Matt Hands, VP, Insurance and MoneySense
Renewable and convertible life insurance policies are both types of term life insurance. Renewing a policy increases your coverage for another term while converting it will turn it into a whole life insurance policy. Policies can be just renewable, just convertible, or both renewable and convertible.
Most term life insurance policies these days are both renewable and convertible, but that's not always the case. To be sure you'll want to check the fine print. As with all things, you'll get the best value for money on renewable and convertible life insurance if you shop around, and compare quotes for different life insurance products. We make that easy, getting the process started in just minutes.
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Term life insurance is what you might call ‘basic’ life insurance. For a yearly premium, your life insurance company promises to pay your chosen benefit to your beneficiaries if you die within a given period of time, the term. Terms are typically between 5 and 30 years, in multiples of 5 or 10. As you get older and your risk of death within the term increases, the cost of term life insurance increases.
These are just the basics - if you need to know more, read our article on term life insurance.
If your term life insurance policy is renewable, it means you have the option of continuing your coverage for another term, once your current term ends. If you were to take out a 10 year policy at age 20, for example, you’d have the option of renewing it when it lapses at age 30. It would then cover you until age 40. Terms are only renewable to a certain age, set by the life insurance company, typically around 80 years.
When you renew a life insurance policy, you generally don’t need to requalify, a process that normally requires a new medical exam or questionnaire. Because this opens the life insurance company to additional risk, your premiums will generally increase a lot when you renew. If you’re still healthy at the time of renewal, requalifying is generally a good idea, because it will reduce your risk factor, meaning your premiums will be lower.
The big selling point of a renewable term policy is that if you were to get sick during your initial term, you would still be able to renew your policy, even if your new situation might render you uninsurable (eg. if you were to be diagnosed with a terminal illness).
A convertible life insurance policy is one that you can turn into a permanent or whole life insurance policy, either at the end of your term, or at certain anniversaries (eg. every 5 years). As with renewable policies, you can do this without requalifying, which is a good choice if your health has deteriorated. You also have the choice to requalify, which can reduce your premiums if you’re still healthy.
Whole life insurance lasts for your whole life, and is a great product for lots of people. However, it’s a more expensive option than term life insurance, at least in the early years of the policy. By taking out a convertible term policy, you have the option to convert to whole coverage in the future, when you can afford it. To learn more about these policies, check out our article on whole life insurance.
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Whether you're thinking about a convertible or renewable policy, you first need to find a base policy that suits you. The best way to do that is to compare quotes - we can help.
Renewable and convertible life insurance policies both offer more flexibility than a normal term life insurance policy. They get you covered today for a reasonable cost, but give you the option to change your coverage if your circumstances change, for better or worse. Because life insurance is cheaper when you’re young, this can be very important!
The downside of renewable and convertible policies is that they're more expensive than term policies that don't offer renewals or conversions. Extra flexibility for you means higher risk for your life insurance company, so they charge a higher premium to make up for it.
That said, there aren't many non-renewable term life insurance policies left in the Canadian market. Most term products are also convertible, though it's not quite as common as the ability to renew your coverage. As with all things concerning life insurance, you need to compare your alternatives and decide what's right for you.
All life insurance companies that offer term life insurance will offer a renewable life insurance option. Because term life insurance is offered by every provider, it follows that you’ll be able to buy renewable life insurance from any company. Convertible life insurance is a little more complicated. If a company offers both term and whole life insurance, they’ll almost certainly offer a convertible option. What you need to consider is whether you will want a permanent policy offered by that company, as there are major differences between providers when it comes to permanent life insurance. Canada’s big three life insurance companies (Sun Life, Great West Life, and Manulife) offer the most flexible permanent (whole) policies on the market, including universal life insurance. Some bank-owned life insurance providers offer basic permanent policies, but they’re generally less sophisticated than the stand-alone companies.
Ratehub.ca is not affiliated or otherwise associated with Hub International Canada.
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Matt Hands, Business Director of Insurance
With 6+ years of experience at Ratehub.ca, Matt’s focus has been on growing its newest business unit, Insurance. He is a thought leader and a valuable resource to respected publications across Canada. read full bio
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