How Long Should You Keep Term Life Insurance in Canada?

The question of?when to cancel their Term Life Insurance Policy plagues many Canadians. Term Life Insurance is an inexpensive and adjustable life coverage choice, but figuring out when to cancel your policy is a hard decision. Loan protection insurance typically comes as an option when you take our Term Life Insurance so that any financial obligations — such as mortgages or personal loans — are covered?if anything happens to you. But when should you keep, and when should you cancel or?swap policies, your Term Life Insurance? Let's dive into the details.

What Is Term Life Insurance?

Before looking at how long you should have Term Life Insurance, it's worth knowing what it?is. Term Life Insurance protects for a set period?of time, usually 10, 20, or 30 years. If you die during this time, your beneficiaries can receive a lump sum payment, which may?be used to pay funeral expenses,189 debts,190 and living expenses.191

The advantage of Term Life Insurance is that it's inexpensive and?easy. You?cover a fixed premium over the term, and your loved ones are financially protected if anything happens to you. The problem is, though, as your financial situation?changes over the years, most people ask themselves how long they should hold this coverage.

When Should You Keep Term Life Insurance?

As an insurance broker, I've seen many clients grapple with these?same questions when it comes to keeping their Term Life Insurance. To illustrate, a 35-year-old dad of two may buy a 20-year policy at first, thinking it will cover him until his?children are financially independent. But as life changes — your kids grow up, your mortgage is paid off, your income level rises — it's not always clear when to let go of?the policy.

Here are several?important reasons to hang onto your Canadian Term Life Insurance Plans for the full term:

1. To Protect Your Family During Financial Responsibilities

You typically buy Term Life Insurance when you have?large financial commitments, such as raising children or paying a mortgage. If you are the primary caretaker to provide for your family, if something happens to you, your?policy will help.

Take one of my clients, Sarah, who obtained a Term Life Insurance Policy when she bought her home. The term was 25 years, and she thought this would give her time to pay off?the mortgage and provide for her children until they become financially independent. Sarah's circumstances didn't change significantly over the years, and she chose to maintain the insurance for the entire length of?the term, confident that her family would be taken care of if the worst were to happen.

2. As Long as You Have a Mortgage or Loan

If you have an outstanding mortgage?or personal loan, you may wish to maintain your loan protection insurance plans until these debts have been paid. A lot of people get loan protection insurance in addition to term life?insurance so they can be confident that their loan payments will be taken care of if either of them dies. This can be particularly crucial?for people with perpetual debts that may run for decades.

One of the most common fears I've encountered is clients being fearful of leaving their families with?an unpaid mortgage. Maintaining?your Term Life Insurance for as long as you have major financial obligations ensures that this debt will be paid and that your loved ones won't be saddled with it.

When Can You Let Go of Term Life Insurance?

Eventually, as your life changes, you might come to realize that you don't need to keep?your Term Life Insurance. This will depend on a few factors, for example, changes in your financial situation, whether?your children are old or you have paid off your debts. Here are?several situations when you may want to drop your Term Life Insurance:

1. Once Your Children Are Financially Independent

One of the most common reasons to purchase Term Life Insurance is to ensure that your children are financially supported until they reach a?certain age. After all, you might not need this level of coverage since?all of your children are financially independent adults with careers.

One client, Michael, purchased a term-life policy when he?had young children. At that time, after 20 years, he figured his kids had finished school, were no longer at an educational cost to the?family, and were well off. His mortgage was paid off as well,?and there was far less demand for his wallet. That is when he chose to drop his loan protection insurance plans and scale?down his coverage.

2. When Your Debts Are Paid Off

Another reason you'll want to hold onto Term Life Insurance is so that your debts — particularly long-term debts, like your?mortgage — are paid off. But once you've?paid off those debts, you might not need as much coverage.

Consider the case of Julia, who had purchased a loan protection insurance?plan when she bought her home. She was able to retire her?mortgage early after 15 years, and her situation had improved considerably. During that time, Julia decided her family no longer needed the coverage, so she cancelled her loan protection insurance plans and lowered?her term life policy coverage.

3. When Your Savings or Investments Are Sufficient

You may gradually accumulate assets, such as savings and investments, that provide financial support to your loved?ones after your death. You can also cancel or reduce your?Term Life Insurance if your assets are large enough to pay your family's living expenses and any debts you may have.

One client of mine had seen the life insurance they had been paying?for, year after year, become redundant after they had accumulated considerable savings and investments. They had plenty of retirement funds and savings?to provide for their family without a life insurance policy. This enabled them to cease premium payments on their loan protection insurance?plans and invest for their financial well-being.

How to Decide When to End Your Term Life Insurance

Your unique circumstances ultimately determine whether you?should keep or cancel your Term Life Insurance. You should consider:

• Evaluating Your Financial Position: Do?you have no debt? Do you have enough savings or income to support the family if you have no?insurance? This will aid you in determining whether you?still require it.
• Reviewing Dependents: Are your children now adults, or?do you still have dependents that you have to support financially?
• Your Health and Retirement Plans: As you get older, you should think about your health and retirement plans as well when taking into account the most suitable time to stop?your policy.

If you need help making this important decision, speak?with an insurance broker who can provide personalized guidance. Online comparison of Term Life Insurance Policy Quotes gives you the best plans available at the?right price that are flexible.

Conclusion: How Long Should You Keep Term Life Insurance?

In Canada, the length of time you should have Term Life Insurance is primarily?based on your financial obligations, your family's well-being, and your situation. Most people maintain Term Life Insurance until they pay off debts, children become financially independent or?have enough savings to support their loved ones.

In the end, how and when to give up your plans of loan protection insurance and Term Life Insurance is a personal decision that is?best made after working out your financial considerations. By speaking to an expert and comparing Term Life Insurance? Quotes Online, you can ensure you make the right choice for your?needs.

Frequently Asked Questions (FAQs)

At?what stage should I cancel my Term Life Insurance?

The ideal time to?cancel your Term Life Insurance is when you've paid off heavy debts, such as a mortgage, and have enough savings or income to take care of your family.

Can I downsize my term life?insurance as I become more financially stable?

Yes, a lot of people will decline coverage as their financial situation improves, particularly when their kids are financially independent or?when they've cleared off significant loans.

How can?I tell if I still need Term Life Insurance?

Assess your finances, determine whether your dependents still require your support and whether your?savings or investments can meet your family's financial needs. An insurance?broker can also help.