The Key To Renewable Term Life Insurance
If you have spent any time researching life insurance policies or more specifically term life insurance policies, you have undoubtedly come across renewable term life insurance. Renewable term life insurance is simply a term life insurance product in which you have the option to "renew" the policy after the term date concludes. This may seem an insignificant distinction from other insurance products, but the details of this feature are what make the product interesting.
With a renewable term life insurance contract, you are given the ability to resume the contract terms beyond the period that was originally established. For instance, if you purchased a 10 year renewable term insurance contract, you will be able to renew the contract for an additional 10 years after the first ten are concluded.
Another variation of this is an annual renewable term life insurance contract. As it states, this insurance product will renew the contract on an annual basis. Each year that the term contract concludes or expires, the policy owner will have the option to continue the product for another year.
What Makes Renewable Term Life Insurance Standout?
There are a couple of features with a renewable term insurance contract that really make the policy standout. The first of which is the option to extend the contract period beyond the original termination date. This has the advantage of allowing you to continue you coverage, especially if it ends up being for longer than you had originally anticipated.
What we haven't yet mentioned is the fact that when you renew the contract, you do not have to still be insurable. Otherwise why wouldn’t you just purchase a new product and not worry about renewing it? The real advantage to the renewable term life insurance policy is that you do not need further medical exams or proof of insurability to continue your coverage. This can be very advantageous if you health has slipped during the contract period.
It should be noted that like most other types of life insurance, you will still have to initially qualify for this type of insurance. Before the insurance company will accept your application, you will need a medical examination and provide medical history. Assuming everything checks out, this initial medical exam is the only time you will have to provide proof of insurability.
What To Watch For With Renewable Term Insurance?
The thing that you really need to pay attention to when you purchase a renewable term life insurance contract is the premium payments. Just because you can renew your contract, doesn't automatically mean that you should renew your contract.
As with other term insurance products, the premium is the big variable. When looking at the difference between term and whole life insurance the major variable ends up being the premium payment. The renewable term insurance payment will typically be lower than whole life insurance premiums in the first couple of years.
The catch with term insurance rates is that they will continue to increase year to year. Where whole life insurance premiums start higher, they are fixed for the course of the contract. After several years, the premium switches to where it is now lower than the rate you would get for an equivalent term policy.
In the course of a renewable term life insurance contract, the premium will continue to rise year to year. If your situation warrants it, you may consider analyzing the possibility of whole life insurance rather than term life. The initial year's cost will be greater, but the overall cost tends to even out (assuming you live beyond around the seventh year).
The other option that you have is to purchase a convertible term life insurance policy. This type of contract, rather than allow you to renew the policy at terms end, provides the opportunity to convert the policy into permanent insurance. This can allow you to keep you cost down in the lower part of the years, and then still have the option to convert to a whole life insurance policy with needing to first qualify.
The bottom line is that before purchasing a renewable term life insurance, be sure to have the numbers analyzed by a specialist (or do it yourself). The ability to renew can be very appealing, but the overall cost may make the insurance too difficult to handle. Also keep in mind that each state and/or insurance company will have an age limit in which you can no longer renew your renewable term life insurance.
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