Chantal Marr: Term Insurance Pitfalls

Posted on December 3, 2010 and updated May 16, 2012 in Insurance Types, Life Insurance Canada News, Life Insurance for Women, Term Insurance 4 min read
Chantal Marr headshot

Chantal Marr was born in Quebec and raised in Thornhill, Ontario. She completed her Bachelor of Arts at Laval University in Quebec City and a Bachelor of Education at the University of Western Ontario. She is bilingual in both English and French, has a passion for helping people and possess very strong organizational and leadership skills. This is why, at LSM Insurance, she is in charge of product reviews and works closely with our team of brokers.

In her vital role she has seen a lot, including many of the specific pitfalls to keep in mind when you’re buying Term Life Insurance.

In case you’ve never heard of the product before, Term life insurance is perhaps the simplest form of life insurance. It provides temporary life insurance protection on a limited budget. It offers a death benefit, but no cash value.

Chantal will tell you that Life Insurance shopping like shoe shopping, in the sense that they both require some research if you want to get the right fit. You need to think about how much coverage you want and what your long term financial goals are. Moreover, the plan you choose has to fit your budget – which is why prudent purchasers in the insurance market shop for the lowest rates and the best value.

For many, this seems reasonable, but what most consumers for life insurance don’t realize is the plan with the cheapest rate is not always the best value.

It’s important to realize there are two different types of Insurance plans, Term Insurance and Permanent Insurance. Term Insurance has a lower initial cost; however the premiums only stay the same for a stated term – usually 10 or 20 years. The cost increases in a dramatic fashion after the term ends. If you don’t renew it, your coverage ends and your premiums are gone.

By contrast, the initial premiums for Permanent Insurance are higher than Term Insurance, but your cost remains level. You also have coverage for your lifetime and depending on the plan it may generate a cash value. 

Remember too that it’s crucial if you do choose a term plan, that the coverage is convertible to a permanent plan without a medical, but even then your premiums are based on your age at the time of conversion.

To get back to our analogy of shoe shopping, ask yourself the following: would you buy a cheap pair of shoes that didn’t fit just because they were on sale?

Of course, the answer is “No”. You wouldn’t get enough use out of them to justify the cost and they would probably cause more trouble than good. Not to say that Term Insurance can’t be a good fit, in fact, in some instances it can, but too many times it’s sold simply because it’s cheap and easy to sell.

One last point, when shopping for your life insurance, be sure that you work with an independent broker who offers a full section of companies and products. 

As Chantal will tell you, just like when buying shoes, you want a store lined with a wide variety of brand names, styles and sizes. Don’t let your local “captive” agent wedge you into a Term policy that doesn’t fit – take the time to work with an independent broker who can create a custom fit that will serve you well for years.

To get started on finding a Term policy that fits you comfortably, call us at 1-866-899-4849, or visit our Term Insurance Quote Page.