📈 The "Shock" Letter
You purchased a "Term 10" life insurance policy a decade ago. It was affordable—perhaps $30 a month. You just received the renewal notice, and your jaw drops. The new premium is $150 a month. Did they make a mistake? No. This is the "Renewal Trap" embedded in almost every Term Life contract in Canada.
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| Bought a 10-Year Term Policy? |
Term Life Insurance provides excellent protection at a low cost, but it is structured to be temporary.
Most Canadians mistakenly believe the "Renewal" price is based solely on their attained age (e.g., moving from age 30 to 40). It is not. It is calculated based on a punitive "Claims Experience" rate that assumes only those with declining health will choose to renew automatically.
Why Does It Jump 400%?
Insurers know that healthy individuals will shop the market for a new, cheaper policy. Who stays and pays the inflated renewal price? Typically, those who have become uninsurable (e.g., diagnosed with cancer or heart disease).
🚫 Renewal vs. Re-applying:
• Automatic Renewal: No medical questions asked. Guaranteed coverage. Extremely Expensive.
• Re-applying (New Policy): You answer medical questions and undergo a nurse visit. If you are still healthy, the market rate is significantly lower than the renewal rate.
What If My Health Has Declined?
"But I had a heart attack last year. I cannot pass a new medical exam!"
In this scenario, do NOT accept the automatic renewal. Instead, exercise your "Conversion Option" before the age limit (typically age 70 or 75).
Conversion allows you to exchange your Term policy for a Permanent (Whole Life or Universal Life) policy without providing medical evidence. While more expensive than a new Term policy, it is often cheaper than the renewal rate in the long run and secures coverage for life.
Chief Editor’s Verdict
Insurance companies profit when you passively accept the renewal letter and pay the spiked premium.
Check your policy's renewal date today. If you are within 12 months of expiry, contact a broker immediately. If you are healthy, re-apply. If your health has changed, convert. The only wrong move is doing nothing.
🇨🇦 Essential Insurance Guides for Canadians
Don't sign a new contract without reading these first:
👉 Braces Cost $7,000? Why Your Health Card Pays $0 👉 Smoker? Here is the 2026 Life Insurance Price Reality 👉 One Mistake, One Lawsuit: The Liability Insurance Guide 👉 DUI or Accidents? How to Get Insured When Everyone Says 'NO' 👉 Denied Insurance? The 'No Medical' Policy for SeniorsThe information in this article is for educational purposes only and does not constitute financial or insurance advice. Policy terms, including conversion privileges and age limits (often 65, 70, or 75), vary by insurance carrier (e.g., Manulife, Sun Life, Canada Life). Renewal rates are subject to the specific terms of your contract. Always review your policy documents and consult with a licensed life insurance agent in your province before making changes to your coverage.
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