Can You Extend a 20-Year Term Life Policy?

SUMMARY

A 20-year Term Life Insurance Policy provides security for families, but when it ends, many wonder about extending it. Options include renewing the policy, often with higher premiums, or converting it to Permanent Life Insurance for lifelong coverage. Buying a new policy may be cost-effective for healthy individuals. Factors like mortgage payments, children’s needs, and health changes influence the decision. Canadian LIC helps clients find the best strategy for continued protection.

Introduction

Most buy a 20-Year term life in order to guarantee the security of loved ones as they raise children, pay off a mortgage, or accumulate a nest egg for retirement. But when the 20 years run out, the need for coverage doesn’t go away. Many Canadians are in that very same position, wondering if one can extend the term on life insurance or if one has to purchase a new one.

The truth is, you may find, at the end of a 20-Year term, that you still want to protect your family financially. Life is unpredictable, and your needs may not always align perfectly with the original term length of your policy. So, if this is you, then don’t worry; you are among many others. We have seen many clients at Canadian LIC struggle for this very reason, and we can tell you that there are indeed choices whereby your protection will not come to an end.

Can You Extend Your 20-Year Term Life Insurance Policy?

Yes, extending a 20-Year Term Life Insurance Policy is often possible, but the process is not always very simple. Most Term Life Insurance Policies in Canada have a renewal option that allows you to extend the policy for an additional term, usually in increments of five or ten years. It is, thus, more convenient, as one does not have to undergo a medical examination or re-qualify for the coverage to continue.

However, there is a catch: renewing your Term Life Insurance will most likely carry a significant increase in premium. When you first bought your term life, its quotes were likely drawn from what your age, health, and lifestyle used to be. Now that 20 years have passed, and you are probably older and possibly less healthy, it will cost you to renew your policy.

Why Would You Want to Extend Your Term Life Insurance Policy?

There are many reasons why someone may want to extend a 20-Year Term Life Insurance Policy. Let’s consider a few common scenarios we’ve encountered at Canadian LIC:

• Raising Young Children: If you purchased a 20-Year policy when your children were very young, you might find that they still need financial support after the term ends. Extending your policy can help ensure that their needs are met, from education costs to living expenses.
• Mortgage Payments: Many people choose a term length that coincides with their mortgage. However, life doesn’t always go as planned, and you might find yourself with several years left on your mortgage when your policy ends. An extension can help ensure that the mortgage will be paid off if something happens to you.
• Health Changes: If your health has deteriorated since you first bought your policy, you may not qualify for a new Term Life Insurance Policy at reasonable rates. Extending your existing policy can be a more accessible way to maintain coverage.

How Does Renewal Work for a 20-Year Term Life Insurance Policy?

Generally, you can renew your Term Life Insurance, keeping the coverage going for another term without having to undergo a medical exam. However, when you purchase life insurance online or through an insurance agent, it usually contains details on renewal options in your policy documents.

Upon renewal, the life insurance company works out new premiums based on your age. Very probably, new premiums will be many times more than you had earlier when you signed up, and it might shoot high also because the insurer takes into account all your growing years and possible health risks.

Although it is an easy option because you do not need to do a new medical, you should be prepared to pay the cost implications of it. The renewed premiums can jump to an amount quite drastically different from what our clients at Canadian LIC expected, and you would be surprised to see if you are not prepared for it.

Can You Convert Your Term Life Insurance Policy to a Permanent Life Insurance Policy?

While you are near the end of your 20-Year term, if you want to have something for much more than your remaining years, conversion of your Term Life Insurance Policy to a Permanent Life Insurance Policies may be your best alternative. Most Term Life Policies have a conversion feature whereby they can be converted to a Whole or Universal Life Policy just before the term. It guarantees coverage up to a lifetime with no requirement for a new medical examination.

The fixed premiums for Permanent Insurance are generally higher than for Term Life Insurance, but they remain fixed for the rest of your life. In addition, Permanent Policies accumulate a cash value component as time passes. Sometimes, these values might be drawn upon and are very flexible if you want to maintain coverage for life or to leave a legacy for your loved ones.

Should You Buy a New Term Life Insurance Policy?

For instance, if you are healthy, a new Term Life Insurance would be the best option to renew when the term is up. Despite the premium still being higher than what you paid in your Term Life Insurance Quotes 20 years ago, it could be cheaper to buy a new policy than renew the old one. If your health has remained stable, you are in a good position to enjoy the preferential rates, thereby making this option cost-effective.

When you buy a new policy, you’ll have the flexibility to choose an option that meets your current needs. Rather than choosing another 20-Year term, you might choose a 10- or 15-year policy, depending on how long you think you’ll need coverage for.

Struggles with Extending Term Life Insurance Policies

We’ve helped numerous clients at Canadian LIC navigate the challenges of extending Term Life Insurance Policies, and their experiences highlight some of the common struggles faced during this process

• Sticker Shock with Renewal Premiums: Many clients find themselves shocked by the significant increase in premiums when they renew their policies. For instance, a client who initially paid $30 per month for a 20-Year term found that his premiums jumped to over $150 per month upon renewal. This unexpected increase can make the decision to renew difficult, especially if there are budget constraints.
• Health Concerns Impacting New Policy Options: We once assisted a client who had developed a chronic health condition during the 20-Year term. She was concerned about being denied coverage if she applied for a new Term Policy. Her only realistic option was to renew her existing policy, despite the higher premiums, to ensure her family’s financial security.
• Confusion Over Conversion Options: Several clients have expressed confusion over whether they should convert their policies to Permanent Coverage. While conversion can be a valuable option, it’s important to understand the differences between term and Permanent Life Insurance and to weigh the benefits of lifelong coverage against the higher premiums.

Strategies for Managing the Cost of Extending Your Term Life Insurance Policy

If you’re concerned about the increased cost of renewing a Term Life Insurance Policy, there are some strategies you can consider to manage the expense:

• Opt for a Shorter Renewal Term: If your policy allows, you could renew for a shorter term, such as five or ten years, rather than another 20 years. This can help keep premiums lower while still providing the coverage you need.
• Reduce the Coverage Amount: If you no longer need the full coverage amount, reducing the death benefit can help lower your premiums. For example, if your original policy covered $500,000, you might reduce it to $250,000 if your financial obligations have decreased.
• Shop Around for New Policies: Don’t assume that renewing is your only option. Comparing Term Life Insurance Quotes from different providers could help you find a better deal, especially if you’re still in good health.

What Are the Benefits of Working with Canadian LIC When Extending a Term Life Insurance Policy?

The decision on what to do when your 20-Year Term Life Insurance Policy comes due is overwhelming, but you don’t need to navigate this road alone. We have extensive experience at Canadian LIC in working through this process with clients and understand the uniquely difficult challenge of extending, converting, or buying a new policy.

Our expert brokers could review your existing policy , explain the implications of extending or converting, or even assist you in comparing Term Life Insurance Quotes. We take pride in knowing each client’s situation on a very personal level, ensuring that the best and most affordable options are recommended

Indeed, the end of a 20-Year term does not have to mean the end of your financial protection, especially if you opt for Canadian LIC. This means that you can rely on these people to take care of your needs and stay within your budget.

Why Extending Term Life Insurance with Canadian LIC is the Smart Choice

It would be very confusing to have so many options if an insurance choice needs to be made to decide to extend a 20-Year Term Life Insurance Policy. Let the experts at Canadian LIC help you and make it easy. Our team will take time to know your personal needs, discuss all available options, and guide you through the most effective solution for continued coverage.