What to consider when your term insurance renews

What to consider when your term insurance renews

Most insurers send you a notification in advance that your premiums will be increasing.

There are a lot of things to consider in deciding what to do.

Ask yourself:

Are you healthy enough to qualify for standard rates? If you are sick, your choices are more limited, but you can still convert to a permanent policy. Or lower the amount of insurance to keep the monthly payments feasible. Or pay the higher premiums because you need the coverage and can afford them.

If you are in good health, you will qualify for lower premiums than the renewal but higher premiums than when you purchased the policy as you are ten or more years older.

If you don’t know if you qualify for standard rates, there is no harm in applying. If you get declined for the new coverage, you can still keep the policy that is renewing. They can’t take the renewable term policy away from you if you continue to pay the premiums.

Now that you are ten years older or more you need to ask yourself how much life insurance you need now? You may need less as your children are older, maybe your mortgage is paid off, or you have lots of savings. However, you may need more if you have more kids, a disabled child, a new mortgage, or spousal/ child support payments.

Then you need to ask yourself, how long do you need or want your life insurance to last? You may want a combination of permanent insurance to cover final expenses or tax and term insurance to cover the debt. The shorter you need the coverage, the less expensive it is.

The other consideration is if you are now less healthy and have a rated policy (that charges extra for higher health risk) or currently have a dangerous hobby like heli-sking or flying airplanes. You would have an exclusion which your old policy doesn’t have. You would need to decide if you prefer to pay more for the old policy to have that coverage or save money on the new one but have those activities excluded.

Most life insurance policies have a two-year suicide exclusion from the date you buy your policy for the first two years. Your old policy will no longer have that, and your new policy will have it for the first two years.

This is why you should meet with an insurance advisor to discuss your individual needs and the variety of policies available to you.