There’s a good chance that when you first purchased your term insurance policy, you were focused on finding low-cost coverage. You were just starting a family, buying a house, building a business, and stretching your money thin due to other financial demands. So, you purchased a low-cost 20-year term policy. Now, it’s 20 years later, you still need life insurance, and you still have financial demands, but your policy’s renewal premium is significantly higher than when you first started.
This is a common situation. There are a number of reasons why your policy’s premium amount increases. The biggest reason is age. On average, a premium amount increases between 8% and 10% for every year of age. Carriers will also increase the renewal rate to expand their policy reserves, or to meet higher costs or lower investment performance.
This is especially noteworthy in today’s low-interest rate climate.
If your term insurance premium has significantly increased when it comes time to renew, you do have options. Start by getting pre-qualified for life insurance to see other policies for which you are eligible. Prequalification should give you a quote that is both competitive and reliable. You may discover that based on your age, health, and other factors, your premium renewal rate is on par with other quotes, or you may find you can obtain a different policy for much less.
As you shop around for different policies, consider a permanent life policy to avoid having to go through this ordeal again. Many term insurance policies can be converted or exchanged for a permanent life policy, including Whole Life and Universal Life, with no additional underwriting required.
Whatever you choose to do, make sure you obtain another policy before cancelling your current one. If you already have a term policy that is within two years of its renewal date, start looking into alternative policies now so you can be prepared and know your options.
If you have questions about term insurance or would like a second opinion on a life insurance quote you have received, please get in touch!