Do you have a term life insurance policy you no longer want? Many people purchase life insurance but then make other arrangements in the future – perhaps you have changed jobs, and your new employer offers life insurance, or you’ve gotten married and purchased new policies with your spouse.
Whatever the reason, many people find they have a term life insurance policy they no longer want.
But what are your options? Can you sell your term life insurance policy in Canada? And if not, what else can you do with it?
Read on to find out more about disposing of your term life insurance policy in Canada, then contact us to learn more.
Can I Sell my Term Life Insurance Policy in Canada?
The simple answer is no; you may not sell your term life insurance policy in Canada. This is not a valid or legal option for disposing of a term life insurance policy you no longer want to own. You may wish to consider other options if you no longer want your term life insurance policy.
Alternatives to Selling
There are alternatives to selling your term life insurance policy you may wish to consider. Your agent can help you learn more about these alternatives if you wish to pursue them.
Transferring Your Policy to Others
Instead of selling your term life insurance policy, you could decide to transfer the ownership of the policy to another person. While selling the policy is not legal, transferring the policyholder to another person is possible – assuming the person taking ownership has an insurable interest in the insured person’s life.
Having an insurable interest in another person’s life means you expect to suffer financial losses should that person die. This could be a spouse, child, grandchild, or another dependent. For example, suppose there is an individual with an insurable interest. In that case, they can be transferred ownership of the term life insurance policy – and at that time, they take overpaying the premiums and be named the beneficiary of the policy.
The Ontario Insurance Law section 179 defines a person who could have an insurable interest in the insured person’s life as:
- Child or grandchild
- Spouse
- A person depending on the insured for support or education
- An employee
- A person with a financial interest
Convert Your Policy From Term Life Insurance to Permanent Life Insurance
Many term life insurance policies are convertible to permanent policies. Check your policy or ask your insurance company or agent if your policy can be converted. If it is, you could convert your policy to a permanent one, which gives you more options.
With a permanent policy, it will accrue cash value over time, which you may be able to withdraw or borrow against. This increases the value of your policy and gives you opportunities to use some of the funds from the policy as you need during your lifetime.
You could also consider selling a permanent policy through a viatical life settlement in the future if your situation changed and you qualified for a life settlement. There are currently only four provinces in Canada where life settlements are possible, however – New Brunswick, Nova Scotia, Quebec, and Saskatchewan.
Let Your Policy end
With a term life insurance policy, you buy coverage for a certain period of time – the policy term. This may be five, ten, or twenty years or another increment decided when purchasing the policy. When this time ends, so does your coverage unless you take other action, like converting it to a permanent policy or renewing the term policy for another term.
If you no longer want to keep this term life insurance policy, you can let it end at the end of the policy term if you are approaching it. That way, you retain coverage for the full period of your policy as you intended when you purchased it but do not need to keep it longer than the initial term.
This option equates to taking no action – but if you have a term life insurance policy that is close to its endpoint, you have been paying premiums for the coverage for the entirety of the policy term until now. If you continue until the end of the policy term, you will still have the coverage you initially purchased through the term date.
Renew the Policy or Extend the Term
If you are on the fence about selling your term life insurance policy, but it is ending soon, you may be able to renew it or extend the term date, depending on your carrier and what your policy allows. This could give you more time to consider other options of what to do with your term policy.
Suppose instead you let your term life insurance policy lapse, and later you decide you want to purchase another life insurance policy. In that case, you may need to retake the medical exam and face higher premiums or possibly a denial of coverage. Because of this risk, renewing or extending the term of your current policy can be a sound option depending on your circumstances and plans.
Final Thoughts
If you purchased a term life insurance policy but no longer want it, think carefully about your decision. You initially purchased it for a reason, and while those reasons may have changed, make sure you have thought through your decision.
While you cannot sell your term life insurance policy in Canada, you could transfer it to someone else, like a family member who has an insurable interest in your life. In other words, someone who is relying on you for support could take over your policy through a transfer.
You could also convert your policy to a permanent one to accrue cash value or sell it through a viatical settlement, if applicable.
Whatever option you decide for your term life insurance policy, talk with your agent or advisor and your family to make the best decision to align with your financial plan.
How do I Learn More?
To learn more about options for your term life insurance policy in Canada, contact the experts at Hometown Life Insurance. Our licensed experts will be happy to answer any questions you have.
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