Whether it is a shorter 10-year term or a longer 30-year term life insurance policy, a lot can change in your life in that time. If your term life insurance is about to or has already expired, it is a great time to think about what you need in your life now, whether it is more or less coverage, a term or permanent life insurance. The most important question to ask yourself is: if you were to pass, what financial aspects would you want to have covered for your family and beneficiaries? Continue reading to understand all the options you have and tips on applying for life insurance.
What happens when your Term Life Insurance expires
Once your term life insurance policy ends, you will no longer be covered if you pass away, meaning the beneficiary will not receive any benefit in case you pass away. So it is important that when your term life insurance expires, you need to not only reassess if you need life insurance coverage but how much coverage you would need – as a lot could’ve changed in the time of your last policy. If your life insurance policy is ending or has ended, your options could be extending your current policy, converting to a term-100 policy, or to look for a different insurance policy such as a different term policy, permanent policy, or a no-medical or guaranteed life insurance policy.
1. Extend or renew your current policy
Sometimes it is an option to extend or renew your term life insurance, giving you the same term length as well as the same coverage as you did in your expiring term life insurance. Renewing the same term life insurance policy is useful when you know you need the same amount of coverage, want nothing permanent, and like your policy. But, it is important to ask yourself when starting or renewing any new life insurance policy, how much coverage do you need. The coverage that’s right for you is based on your situation in life – the main question you need to ask yourself is, if you were to pass away, what would you want to have financially covered for your family or beneficiaries.
To extend or renew your current term life insurance policy, check if your policy contract or company offers the option to extend or renew your policy. Note that often there is an age restriction depending on the length of the term as well as not all companies offer the ability to extend or renew term life insurance policies.
2. Convert to a term-100 policy
Sometimes you know your coverage needs will not change and you want to pay a guaranteed non-changing premium to have coverage for the rest of your life. If your term life insurance policy is ending soon, then you might have the ability to convert your term policy into a term-100 policy. Where a term-100 life insurance policy lasts the remainder of your life with one guaranteed premium for the rest of your life.
3. Get a different life insurance policy
Sometimes renewing your policy isn’t what you are interested in and you’re curious about if any other life insurance option is perfect for you. Finding the right life insurance policy for yourself can be simplified by understanding what your options are and what you are looking for. Maybe you really like how the term life insurance policy works but you’re not a fan of how you access your policy and information with the company, changing companies for term life insurance can make a big difference for you. Understanding the different types of insurance including term life insurance, permanent life insurance, simplified life insurance, guaranteed or no medical life insurance, disability insurance, and critical illness insurance, will help make choosing the right insurance plan for you easier. Talk to a life insurance agent today to look over your life insurance options if you are interested in finding a new policy once yours is expired.
Insurance options and their pros and cons
You have many options for different insurance policies with their pros and cons to help compare and pick the right one for you. In general, life insurance gives a tax-free lump sum benefit to your beneficiaries in case you pass away while covered by the life insurance policy – for life insurance your options are: term life insurance, permanent life insurance, simplified life insurance, and guaranteed or no medical life insurance. But, if you would like other insurance, in case you become disabled or critically ill you have options such as disability insurance and critical illness insurance where these plans are commonly paired with life insurance policies for more coverage for different situations.
For a great comparison of different types of life insurance policies, check out our blog about Guaranteed Issue vs Simplified vs Fully Underwritten Life Insurance Policies.
Term Life Insurance
Term life insurance is a more budget friendly traditional life insurance which requires a medical exam to determine how high of a risk you are to die, and depending on any health conditions you have you may be denied or have a higher premium. But once you lock in a policy, you pay a non-changing monthly rate (also known as a premium) for the duration of the policy, so that in the case that you pass away during the policy term a tax-free lump sum benefit is given to your beneficiary. The main difference with term life insurance compared to other policies, is that the policy lasts for a certain time like: 10, 15, 20, 25, or 30 years. Which is great for someone who has a mortgage, certain occupation, children or dependents, or any kind of debts – so that in the event you pass away, the life insurance coverage could help cover costs, helping your family or beneficiary.
Fixed premiums for duration of policy
Significantly less expensive than permanent life insurance policies
Death benefit is guaranteed
Permanent Life Insurance
Because it covers you for your entire life, permanent life insurance is also known as whole life insurance. And being similar to any type of life insurance, permanent life insurance gives a tax-free lump sum benefit to your beneficiaries if you pass away while under policy. Permanent life insurance does require a medical exam, therefore your premiums do fluctuate depending on the state of your health. And it is common in companies that permanent life insurance policies can build up a cash value over time and promise to not increase your premium once the policy is bought. Giving a few common permanent life insurance plans: participating life, universal life and term-100 life insurance. To learn more about these different permanent life insurance policies, read our blog about Universal Life vs Whole Life vs Term 100.
Simplified Life Insurance
Simplified life insurance says it in the name, it is simplified being easier to obtain, it acts like any other life insurance plan but does not require a medical exam and may ask health related questions. This plan is commonly used when you are denied traditional life insurance like term and permanent life insurance having a more expensive premium.
This policy is great for those with health conditions and were denied traditional life insurance like permanent and term life insurance.
No medical exam, may ask a few medical questions
non-severe health conditions and some risky lifestyles accepted
Fast approval time and easy to obtain
Less expensive than guaranteed or no medical policies
Maximum coverage of up to $1,000,000 depending on the company
Usually more expensive than traditional term and permanent life insurance
Guaranteed Life Insurance or No Medical Life Insurance
Guaranteed or no medical life insurance are a type of permanent or whole life insurance where the most important highlight of guaranteed or no medical life insurance is that they do not require a medical exam or ask any medical questions accepting anyone with severe health conditions or extremely hazardous occupations, and as a result, the maximum coverage ranges from $25,000 – $50,000. These plans target people who are denied from both traditional and simplified life insurance, usually denied because of serious health issues. Guaranteed life insurance and no medical life insurance has the highest premium compared to other life insurance types. If you are interested to learn more, read our blog about Should You Get No Medical Life Insurance.
No medical exam or questions asked
All health conditions and risky lifestyles accepted
Fast approval time and easy to obtain
Maximum coverage of around $25,000 – $50,000 depending on the company
Most expensive policy type
This type of insurance policy can be bought alongside a life insurance policy. The purpose of disability insurance is to replace a portion of your income in the event that you get sick or injured interfering with your ability to work, giving you regular monthly payments while you get better from your condition or until the end of your predetermined coverage period, whichever comes first. If you want to learn more about disability insurance, try reading our blog about Is Disability Insurance Right For You.
Critical Illness insurance
This type of insurance policy can be bought alongside a life insurance policy as well. Although critical illness can seem similar to disability insurance, CI has its differences: critical illness insurance gives the insurer a tax-free lump sum on diagnosis of any one of the critical illnesses like a heart attack, stroke, or cancer, and if they survive the waiting period to receive the benefit. To learn more about if critical illness, try reading our blog about Is Critical Illness Right For You.
Why should I get life insurance?
Life insurance is simply not for everyone: if you don’t have a family, dependents, debts, or other financial obligations, you might not need it. Whether you need life insurance depends on you and your needs, ie., is there someone you would want to help and support in case you pass away? The purpose of life insurance is to give your beneficiary a tax-free death benefit if you pass away within the policy, where that benefit could be used for anything for that beneficiary, whether it supports their living expenses, your funeral expenses, paying any debts from mortgage or post-secondary school, or to keep your business running. If you are still wondering if life insurance is for you, read our blog about Is Life Insurance Worth It.
Why you should consider Critical illness insurance
Critical illness insurance offers a unique feature called “return of premium”. Return of premium allows a policy owner to request return of all premiums (known as ROP) paid after a specific amount of time (provided no claim has been made), typically 15 to 20 years, or at age 65 or age 75. The idea is certainly appealing that one could have coverage for an extended period of time, knowing that if one remains healthy and no claim is made they will receive a 100% return of premium.
Critical Illness Insurance also offers a partial payment benefit (also sometimes called an early discovery benefit). In the event that you develop a non-life threatening or less severe illness that can be treated while you are insured, you are eligible to receive a small payout of your benefit. The payouts are typically 10% to 25% of your policy’s value, and it doesn’t void your policy or reduce your final payout if you do end up also developing one of the defined life-threatening critical illnesses afterwards.
The illnesses that qualify for a partial payment are often forms of non-life threatening cancer and coronary angioplasty, but this will vary by each insurance company.
Other features/benefits, known as riders, to a critical illness policy can include disability waiver of premium rider, which eliminates premium payments if one were to become disabled; a second event rider which provides additional coverage (often limited) in the case of a 2nd critical illness; and a loss of independent existence rider.
Individual critical illness policies in Canada are typically offered in terms of 10 years, 20 years, to age 75 or to the age of 100. Similar to life insurance policies the shorter the term the more cost effective the premium. Some insurers also allow policy holders to lock in premiums to avoid future rate increases.
The most popular face amount for a critical illness insurance policy remains $100,000.
However, as with life insurance and disability insurance policies, not all critical illness insurance policies are made equal. Each insurer offers something different which may or may not fit your needs. For example:
- Manulife Insurance for example offers a LivingCare which provides a monthly care benefit if you become functionally dependent at no additional cost.
- Ivari (owned 100% through a subsidiary of the Canada Pension Plan) offers competitive critical illness rates, however does not provide stand alone critical illness solutions (they only offer critical illness as a rider to a life insurance policy).
- Desjardins Insurance offers a unique shared ownership critical illness policy where a company’s key employees receive coverage and potential for future return of premium with no tax implications
- Empire Life which once offered comprehensive critical illness plans, has made a corporate decision to no longer offer critical illness insurance.
Why you should consider Disability insurance
Disability insurance is meant to replace a substantial portion of your income should you become injured or ill and it affects your ability to work. It provides you with consistent monthly payments while you recover from your ailment or until your pre-determined coverage period ends – whichever comes earlier.
Like critical illness insurance, you can use the benefit on whatever you see fit, but the monthly payment structure is meant to mimic your paycheque and is typically intended to cover your mortgage or rent, and other living expenses while you are on the road to recovery.
There are several varieties and types of disability insurance – but the most common type of disability insurance people consider is long term disability insurance. Long-term disability policies can help provide a monthly income for several years or longer. They typically do not replace 100% of your income, but they can provide resources to reduce the impact of an injury or illness that keeps you from working.
If you’re not sure if disability insurance is right for you, or for a more in depth guide to disability insurance, check out our full guides.
When is the right time to get life insurance after a term expires?
You may have been notified that your life insurance policy expiration date is coming closer, and are thinking I’ll deal with this later, but it is helpful to know that the date that your policy is effective plays a small role in the price of your monthly premium. So, if you are looking to apply for a new policy, keep in mind that insurance companies give you a premium based on your age on your birthday closest to the effective date on the policy. See the example below showing what day you should start the insurance policy to save extra money. Life insurance companies will consider you at the age closest to your birthday so, you will be considered your age if your birthday passed less than 6 months ago, or you will be considered a year older if your birthday is upcoming within 6 months. And by being considered a year older, your premium will be a little higher. Although for some, the difference in the premium is not much, it can make a difference over time. For more information about finding the right time to get life insurance, read our blog about Current Date or Save the Age When Applying for an Insurance Policy.
Finding the best coverage for a life insurance policy
The most important part about starting a new life insurance policy is figuring out how much coverage you need. And the amount of coverage varies depending on the policy you are eligible for, which depends on your state of health and if you have health conditions. Being healthy with little to no health conditions can have your coverage to be above $1,000,000 but, with serious health conditions your max coverage may range from $25,000 – $1,000,000, depending on how serious your health conditions are, resulting in the life insurance company considering you to be at high risk.
Understanding how much coverage amount you need is essential, as the coverage amount is the death benefit given to your beneficiaries in case you pass away. And in order to figure out how much coverage you need, you need to look into your own financial situation – the coverage amount should be enough to cover all the expenses your family might face in case of your death. The amount of life insurance coverage is all dependent on your own personal needs – you need to ask yourself in case you pass away, what would you want to have covered for your family and beneficiaries. Some examples of things you need to consider in the case of your death are the income your family would lose, how much mortgage is left, post-secondary education costs, and the cost to support dependents, following the DIME formula below. For more tips and information on finding the coverage you need, read our blog about How Much Life Insurance Do I Need in Canada.
Frequently Asked Questions (FAQs) about When Your Term Life Insurance Expires
No matter how short your term life insurance is, your circumstances in life can change, where life insurance gives peace of mind to beneficiaries in the case of your passing, a lump sum benefit helps with funeral costs, any sort of debt, and to give your beneficiaries support.
It is important to understand why life insurance can be important to you. If you want to learn more, read our blog about Is Life Insurance Worth It.
There are a handful of things to consider when you purchase life insurance:
Life insurance monthly rate changes depending on the risk of you dying. So the older you are, the more severe health conditions, the more unhealthy your lifestyle, the more high risk you are giving you a more expensive premium for life insurance. For example, below are the monthly rates for ages 35-60 for a 10-year term with $500,000 coverage. If you are interested in understanding the costs of life insurance better, read about How Much Does Life Insurance Cost.
No, a life insurance policy is like any other policy, once the policy ends, you are no longer covered and there will not be a death benefit.
It is very important to understand what you want the coverage for to understand how much coverage you will need – whether you want the coverage to supplement income, help with mortgage, post-secondary education debts, supporting dependents, or funeral costs.
A great way to help you figure out how much coverage you need, is through the DIME formula shown below. Then the difference between your assets and total from DIME is the amount of coverage you need.
If you are interested in tips and methods for calculating the amount of coverage you need, a great blog to check out is How Much Life Insurance Do I Need.
When starting any life insurance policy, it is always good to re-evaluate how much coverage you need. Important factors to keep in mind are the difference between your assets and the amount of debts, income your family needs, mortgage remaining, and education costs for yourself or your dependents.
To calculate your needed coverage check out our blog about How Much Life Insurance Do I Need.
Yes! It is common to pair critical illness insurance and disability insurance with life insurance so that in the case you pass away or are diagnosed with critical illness, or become disabled from working, benefits are given to help you or your family.
The money you spent to pay the premium for the life insurance policy stays with the company. The point of the premium in the life insurance policy is to pay them monthly in case of your passing then, they will pay out a lump sum benefit to the beneficiary following your contract.
Lots of companies have renewal as an option, but not all companies can do this, as well as at certain ages you are not able to extend term life insurance if you pass a certain age depending on the company. Check with your life insurance policy, and if you are interested in seeing your options and want help to find the best policy for you, reach out to us at Protect your Wealth for suggestions and help at no cost.
Life insurance gives you the peace of mind for your beneficiary in case of your passing, and your beneficiary does not have to be your dependents, it could be anyone important to you like a spouse, older children, or someone you consider family. And life insurance is for someone who could have debts, mortgage, post-secondary school costs, or any financial obligations like funeral costs that you wouldn’t want to weigh on someone else.
Try reading Is Life Insurance Worth It, to determine if life insurance is right for you.
One insurance type isn’t generally better than the other, it is situational based on your personal needs. Term life insurance is perfect if you just started a new financial obligation like mortgage, a business, or having children and want the financial security for you and your family in case of your passing, and you may want to choose a 10, 20, or 25 year term life insurance which would be cheaper than permanent life insurance. Or, permanent life insurance is perfect if you know no matter what you want your family to have financial security and want to grow a cash value with time.
No, in term life insurance you pay a premium so that in the case of your death your beneficiary would receive a tax-free lump sum benefit. So, once your life insurance policy ends or expires your beneficiary will not receive any death benefit.
Some companies have an auto renewal to automatically renew your term life insurance but, if you are not opted into auto renewal then your term life insurance will expire and you will no longer be covered by a life insurance policy. Meaning there will be no death benefit in case you pass away.
Some companies do have a choice to automatically renew your term life insurance policy, so be sure to check with your insurance provider if that option is available to you.
Finding the right life insurance for you
Whether you want to find a similar life insurance policy or a new policy to secure your estate, your business or make sure that your loved ones are not financially burdened in the event of your death, having life insurance can be extremely important. Many different examples show that most people who have any assets, or financial liabilities would be better off if they had a life insurance policy to provide them with coverage.
At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to create the best solution for you and your needs. We’ve been providing expert life insurance solutions since 2007, including no medical life insurance, term life insurance, and permanent life insurance, to build the best package to give you the protection you need at no cost.
Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, ON, and service clients anywhere in Alberta, British Columbia and Ontario, including areas such as Oakville, Abbotsford, Grand Prairie, Oshawa and Waterdown.