Term Life insurance Canada- would conversion privilege go away?

Term Life insurance Canada- would conversion privilege go away?

With tremendous transformations in the life Insurance firms in the last 12 Months, historical low Insurance rates and alterations in the accounting provisions have mounted pressure on insurance firms.

As an outcome, insurance rates have been raised by 20% to 30% on permanent life insurance such as term 100 life insurance, universal life level cost of Insurance policies and non-participating and participating whole life insurance. Some firms have also eliminated these products from shelves.

The convertible term life insurance policy could be the next product bearing pressure .The premiums have gone down by a 35% however the conversion provisions is under observation.

The conversion provisions cost huge sums to the firm whereby life insurance policy allows the insured to convert, without a medical, to a permanent life insurance policy.

People who convert their term Life insurance into a permanent plan are most unlikely to allow a policy lapse. Mostly people with poor health convert their term policies .  In such cases the insurance company faces a much greater likelihood of paying out a claim on these policies in the short-term. The insurance broker is also paid full commission on these policies.

When accumulating these factors ,its understandable why insurance firms are considering convertibility feature on term plan. The insurance advisor and consumer benefit from this however it exercises a financial handicap on the profitability  of a Canadian insurance carrier .

What we can foresee in the future, insurance companies may turn to, non-convertible term life insurance policies, or non-convertible term life insurance policies with a small paid-up feature at the end of the term. Another option is to offer a convertible term policy where only part of the face amount is convertible.

With these advancements and benefits in the pipeline the next 12 months look favourably interesting for the insurance industry. 

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