Toronto-based Manulife Financial Corp. is reducing premiums on certain term life insurance policies and tweaking its renewal rate structure for 10-year term policies, the company announced on Wednesday.
The life insurer revealed that for traditional term-10 policies with coverage of $1 million and more dated on or after Sept. 23, 2017, rates would be reduced by 5%.
The reduction is the latest in a recent string of cuts to term life premiums by insurers, says Asher Tward, vice president of estate planning with TriDelta Financial Partners Inc. in Toronto.
“A couple of companies have been slashing term rates,” he says. “It’s not a surprise to me, because interest rates are on the upturn, and bond yields are a little better.”
Manulife also announced a new yearly-renewable term (YRT) renewal rate structure for term-10 policies. Under the new structure, clients with term-10 coverage who renew their policy following the initial 10-year term will see their rates increase annually starting at the 10th coverage anniversary, rather than increasing every 10 years until expiry, as they do under the conventional structure.
The change means that upon renewal of a policy, premiums won’t increase as significantly in the first couple of years as they would under the conventional structure. That lets advisors “ease renewal sticker shock” for clients, Manulife says in its announcement.
“In the past, simply letting the coverage renew wasn’t a viable option because of high renewal rates,” Manulife says in the announcement. “That’s no longer the case.”
The insurer suggests that for clients who want to maintain their coverage for a few more years beyond the initial 10-year term, without converting their policy or applying for a new one, the new structure makes renewing for the short term more affordable.
That means fewer clients will rush to replace their policy with a new one — or cancel their coverage altogether — when the initial term has ended, Tward says.
“People won’t move as quickly to another term-10 product,” he says. “It’s a consumer-friendly move, because there are many people who are at the end of their 10-year cycle, and [the renewal rate] is so prohibitive.”
For clients who might not qualify for a new life insurance policy due to health issues, the option of extending their coverage would likely be particularly appealing, Tward says.
“It buys them a couple more years of coverage that they wouldn’t otherwise get,” he says.
The new structure applies to traditional term-10 policies dated on or after Sept. 23, 2017. At launch, this change will apply to standalone policies only, and not term insurance riders or coverage added to existing non-traditional term policies, Manulife says.
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