- Find out if you have a convertible feature.
When shopping around for term insurance it would be a mistake to go for the cheapest policy. As is often said in life, you pay for what you get. The cheapest term insurance policies have no conversion features. You don’t want to be in a situation where in 20 years you have paid into a policy for 20 years …. You are 20 years older, in poorer health, and have no coverage.
Permanent insurance is an amazing retirement tool – and its nice to know that this conversion option is available to you regardless of your health. And we understand the monetary investment commitment is significant – but you can convert all or a proportion of your policy if that makes more sense for your situation in the future.
- Know your dates and convertible options.
Many 10-year term policies can be converted to 20-year term within the first 5 years without proving health. And you can usually convert any term policy to a permanent policy before age 65. But every insurance policy is different, and you should check your policy specifically.
- Term insurance guarantees future insurability now
While you may have great health today – the future is uncertain. And generally speaking health declines as we age. How many people do you know that have improved their health over the last decade compared to those whose health as deteriorated? The cost of your insurance, even the ability to get coverage at all is based on your age and health.
You can’t purchase home insurance when your house is on fire. And you can’t purchase life insurance if you have a heart attack or cancer. While you may be in perfect health today, life is unpredictable, and tomorrow is not guaranteed.
Term insurance is cost effective enough that there is no excuse not to fully insure yourself. It would never make sense to insure your home for less than the cost to rebuild it. You insure it for its full replacement value. Similarly, an insurer will give you coverage up to your full human economic value – typically 15 – 20 times your income. It’s a mistake to insure your family based on need. Sure they can move to the boonies and live in a house half the value of the current one. Children will “survive” without post secondary educations. Bare bones coverage is not the right approach. Full human economic value is always recommended.
- What are your renewal rates?
Contrary to popular belief, 20-year term does not typically expire in 20 years. Generally speaking it renews … all be it at a significantly higher cost. Often leading to one dropping their term insurance at the renewal period. Clients don’t often consider the renewal rates at the end of the term period. But this can be an important feature … especially if your health declines in the future.