A renewable term insurance policy is a term life insurance policy that includes a Clause for Renewability which allows you to extend your life insurance coverage beyond the original duration of your Policy Term.
That means, even if your health has declined since you started your original term life policy, you can renew your coverage usually on an annual basis, for a period for one year, and without having to take a doctor’s examination to find out if you qualify for your renewal life insurance policy.
You won’t have to re-qualify for a new (renewal) term policy, but your extended renewable term life insurance coverage will increase your current policy premium. That means, if you want to renew coverage, it will cost you more money – you’ll be charged a higher premium based on your age at the time you renew your life insurance policy.
What Is Renewable Term Policy?
Renewable term life plans offer you the option to extend your current life insurance coverage without having to buy a new life insurance policy.
Term insurance guarantees a death benefit is paid out to the beneficiary of your policy for a specific duration, usually 10, 15, 20 or 30 years, should you (the insured person) die during the term of coverage.
If you die during while your life insurance is In Force, your beneficiary receives the death benefit payout of your insurance policy from theinsurance carrier. If you die after the life insurance expires, your beneficiary receives nothing – the coverage ends and there is no pay out of any benefits.
When you first sign up for coverage, you can include a Renewable Clause to your insurance policy.
There may be an additional charge added to include the Renewable Clause.
Renewability allows you to keep your current life insurance beyond the original Policy Term, without having to take a health exam at time of renewal.
If you renew your Term Policy, your premiums will increase based on your current age and other factors.
How Does a Renewable Term Life Insurance Policy Work?
A renewable term clause allows you to extend your life insurance coverage even if you have developed health problems.
Life Insurers usually adjust for this increased risk by raising your premiums at renewal; however, your policy’s death benefit will not be reduced at renewal, unless you request the coverage amount to be lowered.
You can’t be turned down for Renewal Coverage if your insurance policy includes a Renewable Term Clause.
Many term life insurance policies let you keep renewing your life insurance coverage; however, your cost of coverage (premiums) will increase with each renewal of your policy.
Annual Renewable Term Policy
A Renewable Term Clause is different than an Annual Renewable Term Policy.
An Annual Renewable Term Policy offers an initial one-year life insurance policy, and the option for you to extend your life insurance coverage each year (annually) at expiration of your current policy.
You can renew your coverage each year up to a certain age with annual renewable term plans.
Annual renewable term policies offer guaranteed insurability for a certain time, along with a level death benefit.
Annual renewable term premiums are increased each year at renewal, as your longevity (risk of dying) increases each year.
Convertible Term Life Insurance
A renewable term insurance policy differs fromconvertible term life plans.
A Convertible Term Policy allows you to convert your current term life insurance coverage intopermanent life insurance, which lasts for your entire lifetime.
Advantages of Renewable Term Life Policies
Renewable term insurance may be right for you and your family if you still have financial obligations when your current term life insurance policy expires, such as, dependent children, a mortgage on your home, or other family members who still rely on you for some means of financial support.
Renewable Term Life Policy Advantages
Flexibility
If your financial obligations continue past your current policy term, choosing to renew your policy offers the flexibility needed to give you peace of mind knowing you are still able to provide the financial security your family needs.
Affordability
Over the short term, it may be cheaper to renew your current term coverage than to purchase a new life insurance policy or convert your term policy into a permanent life insurance protection.
Convenience
It’s easier to renew a term policy instead of applying for a new policy and going through the underwriting proves and medical examination, if you utilize the renewable term clause in your policy.
No New Doctor Exam
Renewable term insurance exempts you from answering additional medical questions or having to take a new health checkup. This can be helpful if your health has changed since you bought your term life insurance.
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