Almost every week I speak to someone whose Term Life Insurance policy is coming up for renewal. In many cases, I get this call because either the person that originally sold the policy has not kept in touch. That person has left the industry. The policy owner did not want to meet because they felt that their previous advisor only wants to sell them more insurance. Whatever the reason, the renewal means a dramatic increase in the monthly cost. Almost to a person, they say ‘Well, I’m certainly not going accept that.’
You do have options.
1. Accept the increase in price, the same benefit amount remains as does the length of the Term. (With the increase in price this is obviously not a great choice) You can do this. Please don’t do this.
2. Complete a new application. If you still need the same benefit amount or more, taking a new policy may be wise. This would involve a new medical examination. The pricing would be based on your current age, health situation, and benefit amount. Typically, the cost for a new policy is far less than the renewal cost. The challenge: What if your health has significantly changed to where you may not qualify for a new policy or be rated?
3. Reduce the current benefit amount. If today, you don’t need as much protection, reducing the benefit amount, within the same policy, will generally lower your cost and you can restart a new Term period. There are no new medical examinations or tests. The challenge: In a few years you’ll be faced with the exact same situation. The policy is renewed at a higher cost.
4. Convert some or all, of the current benefit amount to a permanent policy. Again, no new medical examinations or tests. The challenge: Because the policy is now permanent your costs will be higher. However, so long as the policy is in force, whenever you pass away, the benefit amount is paid to your beneficiaries.
A few months ago, I was speaking with a business owner that had a Term policy coming up for renewal. He wanted to drop the policy because of the increasing cost. We determined that because his health had significantly changed, he would never qualify for a new policy. He was comfortable with the cost he was currently paying. What we did was reduce the benefit amount and convert it to a permanent policy. For virtually the same cost that he had been paying for the last 10 years he, and his family, now have a permanent solution. Best of all the cost per month will never increase again!
When you decide to invest in a Life Insurance policy it’s important to understand what you’re trying to accomplish.
Benchmark Insurance Ltd, is a niche insurance agency providing Life, Critical Illness, Long-Term Disability, and Group benefits to individuals and businesses throughout Ontario. Please let us know how we can help. firstname.lastname@example.org 647-955-1242
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