April 11, 2023

Term Life Insurance – Two Valuable Options

Chris Lubell

Term life insurance is frequently the product of choice for insuring one's family for many Canadians, especially those with young families. This is primarily due to the fact that it has the lowest initial cost for life insurance.
The paradox of permanent, cash value life insurance is that it is most affordable when you least expect it, even while it offers tax-advantaged prospects for growth. Term life insurance is a simple choice for individuals who wish to ensure that their loved ones will be appropriately protected in the event of their passing.

The good news is that you have protection guaranteed for the duration of the policy contract once the life insurance is in place. The bad news is that with renewable term life insurance, the premiums significantly rise after renewal.

  • In order to acquire the most recent rates for a person in good health, reapply before the renewal date.
  • Convert to level cost or cash value insurance as soon as you can.

If the insured reapplies for the policy and provides updated medical information and other underwriting documentation, the amount of the premium increase may be decreased. Sadly, there is a chance of losing insurance completely or partially prior to the renewal date. If this happens and the insured still needs the coverage, they might not have a choice but to renew if it weren't for two crucial clauses found in the majority of term insurance plans. These two choices significantly increase your ability to be insured in the future.

Two alternatives to think about

Conversion option - The term insurance policy can be "converted" to a permanent plan without any medical justification at any point before age 70 or 75 (depending on the company). For an insured who needs lifetime protection for estate planning purposes, such as the payment of taxes upon death, this is a beneficial alternative. This option does not require a medical exam, thus your insurability is not taken into account. Any permanent plan offered by the company, such as Whole Life, Universal Life, or Term to Age 100, may be converted from a term insurance in general.

The "exchange" option enables you to move to a different term insurance policy without providing any proof of insurability. This provision enables the policyholder to start a term policy with the lowest entry level premium (10 year renewable term) and exchange it for a 20 year or 30 year renewable term during the first five policy years without running the danger of losing their eligibility to be insured. The full conversion option would still be accessible under the swapped policy in the event of a future non-medical shift to permanent coverage, even though this option is typically only usable once.

While the exchange option might not be available with all term insurance policies, the conversion option is a feature that practically all term life plans have.

You might wish to think about using your conversion or term exchange option if you recently bought a term insurance policy and want to secure rates for a longer time.

Make sure the plan you are contemplating has both conversion and term exchange options if you are currently thinking about buying term insurance.

Contact me if you have any inquiries. As always, feel free to spread this information to anyone you believe would be interested in it.

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