Should I continue my term life policy when rates go up?


Q. I’ve had a $500,000 20-year term policy for which I paid $75 per month. It’s coming to the end of 20 years and the new cost will be more than $250 per month. Should I continue it? My kids are in college and I have another $500,000 policy that will last for longer.
— Unsure

A. The question of whether to continue a term policy that will get more expensive is an important one.

Keeping a policy when it enters the time period with higher premium fees for renewal — which by the way are likely to increase each year — is a very personal decision.

You need to consider several factors, said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

Among the questions you need to ask yourself:

Is your other $500,000 policy enough to protect your family sufficiently, including covering your children’s future college cost? Do you have other obligations that the same policy would need to protect? How much longer will that policy’s term premium guarantee last?

Whether or not you work and how much longer you work is another consideration, as is whether or not you can afford the higher premiums, he said.

Also think about whether you are insurable, Gaelick said.

“Possibly you can shop the open market and purchase a new policy which is likely to be a lower premium than the policy whose term is about to expire,” he said. “This is logical as you’d need to prove good health so rates for a new policy would be lower than one where your current insurance company knows nothing about your current health, since it’s 20 years later.”

If you are not insurable, you may want to consider keeping that policy or seeing if you have the option to convert it into a permanent plan, he said.

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This story was originally published on March 23, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.