Term Life Insurance Renewals and Conversions – Pitfalls and Considerations
Term Life Insurance in Vancouver have two important features that you should look for.
Renewable and Convertible are the terms that describe these features.
Convertible Term Life Insurance
Not all term life insurance products available in Vancouver are created equally. While many of the major providers will build in a conversion clause into their Term Life Insurance plans, some more obscure or online only providers will not have this very important feature. A conversion clause allows you to trade your existing term life policy for a permanent policy, at the same health class, without a medical or health questions. Typically, there are more health conditions as a person ages and it is hard to predict whether a person can be insured with life insurance many years later. With a conversion feature built into the term life product, you can exercise the conversion clause even if you can no longer qualify for insurance due to medical issues.
Depending on the carrier, the maximum age to convert is usually between 65 to 75 years old. This maximum age of conversion offered by a carrier should be taken into consideration when buying life insurance.
Strategically Choosing the Carrier with Conversion Options
Many people looking for life insurance will recognize the important of the conversion feature in a Term Life Insurance product. There is, however, another important consideration when choosing a life insurance carrier even if the prices and conversion feature appear to be very similar. Recognize that in any future conversion that you will be limited to converting to a permanent product that the carrier offers. Not all carriers offer all products, for example a limited pay whole life or a Term 100, and you may consider what possible end product you want the option of converting to in the future.
When converting an existing Term Life Insurance product, you have the option of only partially converting the amount if the cost is too prohibitive to convert the entire coverage. The remaining balance of coverage can usually be kept, if desired, or deleted entirely. Some carriers will even allow you to trade the balance of the old term life insurance policy with a brand new term life insurance policy. The advantage of the latter is that you can extend your coverage on a term without the need for any medicals.
As previously mentioned, some more oscure and/or online-only type carriers will offer a Term Life Insurance product that is not convertible. This means that when your term expires, and you are uninsurable, then you have no guaranteed life insurance options available.
Renewable Term Life Insurance
As with the conversion feature, not all carriers offer Term Life Insurance products that can be renewed when the term comes to an end. Renewing means that you are able to continue on the policy, at a pre-determined higher rate (typically a much higher rate), and there is no need for any medical qualification.
For those policies that are renewable, the insurance carrier will send you a letter by mail telling you that your policy is about to renew at a higher price. If you do nothing, the renewal is automatically done. For this reason, it is imperative that you keep your contact information up to date with the insurance carrier.
Even if your Term Life Insurance comes to an end, as mentioned above, a renewable Term Life Insurance policy will automatically transition to the new price. To prevent this from happening, you must submit a written cancellation notice to the insurance company. In addition, the insurance carriers usually take about 5-10 business advance notice in order to discontinue an automatic draw.
Choosing to Renew over Converting or Replacing
While the renewal rates are substantially higher than the original rate once the Term of the Life Insurance expires, there are some people who will choose to renew instead of replacing or converting the policy. For example, if health no longer permits a new application and the permanent insurance options are too expensive, but you still need some form of coverage, then it may make sense to continue on the policy for a little bit longer. Some will opt to reduce the coverage amount to help manage the expense.
Like Non-Convertible type policies, some carriers will offer Term Life Insurance products that are non-renewable. This means that once the term ends, you have no option to continue at all.
Term Life Insurance Company in Vancouver
To provide service to families in Vancouver and the rest of Canada, Venture First Advisory is located in the heart of Downtown Vancouver in the iconic Electra Building, formerly the BC Electric headquarters. The Electra building can be recognized by the unique blue and green fin lights that run the vertical height of the building. While we now do most of our business, including term life insurance, by phone and/or video conference, our location is within easy access for those who work or live downtown. Contact Us as we are an experienced Vancouver life insurance advisor.