What happens when your term ends

First, what does not happen

You do not get your premiums back. A standard term policy has no cash value and no maturity payment. The coverage was the product, you had it for the whole term, and at the end it stops. Return of premium versions exist and are a different, more expensive product.

The policy also does not usually vanish silently on the anniversary. Most Canadian term contracts convert automatically into their renewal form, which means the coverage continues at the new price unless you cancel it. That matters: people who assume the policy simply ended sometimes discover months of much larger premiums have come out of their account.

The four options

Let it renew. The contract lets you continue without answering a single medical question. The price resets to your attained age and normally rises steeply, often by a multiple rather than a percentage. After the first renewal, many policies then reprice every year, so the cost climbs from there. Full detail in renewing term coverage.

This is the right choice in one specific situation: your health has changed enough that new coverage is not realistic, and you still need the protection. In that case the renewal price is the price of coverage you could not otherwise obtain, and it is worth paying.

Convert it. If the conversion right is still alive, you can exchange some or all of the coverage for permanent insurance with the same insurer, without new medical evidence. Permanent coverage costs more than the original term did, but the premium then stays level for life rather than climbing every year.

The problem is timing. Conversion deadlines usually arrive before the end of the term, commonly at a set age such as 65 or 70, or a set number of years before expiry. It is entirely possible to hold a policy that still has four years to run and no conversion right left. Check the contract, not the assumption.

Apply for a new policy. If you are in reasonable health, this is usually the cheapest route. A fresh term policy at your current age costs more than the one you bought twenty years ago, and it is normally far less than the renewal price on the old one, because renewal pricing assumes the people renewing are the ones who could not pass underwriting.

The requirement is that you can pass underwriting. That is not knowable in advance, which is why you apply for the new policy before cancelling the old one. Never surrender existing coverage until the replacement is issued and in force.

Let it end. Sometimes the honest answer is that the job is done. The mortgage is paid, the children are working, and the estate could cover its own costs. Continuing to pay for a large death benefit because you have always had one is not automatically sensible. Whether coverage still earns its premium is a real question, covered in coverage in retirement.

What to do, and when

Twelve months out. Find the policy document and confirm three things: the exact expiry date, the renewal premium, and whether the conversion right is still available and until when.

Nine months out. Redo the coverage calculation from scratch. What is left on the mortgage, who still depends on you, what the estate would owe. The answer is often a smaller number than twenty years ago, and sometimes it is larger.

Six months out. If you need continuing coverage, apply for the new policy. Underwriting takes weeks and can take longer if your doctor’s records are needed, so this is not a job for the final month.

When the new policy is issued and in force. Cancel the old one, and not before.

The trap

The common failure is finding out about all of this in the month the price changes. By then the conversion deadline has usually passed, there is no time to underwrite a new application, and the only remaining options are paying the renewal price or having no coverage.

If you hold a term policy, the expiry date and the conversion deadline are the two dates worth writing down now.

If your health has changed

Reapplying may not be realistic, and that is exactly what the renewal and conversion rights are for. They exist precisely because insurers know some people will be uninsurable by the end of the term.

Renewal keeps the coverage at a rising price. Conversion, where still available, keeps it at a level price for life. Between the two, conversion is usually the better outcome for someone whose health has changed, which is another reason to check that deadline early. Where neither is available and new underwriting is difficult, simplified issue and guaranteed issue products may still be an option, at smaller amounts.