So you were on top of your game and purchased term life insurance years ago, when you were younger to protect the ones you love. That is fantastic. Now, you are coming to the end of your term and it is time for your insurance to renew. Here are a few things you need to be conscious of when a term life insurance policy renews;
- It will automatically renew for another term for the length of time equivalent to your original policy (if the policy includes a renewable clause). For example, a 10 year term policy renews for another 10 years before it automatically renews again.
- Your premiums will increase significantly. For example; the renewal premiums could increase four, five or even six times the cost of what you are currently paying per month. Your renewal rates were established when you bought your policy and are listed in the policy booklet.
- The cost of the renewal is often dramatically more than the cost of a new term policy. Why? This is because the insurance company is now assuming the increased risk of having to pay out a claim on your policy. 10, 15 or 20 years has passed since your initial application for life insurance and any medical underwriting that was done on you. During this time, many things may have changed in your medical health status; you may have developed a health condition or had a change in lifestyle which increase the risk of mortality.
What you should do if your term policy is up for renewal:
- Contact your insurance advisor (do it sooner than later to ensure you have plenty of time to build your plan and put it in place if you do not want to get hit will the costly renewal premiums). Sometimes the process from the time of application for a new life insurance policy to when the policy is in force can take a few weeks or longer to complete, depending upon the insurance carrier and their underwriting procedures.
- Together, you and your advisor will go through a financial analysis to determine your current and future needs and find the right solution for you. If you have dependents you should have life insurance.
- Once the new policy is approved, delivered and in place, you can cancel your existing term policy. Do not cancel your original policy until the new one is in force, to ensure you are never without coverage.
Photo by Patricia Prudente on Unsplash.