Going with either term life insurance or whole life insurance is a very personal decision. It depends on a variety of factors — your financial status, your financial planning needs, your age, and much more.
The good news is that once you make a life insurance decision, you are never stuck with it. Yes, there are benefits of sticking with term life insurance, and there are different types of benefits for staying with whole life.
But whether you are looking for more coverage or your financial needs evolve over time, it is always possible to convert your term life insurance over to whole life.
Let’s take a closer look at who it all works.
Insurance providers in Canada commonly make converting your life insurance a stress-free experience.
The first step is to personally review the language of your policy or have an investment advisor walk you through the fine print. Some policies may not allow for term-to-life conversion and some have restrictions on when you are eligible to convert.
While many Canadian insurance providers may let you convert at any time while some have time-frame restrictions. You may be able to convert only within the first few years of your term life insurance policy.
For example, one of the term life policies at Canada Life lets you convert to a whole life policy any time after you’ve held the term policy for one year. In addition, those who have term life insurance at Canada Life who are 69 or over can convert to a whole plan within the first two years of the term policy.
In general, your premiums will likely go up when you convert — whole life insurance is almost always more expensive than term life — but your premiums will also reflect the extent of whole life insurance coverage you want.
Some providers in Canada do not require you to reapply for coverage or answer health questions. Whether you have a new occupation since you got the term insurance generally does not impact whether you can convert.
After reviewing your policy to see if you can convert from term to whole life, simply get in touch with your insurance company or your personal insurance agent/financial advisor to request a conversion.
Just as you won’t likely have to answer more health questions, you probably won’t have to go through the underwriting process again in Canada. Each insurance provider works slightly differently, but to convert you may just have to fill out a questionnaire about the conversion and wait a few days to take advantage of your new whole life policy.
There usually aren’t fees associated with converting from term to whole life within your insurance provider.
What will cost you more is the monthly or yearly premium. Term life is comparatively inexpensive since it is active for set amounts of time (usually 10 or 20 years) and provides basic coverage for you and your dependents.
Whole life insurance lasts a lifetime: premiums are set and do not change whether you have the policy for 5 years or 50 years. That’s a big reason why whole life insurance premiums can cost up to 5 or 15 times the amount of term life premiums.
Another cost rise factor: the different nature of whole life policies. Unlike term life, many whole life policies act as investments with a cash value that accumulates during the life of the policy.
It’s not all bad news. Depending on the insurance company, you may be credited for the amount you’ve put into your term life policy and that may apply to your whole life policy. Credits often depend on how early you convert.
Why go with whole life over term life? There may be major life changes that have changed your financial approach and your need for a more detailed policy. Financial situations always change over time, and the place you were in when you got a term life policy may differ drastically from where you are today.
One thing that may differ is your health, which is a major factor in determining an individual’s policy premium. If you end a term life policy and then re-sign for a new set term, the cost is often very high.
Sometimes, it’s more beneficial just to convert to a whole life policy, especially if estate planning and quickly setting up death benefit beneficiaries is more on your mind.
If you’re in a better financial place and need a plan that can specifically address protecting your specific assets or designating beneficiaries for specific assets, going with whole life insurance may be a better fit for you.
Additionally, if you’re looking for additional avenues to grow wealth or leave a fruitful legacy for family or other beneficiaries, whole life policies better address those needs.
And since premium rates do not change with whole life, and because it accumulates cash value and ensures tax-free death benefits, whole life insurance may be preferred as you age or if financial times are more uncertain.
You never have to make important life insurance decisions on your own. If you’re interested in converting from term life to whole, have questions or concerns, or just need some assistance in tailoring your new whole life policy to fit your specific needs, it may help to reach out to an insurance agent who also specializes in financial advising.
One such financial professional is Sim Gakhar, who is part of the dedicated and knowledgeable HUB Financial team. Gakhar has worked with clients throughout Ontario, Canada, for over a decade, especially when it comes to converting from term life to whole life, and has a 99% client retention rate
It all starts with an initial consultation. Simply give Gakhar a call (647-889-7290) or send her an email at [email protected]. Gakhar is looking forward to helping you today with all of your life insurance needs.
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