When life insurance policy rates increase, clients get “Sticker Shock”!
Receiving a renewal notice for your life insurance policy can be discouraging. Especially when you see that the rates have significantly increased, sometimes by two, three, or even five times.
Rate hikes at renewal are common with term coverage. Insurers keep premiums steady for a specified period, assuming you will be younger and healthier then.
In today’s post, we discuss how to mitigate or even avoid the impact of an upcoming rate increase. By following these practical strategies, you can protect your family while significantly reducing costs over the next decade.
Life insurance rates vary significantly. Average monthly premiums range from as low as $17 to well over $300 per month. The reason for such a wide gap? Life insurance rates are quoted based on your coverage requirements and lifestyle, and no two individuals have exactly the same needs.
Your complete guide to life insurance in Canada, MoneySense.ca
Track Your Renewal Clock
Track when your level-term period ends and mark it on your calendar three years in advance. Remember, most Canadian term contracts renew at option, with rates resetting annually, which can be two to five times higher than your current rate.
By monitoring your renewal date, you’ll gain negotiating power, allowing you to shop for new coverage well before the insurer sends you a “renewal shock” letter.
Understand Why Life Insurance Policy Rates Rise
Insurers use actuarial tables; as you age, the statistical chance of a claim grows. Renewal pricing reflects your current age, not the age you were at the time of purchase, so every birthday matters.
Health changes compound the cost: new medications, elevated blood pressure, or a recent procedure all raise perceived risk.
Inflation in the medical sector also nudges life insurance policy rates higher: every dollar in claims now costs more to pay out than it did a decade ago.
Translation: renewal rates aren’t arbitrary—they’re rooted in real-world data. Your mission is to re-shop the market before those increasing risk factors get priced in.
Shop Online Way Before Renewal
Comparing quotes online is the single fastest route to better rates.
Independent platforms scan 20+ carriers in seconds, revealing surprisingly wide spreads; one insurer might quote $82 per month, while another, viewing the same profile, quotes $64.
Gather quotes at least 12–18 months before the end of your term. If you like the numbers, you’ll have plenty of time to complete medicals and underwriting.
Online comparisons enable you to determine whether requalifying saves money or if keeping the existing contract is more beneficial. There is no guesswork involved.
Beat “Age Nearest” Pricing By Applying Early
Insurers determine pricing based on your insurance age, often referred to as “age nearest,” which is the age you will be closest to on the application date.
For example, if you turn 51 in two months, you are priced as 51 rather than 50. Since base rates typically increase by about 8–12% per year, your final premiums could rise by 10% as soon as you reach that “nearest” age threshold.
To avoid this increase, it’s advisable to apply three to four months before your next half-birthday. Locking in your policy while you are technically a year younger can save you money now and continue to save you annually through the new term.
Many Canadians overlook this detail and end up paying thousands more over the life of their policy.
Get a Full Medical Exam
Simplified-issue (no-medical) insurance products may seem convenient, but they often come with higher base costs, typically 25–50% more than fully underwritten policies. If you are in reasonably good health, consider opting for a paramedical visit. This generally involves scheduling a checkup with a nurse, who collects blood and urine samples, measures your blood pressure, and conducts a brief interview.
Good results can earn you a spot in Preferred or Super-Preferred classes, which substantially reduce premiums.
Even modest metrics, such as slightly lower cholesterol, a solid BMI, and well-controlled blood pressure, can shift you down a rating class and reduce your monthly premium by $15–$40 on a mid-sized policy. Over 20 years, that amounts to significant savings.
Prep for the Exam and Improve Your Quoting Class
To prepare for your blood draw, follow these guidelines for better results:
- Hydrate Thoroughly: Drink plenty of water for at least 48 hours before the exam. Proper hydration makes blood drawing easier and supports normal kidney function.
- Fast for 8-12 Hours: If possible, avoid eating for 8 to 12 hours before the test. Fasting can help lower triglycerides and blood sugar levels, which may improve your results.
- Avoid Caffeine and Alcohol: Refrain from consuming caffeine and alcohol for at least 24 hours before the test, as both substances can elevate blood pressure.
- Skip High-Sodium Foods: The day before your test, avoid foods high in sodium, as they can increase blood pressure and potentially impact your lab results.
- Postpone if You’re Sick: If you are ill, consider rescheduling your test. Even something minor, such as a head cold, can trigger inflammatory markers that may lead to concerning test results.
These adjustments may not drastically change your health profile overnight, but they can be the key to improving your assessment, which is vital for life insurance policy rates.
Replace, Then Cancel: The “Clean Slate” Method
Instead of allowing your old policy to renew at inflated rates automatically, apply for a brand-new term policy from scratch. If you are approved for the new policy, keep both the old and new policies active until the new one takes effect, and then cancel the old policy.
Due to the more competitive market and shifts in interest rates, new policies often cost 40% to 60% less than renewing an older policy.
**Key point:** Never cancel the old policy until the new one has been fully issued and paid to ensure continuity of coverage.
Time-Sensitive Opportunities: Quit Smoking or Lose Weight
Smoking surcharges significantly increase your premiums, potentially doubling or tripling them. Most insurance companies will reclassify you as a non-smoker after you have been tobacco-free for 12 consecutive months.
Making the change from “Smoker Standard” to “Non-Smoker Standard” can result in savings of $500 to $2,000 per year, depending on the level of coverage and the term length.
Similar savings can be achieved if you lose enough weight to move to a lower Body Mass Index (BMI) tier. If you maintain your weight loss for 12 months, you may qualify for better insurance classes.
Taking these health steps before shopping for policy renewals maximizes the likelihood that your new life insurance rates reflect your healthier lifestyle.
Bundle Coverage or Layer Policies
Combining different policies, such as a 10-year mortgage term and a 20-year income replacement term, can be more cost-effective overall compared to a single large 20-year policy. As your debt decreases or your children grow up, the shorter policy layers expire, while still maintaining the coverage you need (without paying for unnecessary premiums).
When it’s time to reevaluate your options, you may be offered a smaller face amount, which can significantly lower your rates.
Ask for a Broker Cover Letter
Underwriters are people, too, and a well-written summary from your broker can make a difference in borderline cases. Emphasize your exercise routine, healthy diet, and stable career.
If your family has a history of longevity, such as parents or grandparents who lived into their 90s, ask your broker to highlight this information.
Underwriters tend to be cautious, so providing extra context can help elevate your file to a better tier, potentially reducing your life insurance policy rates even further.
Reevaluate Your Coverage Needs
Do you still need a $1 million death benefit? If your mortgage is mostly paid off and your children are nearly independent, you might not need such a large coverage amount.
Reducing the face value by even 25% can save you hundreds of dollars on annual premiums.
To accurately assess your coverage needs, utilize a current needs analysis tool. Start by adding up your debts, expected future tuition costs, and the amount of income you would need to replace. Next, subtract any savings, existing assets, and your spouse’s income from this total. The final amount reveals the coverage gap that requires insurance, helping you avoid paying for unnecessary protection.
Keep an Eye on Interest-Rate Environment
Insurers invest your premiums primarily in bonds. Rising interest rates can improve portfolio yields, allowing carriers to price new policies more competitively.
If rates are trending upward, it’s an opportune moment to seek new quotes; you might capture long-term savings before carriers adjust again.
The Three-Year Renewal Checklist
- 36 months out: Confirm your contract’s renewal date and add reminders to your diary.
- 24 months out: Improve your lifestyle by starting a no-smoking streak or a weight loss plan.
- 18 months out: Run basic online quotes to gauge potential savings.
- 12 months out: Engage an independent broker; schedule medical; gather medical records if needed.
- 3–6 months out: Compare final offers, accept the best policy, then activate the new coverage.
- 1 month out: Cancel the old policy once the new certificate is received and the premiums have been paid.
Following this checklist ensures you never again face a surprise hike in life insurance policy rates without a Plan B.
Conclusion: Rate Hikes Don’t Have to Hurt
Renewal increases are unavoidable, but overpaying is not.
Understanding the reasons for rate increases, staying aware of your calendar, and taking proactive measures can help you save thousands on future premiums. To do this, consider shopping early, applying for coverage before your age changes, being proactive about your medical exam, improving your health, and layering coverage.
At TermCanada.com, we help Canadians implement these strategies every day. With a single, no-obligation quote request, you receive a transparent overview of today’s best life insurance policy rates, along with insight on how each strategy can benefit you.
Don’t let unexpected renewal increases disrupt your finances. Start your comparison today to provide your family with the security they deserve, all while maintaining a budget that works for you.
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