Provisions that make a difference!

Do you have a term life insurance policy? If so, did you know you can renew or even convert it into a permanent life insurance policy? The right to renew or convert your policy are two options that can be very profitable, depending on your situation.

Renewing your policy

When your insurance policy comes to term, you can renew it without having to provide evidence of insurability.

Remember that, by definition, a person's insurability is an analysis of information enabling the insurer to form an opinion based on the risk that the person, to be insured, represents. The risk analysis is based on such considerations as the person's state of health, hereditary illnesses and lifestyle.

When you invoke your renewal privilege, your policy is automatically renewed without you having to submit additional proof. For instance, if you have 10-year term life insurance, you can renew it for another 10 years. Such a renewal is for a fixed period, until you reach the age designated on your contract. The duration of your new term will be the same as the one in your initial contract.

Generally speaking, the renewal period allowed for a term product ends when the insured reaches age 70 or 80. (At this time the required premium will increase according to the person's age.)

The renewal privilege can also be beneficial in certain situations, such as when the insured's initial short-term coverage must be changed because his mortgage loan has been extended. Also, if the insured's health has deteriorated and he wishes to renew his insurance, he can do so without having to provide evidence of insurability.

Converting your policy

The conversion privilege authorizes you to convert your term insurance to permanent insurance without having to submit new evidence of insurability.

The period during which the conversion privilege can be exercised is generally shorter than the total duration of the policy. For instance, someone who has 20-year term insurance that terminates at age 80 can convert their insurance up to age 75.

Not having to submit new evidence of insurability can be very profitable, especially, if your health has deteriorated since you took out your insurance. Essentially, you can then take out permanent life insurance in spite of your state of health. However, since the premium is always based on how old you are when you convert your insurance, you can expect the premium to go up.

In short

Whether for a conversion or the renewal of your insurance, the provisions may vary from one contract to another. This is why it's important to take the time to get the right information and carefully read your insurance policy.