The term 10 insurance product basically is Life Insurance Canada product where the monthly premium payment will stay the same for a period of 10 years. So for example if your monthly payment is $50 it will stay at $50 for the next 10 years.
Now, what happens after 10 years is that you have what’s called renewable option, meaning that you can renew the term 10 for an additional 10 years. Of course, the renewal monthly rate would be significantly higher as you are not required to do a medical. The advantage of this of course is that regardless of your health, for example if you had cancer, diabetes, high blood pressure, or even a heart attack you would automatically be renewed without any medical and no possibility of decline. However, the renewal rate would jump up anywhere from four to six times. So if your premium was $50 a month you would be looking at paying approximately $200 monthly. If you are still healthy after the 10 Years you can always reapply to the same or another company do the medicals and get a much better rate. But remember you are taking a big risk in waiting especially if your health has changed.
In most cases, I do not recommend the term 10. It is just too short of a period of time specifically for protecting your mortgage and children. I will recommend the term 10 to protect a business loan or a credit line that you anticipate paying off in a shorter period of time. In these instances, I would probably recommend using a term 10.
The term 10 has two features, one which we’ve already discussed, which is the renewable feature. It also has what’s known as a convertible feature, and convertible simply means that up to a certain point in time, that of course depending on the insurance company, usually it’s in the range of either 75 or 85 years old. You have the ability to convert your term insurance product or a portion of it into what’s known as a permanent insurance product. Very short definition for permanent insurance is where your monthly payment will stay the same forever. It will never go up, unlike the term 10 and the coverage will stay with you for life. This convertible feature can be exercised as long as it’s before the date stated by the insurance company and will allow you to hold on to a permanent insurance for the rest of your life. Keep in mind, however, that the older you are and the older you are when you do the conversion will impact your monthly premium greatly because number one you’re buying a better product, which is more expensive, and secondly you will be older so your insurance premiums will be higher. The older you are, the more expensive the premiums because the higher the risk you are.
Why convert? Well suppose you get cancer, diabetes or ny health related issue, you may not be able to get declined if you ever reapply or you may get a rating which is a higher premium then initially quoted due to health issues that make it more difficult for you to get insured.
I hope this brief description helps. Let me know if you ever have any questions. If you have a Term 10 I would recommend reapplying for a Term 20 or 30 giving you a much safer insurance locked in at the same rate for a longer period of time.