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Should You Renew Your Life Insurance Policy?

Written by: Bonnie Stinson
Insurance Writer
Edited by: Jessica Barrett
Content Marketing Manager
Updated
September 13, 2024

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Key Takeaways
  • You can renew most life insurance policies in Canada at the end of your term.
  • Renewals sometimes mean higher premiums than you’d pay with a new, underwritten term policy.
  • Renewing your policy might be a good idea if you’ve developed health issues that could prevent you from getting a new one.
  • When your term policy ends, you should assess your options to find the most affordable one for your situation.

What is a life insurance renewal?

Life insurance renewal is when you renew your policy when your term life insurance ends to extend your coverage. This feature is also called “guaranteed renewability.” It’s available with most term insurance policies in Canada, although renewal may or may not be automatic.

Many term life insurance renewals are annual, but you may be able to renew your policy for five or even 10 years, depending on your provider. Term life insurance policies with PolicyMe include renewability for one year at a time after your term ends so that you can decide whether to keep your life insurance coverage based on your changing needs and budget.

Pros and cons of life insurance renewal

  • Continued coverage without a new medical exam
  • Shorter-term coverage (typically a year at a time) to accommodate your needs
  • Simple process that avoids the hassle of applying for a new policy
  • Higher premiums since renewal rates are based on your current age
  • Possibility of unintended lapse if your coverage doesn’t renew automatically each year

Should you renew your term life insurance policy?

You may want to consider renewing your term life insurance policy if:

  • You still need coverage, but only for a few more years
  • Your health has declined and you may not qualify for a new policy
  • You want to avoid the application and underwriting process for a new policy

On the other hand, renewal might not be the best choice if:

  • You’re still in good health and could secure a new policy at reasonable rates
  • You want stable premiums and longer-term coverage
  • Your coverage needs have changed
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Know your options

PolicyMe offers guaranteed yearly renewals on term life insurance policies—but a renewal isn’t your only choice if you still need life insurance when your term policy expires.

Here’s how to decide what’s right for you: 

1. Know your current policy’s expiry date. The renewal process may be automatic, in which case, you’ll want to do your research well before the renewal occurs.

2. Consider your life insurance needs today. Use an insurance estimator tool if you’re not sure about your current needs. Your original term policy may have provided 20 years of coverage, but if your income has changed and your kids are financially independent, you could probably decrease your coverage.

3. Get quotes for a new policy. Shop around with Canada’s best life insurance providers and get life insurance quotes based on your current needs. A new policy with a smaller death benefit might be more cost-effective and better suited to your current situation than an automatic renewal—or it might not.

4. Cancel your renewal if you don’t need it. Some policies automatically renew each year once your term is up, so you need to contact your life insurance company to advise of your cancellation.

For some Canadians, renewing a term life insurance policy might make sense. For others, though, it can be far more affordable to apply for a new policy with underwriting. Explore your options to make an informed decision that’s right for you.

Alternatives to life insurance renewal

If you still need coverage, there are two alternatives to life insurance renewal: get a new term policy or convert to a permanent life insurance policy.
New term policy
Convert to permanent insurance
Pros
  • Premiums can be lower than a renewal
  • New term length and death benefit tailored to current needs
  • No medical exam required
  • Lifelong coverage with cash value
Cons
  • May require medical exam
  • Coverage may be refused if health has declined
  • Premiums may be higher than both renewal and new term policy
  • Less flexibility in adjusting coverage

If you’re still healthy, a new term policy is probably the best choice. While renewal is convenient, it’s rarely the most affordable option. 

FAQ: Life insurance renewal

Bonnie Stinson is an insurance writer and researcher in Toronto with a decade of experience producing helpful, accurate content for Canadians. They have published resources for some of Canada's most innovative and consumer-trusted companies in the health, legal, and fintech sectors. 

Bonnie Stinson is an insurance writer and researcher in Toronto with a decade of experience producing helpful, accurate content for Canadians. They have published resources for some of Canada's most innovative and consumer-trusted companies in the health, legal, and fintech sectors. 

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