big enough to cover your mortgage and much more. Plus, your beneficiaries are the ones who get the payout — not the bank. They’ll have the ability to use the money as they see fit.

Premiums for term insurance are often cheaper than the premiums for mortgage insurance. On top of that, mortgage insurance premiums remain level even as the size of your mortgage shrinks.

Don't buy two insurance products when one can do the job.

The medical exam is performed by a doctor or nurse selected by the insurance company.

You’ll be asked about your family’s health history and your own personal habits. The doctor will calculate your body mass index and will take samples of your blood and urine. If you apply for a large policy, you may be asked to undergo more screening.

Never lie on the medical exam. If you do, it will result in your application being denied, your premiums getting raised, or your policy being cancelled flat-out. There may even be legal repercussions.

Insurance companies can find out if you’re lying by cross-referencing your self-reported information with your Medical Information Bureau (MIB) record.

The MIB is a non-governmental, self-regulating body that maintains records on the health of millions of people in North America. To have a file, you must have applied for an individual insurance plan within the last seven years with a company that’s partnered with the MIB.

Your death benefit is the amount of tax-free cash your beneficiaries receive if you die while your policy is active.

How big should your death benefit be? Seven times your current gross pay: that’s a quick and easy way of estimating your coverage needs (at least for the purposes of filling out a quote online).

But you’ll have to prove to the insurance company that your beneficiaries will need that much money. And to do that, your agent will have you fill out a financial needs analysis form. It’s a detailed questionnaire that requires you to state your debts, your assets, as well as your current and future financial needs.

At the end of the exercise, you should have a clear idea of exactly how much coverage you need.

That said, your needs will change throughout your life. Any time you hit a major milestone — having kids, buying a house, getting a big promotion — remember to review your policy. As your expenses increase, your estate and your beneficiaries will require more coverage.

Here’s a tip — it’s an important one, too.

Do a financial needs analysis. Then, buy more life insurance than it calls for.

If one day you decide you to increase your benefit, you’ll have to re-apply and prove your health, which may have deteriorated since you first took out your policy.

There’s an old saying: insurance companies hand out umbrellas on sunny days and ask for them back on rainy days.

Another way to avoid a second health test is to buy a guaranteed issue rider. This is an optional product you can add to your policy. It guarantees your ability to purchase more coverage in the future without doing another health exam.

You can breathe a sigh of relief — you won’t be asked to do another medical exam.

When your policy nears the end of its term, your insurer will send you an early renewal notice. Renewals happen automatically.

Your premium will rise after each term ends. The amount by which it will rise should be spelled out in your contract — you should never be caught off-guard by the cost of your policy.

So, if you’re still healthy and think you’re overpaying for insurance, you could switch to a provider that’s offering you a lower rate. Just be aware that your new insurer will ask you to do another medical.

If you decide to switch, make sure you do so well in advance of your renewal and wait until you’ve been approved for the new policy before you cancel your old one.

Some insurance plans will give you the option of converting your policy into permanent life insurance, an option that exists up until the ages of 65 or 70.

Becoming a policyholder is a big commitment, but that doesn’t mean you need to stay beholden to the insurance company if your circumstances change.

Term life insurance policies can be cancelled — the industry terminology for this is “forfeiting” — and most insurers won’t charge a fee for doing so. But it does mean you’ll lose your coverage, and you may have a hard time getting it in the future if your health status changes.

Before making the decision to cancel, you may want to consider reducing your death benefit if you’re struggling to make the monthly payments. This will bring the cost down.

Permanent life insurance policies have a cash value, so there’s a payout if you forfeit the policy after holding it for a predetermined number of years. This isn’t the case with term insurance. You won’t be hassled by creditors if you cancel your term policy, but you also won’t be able to recoup the money you put towards your coverage.

Shop around. You wouldn’t think there’d be much variance in price with a product like life insurance — but there can be. Each insurer chases a different demographic and will price policies accordingly. Some Canadian providers only want a clientele that's low-risk, whereas others specialize in covering people deemed to be higher-risk.