Case Study: Where term life makes sense
By Brandi Dickson
Meet, Scott Jones. He’s a 45-year old man, with two kids, Justin and Tiffany.
Justin is 10 and Tiffiany is 8. Life expectancy for a Canadian male is around 85 years so chances are Scott will pass in the next 40 years. So, he should get a 40-year term policy to guarantee a payout, right? Well, not so fast.
Scott’s kids will be financially independent adults in the next 15 to 20 years. His partner is only 30 and likely will still be working at 50. With the kids out of the house, living costs will drop, and making ends meet will become more manageable.
If Scott instead opted for 20 years of coverage through a renewable term policy with the same payout to cover his family’s financial needs, his premium would be considerably lower than a 40-year policy. If he dies at 48, his family will receive the same death benefit with either policy but he’ll save thousands of dollars while living and still meet his coverage needs.
On the flip side, if he is still alive and kicking at 65, he could choose to extend his coverage for another 20 years, albeit at a higher premium, or reduce his coverage altogether to match his new financial situation. This is always another discussion and should be reviewed every 5 years.
