We discussed life insurance recently, where we established how term insurance is more beneficial than regular insurance. Term insurance is affordable, predictable, and, most importantly, simple. By paying lower premiums in the early years, you can ensure your standard of living stays the same. Furthermore, you enjoy income replacement and the possibility to pay off the debt in the event of unforeseen circumstances.
At first, it is easy to opt for term insurance as the most cost-effective solution for your income needs. But you tend to find it more expensive as the years roll by. That is why Ottawa Certified Financial Planners always advise people to review their positions, especially before the term renewal date. It is also important to reassess your current needs and options at the point of renewal.
Here are a few details to reassess as your term insurance approaches renewal:
Identify your current needs
Do you have an insurance needs analysis done? If not, you should work with your Ottawa CFP as soon as possible. Considering our life constantly changes, you must factor in all that has happened since your plan’s inception. Based on your current needs, you can decide if you still need the insurance (or not). If you do, you can then determine if the coverage is enough. For example, additional coverage may be necessary if your debt profile has risen, acquired a new property, or you have started a family since the start of your initial plan.
Identify your estate goals (if any)
Your need for insurance can be temporary or permanent. For instance, reducing your mortgage debt is an excellent feat, but it means you should now consider somewhat more permanent insurance. In addition, it is never too early to think about your estate and associated issues, such as final expenses, capital gains, charitable donations, and inheritance. If these needs exist, you can opt for a partial move to permanent insurance to solve your estate issues while reapplying for a new term policy to meet the other temporary needs.
Assess the current state of your health
You can choose your existing carrier or a new one when reapplying for a new term. However, you must be ready to pay more in costs as you age. Away from that, you must understand the rules of insurance writing – the older we get, the less healthy we become. Therefore, buying life insurance can be a bit tricky. Of course, you get the best out of it when you do it sooner. There are other simple and guaranteed products specially designed for people with existing health conditions.
Waiting has a cost
Do you know what a cycle-loop is? Replacing your current coverage with another term solution is called cycle-loop. As enticing as this can be, it is just a subtle way of delaying the inevitable. You will eventually opt for a more permanent insurance solution at some point. So, postponing this move makes it more expensive in the long run.
Continually reassess your insurance needs to know the perfect time to make that switch. Of course, you can also combine both depending on the situation, relieving you of future high conversion costs.
Finally…
Term insurance is one of the best short-term insurance options out there. But renewing your term insurance must be a well-informed decision. You must consider your needs and understand your present insurance options. You must also know the different insurance underwriting guidelines. Having the right information at your disposal positions you to make the right choices. You can always consult an Ottawa Certified Financial Partner where and when you are stuck.
