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What happens when your term life insurance policy is about to expire? Should you renew it or explore other options? If you still need coverage, renewing your term life insurance may seem like the easiest solution—but is it the best one?
Renewing your policy allows you to maintain coverage without going through medical underwriting, which can be crucial if your health has changed. However, renewal premiums are significantly higher than what you paid during the initial term. Before you decide, it’s important to understand how renewal works, what alternatives are available, and which option best fits your financial goals.
In this guide, we’ll break down the key factors to consider when deciding whether to renew your term life insurance policy, compare renewal terms from different insurers, and explore alternative strategies that could save you money or provide better long-term protection.
- Key takeaways:
- Expect a significant increase in premiums when renewing your term life policy, sometimes up to 20 times more than what you originally paid.
- Renewing is guaranteed regardless of your health, which can be beneficial if you’ve developed medical conditions.
- If you’re still in good health, buying a new policy may be much more affordable than renewing your existing one.
What Is A Term Life Insurance Renewal?
When you purchase a term life insurance policy, you agree to pay regular premiums in exchange for a tax-free death benefit—a lump sum that your beneficiaries receive if you pass away. This benefit can help your family maintain its lifestyle, pay off debts like a mortgage, cover funeral expenses, and manage future costs such as post-secondary education for children.
Term life insurance is designed to last for a specific period—typically 10, 20, or 30 years. During this time, your premium remains level and predictable, locking in a fixed cost for the entire term. The policy is guaranteed, which means the insurance company cannot cancel it or raise your premiums if your health declines. The peace of mind this guarantee provides is one of the main benefits of life insurance and makes it worth it for many Canadians.
A common misconception is that your term policy simply expires when the term ends. However, most term policies sold in Canada are renewable term insurance. This means that you have the option to renew your policy past the initial term without needing to provide evidence of good health or undergo another medical exam.
However, when you renew your term life insurance policy beyond its initial term, your premium increases substantially. This adjustment accounts for your older age at renewal, as older individuals statistically have higher odds of passing away compared to younger ones. Insurance companies in Canada typically offer one of two types of renewal premium structures:
- Level premium: The premium is fixed for another term length equal to your initial term.
- Annually increasing premium: The premium rises each year with your age.
Your policy will include a renewal premium schedule so you know in advance what to expect. Although you may have purchased the policy many years ago and forgotten the specifics, the schedule should prevent any surprises when it comes time to renew.
Additionally, your policy will show a termination date, which is when your coverage ultimately expires if you continue to renew and pay the premiums. This termination date is usually set at age 85, although some insurance companies may allow renewal up to age 100. In the latter case, the policy becomes paid up, meaning no further premiums are required, and you remain covered for life. However, keep in mind that premiums typically increase exponentially with age, so renewing until age 100 is often impractical.
When should you renew your term life insurance policy?
This question often comes to mind as you near the end of your term. You might wonder, “What’s the purpose of renewing my term insurance policy if I initially bought it to cover a specific period?” While it might seem logical to cancel the policy once the term ends, life is full of changes. Your personal and financial situation can evolve—sometimes drastically—making your original insurance plan less suitable over time. Here are two primary reasons you should consider renewing your term life insurance policy:
Financial and personal situation changed: Major life events such as starting a family, adopting more children, getting married or separated, purchasing a new home, changing careers, or experiencing significant salary changes can all impact the amount of life insurance you need and the duration for which you need it.
For example, having another child later in life might mean you need income protection until that child reaches adulthood. Similarly, refinancing your mortgage or buying a new home could extend your financial obligations, warranting a longer coverage period.
Health and lifestyle changed: If your health has declined or your lifestyle has become riskier—due to factors like dangerous hobbies, recent driving infractions, or lifestyle habits such as excessive alcohol or unprescribed drug use—it might be challenging to purchase a new policy.
In these cases, renewing your existing term policy becomes one of your few options to extend your coverage, even if it comes at a higher cost.
Benefits of renewing your term life insurance policy
Renewing your term life insurance policy comes with several advantages that help you align your coverage with your evolving needs:
No medical exam required: Renewal does not involve any additional underwriting. You won’t have to answer questions about your health or undergo a medical exam, saving you time and hassle—especially if you have health issues.
Simplicity: Because your term insurance is “guaranteed renewable,” the insurance company is obligated to renew your policy regardless of any decline in your health. Renewal is a straightforward process without extra paperwork; you simply pay the higher premiums.
Continuous coverage: Renewing ensures that you maintain continuous coverage. You avoid the risk of a coverage gap that might occur if you try to replace your term policy with a new one and accidentally cancel your existing policy too early.
Drawbacks of a term insurance renewal
While there are clear benefits to renewing your term life insurance policy, it’s important to consider the potential drawbacks:
Higher premiums: The most significant drawback is the increase in premiums upon renewal—sometimes up to 20 times the initial cost. This increase reflects your older age and the higher statistical likelihood of a claim.
Additionally, because the premiums are guaranteed, the insurer factors in the higher risk associated with renewing policies for less healthy or higher-risk individuals, a phenomenon known as anti-selection.
Limited renewal periods: Most term life insurance policies have a cap on the number of times you can renew or a maximum age—usually 85—beyond which renewal is no longer available. As you age, the cost of renewal may become prohibitively expensive, eventually forcing you to lapse the policy at a time when a claim is most likely.
How To Renew Your Term Life Insurance Policy
When you purchase a term life insurance policy, renewal is typically an automatic process. As long as you continue to pay your premiums, you will remain covered beyond the initial term. The insurance company will notify you of the higher premium through a renewal notice mailed to you.
If you’re on a monthly payment plan, the insurer will automatically debit the higher premium amount from your bank account. It’s important to note that you must notify the company if you do not want your coverage to be renewed past the initial term.
For those on an annual payment plan, your policy will lapse if the payment is not received after the grace period. This system ensures that your coverage continues seamlessly, but it also means you need to stay informed about the renewal details and premium changes.
What kind of renewal terms do insurance companies offer?
In Canada, there are two main types of term life insurance renewal terms:
- Level premium: With a level renewal premium, your policy is renewed for another term length equal to your initial term. For example, if you have a 20-year term policy, it will renew with a fixed premium for the next 20 years.
- Annually increasing premium: Under this model, the premium rises each year. For instance, year 21 of a 20-year term policy will have a higher premium than years 1-20, with each subsequent year’s premium continuing to increase as you age.
Additionally, while most companies set an expiry date by which you can renew, some insurers allow you to renew until age 100. When the policy reaches age 100, it becomes paid-up—no further premiums are required—and your coverage remains in force for life. This option essentially mimics the features of a permanent life insurance policy, guaranteeing lifelong coverage and a death benefit as long as you continue paying the premiums, even though the premium increases can be substantial as you get older.
Below is a table summarizing the different renewal terms offered by insurance companies in Canada:
Insurance company | How the premium increases upon renewal | Age limit when policy expires |
|---|---|---|
Assumption Life | Annually increasing premium | 90 |
Beneva | Premium increases every 5 years | 85 |
BMO Insurance | Level premium for another term length equal to the initial term | 85 |
Canada Life | Annually increasing premium | 85 |
Canada Protection Plan | Level premium for another term length equal to the initial term | 80 |
Desjardins | Term-10, term-15, term-25, term-30: Premium increases every 10 years. Term-20: Premium increases every 20 years. Term-65: Non-renewable, coverage terminates at age 65. | Term-10, term-15, term-20, term-25, term-30: 85. Term-65: 65 |
Empire Life | Term-10: Premium increases every 10 years until age 75, then remains level until age 100. Term-15: Premium increases every 15 years until age 70, then remains level until age 100. Term-20: Premium increases every 20 years until age 65, then remains level until age 100. Term-25, term-30: Annually increasing premium after the initial term until age 85, then remains level until age 100. | Paid-up at age 100 |
Equitable Life | Term-10, term-20: Annually increasing premium. Term-30/65: Non-renewable, coverage terminates at the later of 30 years and age 65. | Term-10, term-20: 85. Term-30: Later of 30 years and age 65 |
Foresters | Term-10, term-20: Level premium for another term length equal to the initial term. Term-30: Premium increases every five years. | 85 |
Humania | Level premium for another term length equal to the initial term | 80 |
Industrial Alliance | Annually increasing premium | Paid up at age 100 |
ivari | Term-10, term-20: Level premium for another term length equal to the initial term. Term-30: Level premium until age 100. | Term-10, term-20: 80. Term-30: Paid up at age 100 |
Manulife | Term-10: Annually increasing premium. Term-20: Premium increases every 20 years. Term-65: Non-renewable, coverage terminates at age 65. | Term-10, term-20: 80. Term-65: 65 |
RBC Insurance | Annually increasing premium | Paid up at age 100 |
Sun Life | Level premium for another term length equal to the initial term | 85 |
TD Insurance | Level premium for another term length equal to the initial term | 80 |
UV Insurance | Premium increases every 10 years | Paid up at age 100 |
By reviewing these options, you can identify which insurance company provides better options that align with your long-term needs for a term life insurance renewal.
Alternatives To Renewing Your Term Life Insurance Policy
Before renewing your term policy, it’s worth exploring other options that may be more suitable with your financial goals. Here are a few alternatives to consider:
Replacement
Replacing your term policy involves cancelling it and purchasing a new one. The key advantage of replacement over renewal is that the premiums for a new term insurance policy are usually much lower than the renewal premiums for your existing policy.
With a new policy, you undergo up-to-date underwriting on your health and lifestyle, which allows the insurance company to offer you the best rates available based on your current condition. In contrast, when you renew, the insurer factors in the elevated risk associated with those who choose to renew—typically individuals with poorer health or riskier lifestyles—which drives the premiums higher.
For example, consider a 35-year-old male non-smoker at standard rates. He might purchase a 20-year term policy with a $500,000 death benefit for $32 per month. When his policy comes up for renewal 20 years later, the premium could increase to $527 per month—a more than 16-fold increase.
However, at 55 years old, if he remains healthy and maintains a low-risk lifestyle, he could purchase a new 20-year term policy for around $214 per month, saving more than half the cost compared to renewing his existing policy. Keep in mind that these premiums are based on today’s rates and may change over time.
Before replacing your policy, ensure that your new coverage is fully in force before cancelling your existing one. The last thing you want is to find out that you were declined or offered much higher rates due to recent health or lifestyle changes.
Decrease the death benefit
If you still need some coverage but want to reduce the cost of renewal, you may have the option to decrease the death benefit on your existing policy before renewing. Life insurance needs typically decrease as you get older, especially if you have paid down your debts, your savings have increased, and your children are financially independent or will no longer rely on you for long.
By lowering the death benefit, your renewal premium will become more affordable. The premium savings are typically proportional to the reduction in coverage. For example, if you reduce your death benefit in half, you will also approximately cut your premium in half. This option allows you to maintain some coverage without paying excessively high renewal premiums.
Conversion
If what you need isn’t term insurance but rather permanent coverage, conversion might be the more suitable option. Conversion allows you to switch your term policy into permanent life insurance without having to go through additional medical underwriting. This can be particularly beneficial if your needs have shifted over time.
Permanent life insurance can serve a variety of purposes, such as estate planning. It can help you pay off taxes owing at death so that your children inherit your estate intact or enable you to leave a legacy to loved ones or a charity. Additionally, if you’re a high-income earner looking for a tax-advantaged vehicle to build wealth, permanent policies can be attractive.
The most common permanent life insurance products in Canada include:
- Term-100: Does not offer cash value but provides coverage for life with premiums payable until age 100.
- Whole life insurance: Builds cash value over time and may pay dividends that can be reinvested to increase the death benefit and cash value.
- Universal life insurance: Offers flexible premium options, adjustable death benefits, and investment choices.
Cancellation
If, after a thorough needs analysis, you determine that you no longer require life insurance, you have the option to cancel your policy. This decision should be based on a reassessment of your personal and financial situation, including factors such as your debt (including your mortgage), income, the age of your children, and your overall savings.
You may find that you no longer need term life insurance if you’ve accumulated sufficient savings and assets to effectively self-insure, or if your dependents no longer rely on you financially for support. Additionally, if you don’t need permanent coverage for estate planning, tax-advantaged savings growth, or wealth transfer, cancellation might be the right choice.
However, it’s crucial to keep in mind that cancellation is permanent. If you change your mind later, you may need to reapply for coverage at higher rates, or you might even be declined due to any health changes that have occurred. Therefore, before cancelling, be absolutely sure that you won’t need life insurance in the future.
Frequently Asked Questions
Can a term life insurance policy be renewed?
Yes, most term policies sold in Canada can be renewed at a higher premium after the initial term ends.
Does your term life insurance automatically renew?
Yes. Your insurance company will notify you of the renewal premium increase, and if you’re on a monthly payment plan, the higher premium will be automatically withdrawn from your bank account.
Will your premiums stay the same if you renew?
No, your premiums will rise when you renew your term life insurance policy. The new rate depends mainly on the renewal type (level or annually increasing) and can be up to 20 times higher than your original premium.
Can you renew your term life insurance policy more than once?
It depends on your policy’s expiry date, which determines when your coverage will end. For most term life insurance plans, the age limit is 85, meaning you can renew your policy until then.
Do you have to provide proof of good health to renew your term life insurance?
No, you do not need to provide proof of good health to renew your term life insurance policy. Renewal is guaranteed by the insurance company, even if your health declines or your lifestyle risks increase.
Is it always best to renew your term life insurance policy?
No, renewing your term life insurance policy isn’t always the best option. If you’re in good health, you may be able to qualify for a new policy at standard or preferred rates, which could be much more affordable than the higher renewal premium. Replacing your policy with a new one is often a better choice in this case.
Navigating Term Life Renewal: Protect Your Loved Ones & Manage Costs
Renewing your term life insurance policy is an option, but it’s important to carefully consider your alternatives before making a decision. While renewal guarantees continued coverage without medical underwriting, the premiums can be significantly higher. Exploring other options, such as replacing your policy for a lower rate, converting to permanent insurance for lifelong protection, or cancelling if coverage is no longer needed, can help you find the best solution for your situation.
If you’re unsure about the right path, we’re here to help. At Brian So Insurance, we provide personalized guidance to ensure you make the best decision for your financial future. We offer comparisons across multiple insurance companies to help you secure the most suitable and cost-effective coverage. Beyond selling insurance, we provide ongoing support to ensure your policy continues to align with your evolving needs.
For a free, no-obligation consultation, email info@briansoinsurance.com or call 604-928-1628 today. We can also design a comprehensive insurance solution—including term and permanent life, disability, health & dental, and critical illness insurance—so you’re protected against all of life’s risks. Alternatively, use the form below to receive a personalized quote straight to your inbox.
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Hi Brian,
Converting term insurance to permanent insurance (whole life insurance) vs taking a new permanent policy which one makes sense?
You said it may be cheaper to obtain a new term policy vs renewing existing term policy if one is in good health. Will the same principle apply if you want to convert term to permanent policy?
Thanks
Hi Maclean,
Converting makes more sense if your health has declined and made you unlikely to qualify for insurance at the standard rate. However, you may not like the permanent insurance options provided by your current insurer, in which case you may buy a new permanent policy with a new insurer, health permitting.
Converting will cost the same whether you buy a new policy or convert your term policy.
Cheers,
Brian