One of the most important financial decisions one can make is purchasing a term life insurance policy. It is a life insurance policy that provides coverage for a set period of time, typically 10, 20, or 30 years (or as specified in the contract). If the insured passes away during the policy term, the death benefit will be paid to the beneficiaries in a lump sum amount. This money can be used to pay off debts, cover funeral expenses, and support the family while they adjust to life without the breadwinner.
But if you survive the policy term and go for new coverage, you may have to pay a higher premium for a new plan. Here, a renewable term insurance policy can give you a helping hand. A renewable term life insurance policy allows you to renew your current policy at the end of the term without having to re-qualify for coverage. For example, an annual renewable term life insurance policy can be renewed yearly.
Let’s dive into some important aspects of a renewable term life policy to understand if you should buy this plan or not.
Benefits of a renewable term life policy
Below mentioned are some of the major benefits that come with a renewable term life policy.
1. You may redeem your coverage at the end of your original contract.
2. A renewable policy allows you to maintain your coverage without undergoing a new medical exam or answering any additional medical questions. This can be helpful if your health has changed since you purchased your term policy.
3. Renewing your policy can help you lock in a lower premium. If you have been paying premiums for several years, your rates will generally be lower than if you were to purchase a new policy. Moreover, you can also use a term plan calculator to evaluate the premium of your term insurance. Simply enter your basic details, like gender, age, policy tenure, cover amount, tobacco consumption, and annual income, to get instant results.
4. A renewable policy allows you to adjust your coverage as your needs change over time.
5. Life is unpredictable and full of uncertainties. Thus, a renewable term life insurance policy can provide peace of mind once you are satisfied that you and your family will be protected in the event of your sudden demise.
Important points to consider before renewing a term insurance policy
Before renewing any type of term insurance policy, it is important to know a few key points.
1. First, read all about what is term insurance and its notable aspects to avoid confusion. Now, check whether or not your specific policy comes with the provision of renewability. Each insurer has set different criteria; thus, it is important to clarify all the specificities with the insurer itself.
2. Renewal is allowed only until the policyholder reaches a certain age. In most cases, the maximum age limit set by insurers has been set at 80, after which one may not be able to renew their policy.
3. You can renew your term insurance cover if your chosen policy brochure specifies the provision for renewability. So, read all the teams and conditions before choosing term insurance.
4. Compare rates from different insurers before renewing your policy.
5. The premium amount might increase based on the policyholder’s age.
The bottom line!
So, who should buy a renewable term life policy? If:
You have budgetary issues: If you cannot afford the premiums of your traditional term plan, you can choose a renewable policy. The premium of renewable term plans is generally lower than the new ones.
You want flexibility: This policy can be a good option for someone who wants the flexibility to renew coverage without going through another medical exam.
You want temporary coverage: If you do not want to commit to a long-term protection plan, a renewable policy can work for you.
Your health is improving: Buying a renewable plan can be ideal if you are dealing with temporary health issues. This way, you can get time to improve your health and ensure that you are not paying a higher fixed premium rate.
If you have decided to purchase a renewable term life policy, make sure to check if your insurer offers this clause or not.