As your life changes, so does your need to protect your loved ones financially, especially in unforeseen circumstances. Term life insurance is a reliable option for many individuals, offering affordable premiums and coverage for a specific time period. When your term life insurance approaches its end of term date, however, you may receive a notice about a significant rate increase. This may be unsettling and make you nervous, but there are steps you can take to navigate this situation wisely.
Understand Why Rates Increase
First, you need to understand why your rates may be increasing. Term life premiums are based on factors including your age, current health and, potentially, changes in your insurance company’s pricing structure once your current policy reaches its end of term. They price the original policy over a predetermined period of time (10 year level premium, 15 year level premium, 20 year level premium, etc.) and once the policy reaches the end of its term, the policy will generally transition to a one year term and your premium will experience a significant increase. As you age, the risk to your insurer increases, which can also contribute to the increase in cost over what you were originally paying when the policy was originally started.
Assess Your Current Situation
Take a moment to assess your current circumstances: have you had any significant changes in your health since you first purchased your policy? Have you taken up any risky hobbies, or jobs, that could affect your premium? Understanding your current health and other risk factors can help you understand whether your rate increase is reasonable or if there are things you can address to potentially lower your premium.
Consider Policy Options
Your policy end of term period is a great time to reassess your coverage needs. Do you really still need the same level of coverage, or have your financial obligations changed? If, instead of renewing the same policy, you adjust your policy term or coverage amount, you may mitigate some future rate increases on the current policy once it reaches its end of term. Here’s a couple of guidelines to keep in mind as you are selecting your desired coverage: the amount of your coverage should equate to approximately 10x your annual income. The duration of your term policy should take you to age 70. The Low Cost Life Insurance team also conducts annual reviews for each of our clients to ensure we are providing you the right coverage for your current stage of life.
Health and Lifestyle Changes
If your health has improved, or if you have quit habits like smoking or any other tobacco usage, you could qualify for better rates and help offset your rate increase. Be sure to inform your insurer of any changes that could positively affect your premium.
Consult with an Expert
Renewing your term life insurance policy once it reaches the end of term doesn’t have to be a daunting task, even when faced with a rate increase. By understanding the factors contributing to the increase, considering policy adjustments, and staying proactive about your health, you can easily manage the renewal process. Our team is here to support you every step of the way, offering affordable and customizable term life insurance policy options tailored to your needs.
