Renewable Term Life Insurance

What is renewable term?

A renewable term life insurance is a clause of terms in which a policyholder can renew the policy without undergoing medical examination within a set number of years. In a renewable term, premiums tend to rise after the renewal of the policy while death benefit remains the same. A renewable term is age limited and expensive than traditional term, on other hand, you will not be allowed to renew the policy after reaching a certain age (old age).

How it works?

When you buy a renewable term, you are locked in a clause of terms in which you are allowed to renew your life policy without undergoing medical examination or re-qualification process. However, the premium costs rises every time as you renew the policy. In case you die within a given time of coverage, your beneficiaries receive death benefit.

Does it have cash value?

Cash value is an amount that grows alongside your policy, you can withdraw or take a loan against it. As other types of term life insurance, a renewable term doesn't have cash value.

What is the difference between renewable term and Convertible life?

A renewable term is a life insurance policy that can be renewed or extended without medical examination. While convertible term is a type of term life insurance that can be converted to other types of life insurance without undergoing medical examination. 

However a single policy can be renewable and convertible as well, this type of policy is known as renewable and convertible term policy (R&C).

Advantage of renewable term

1. Allows to renew the policy without re-qualification process.

2. Less expensive compared to permanent life insurance.

Disadvantage of renewable term

1. It is age limited; when you reach a certain age, you will not be allowed to renew the policy again. 

2. Premiums rise as you renew the policy; you could find yourself pay huge if you renew it many times.

3. It is expensive than traditional term; the premiums are higher than in traditional term life insurance.

Conclusion

Renewable term insurance is mostly suitable for younger and Heather people, since it offers coverage at a lower cost for younger and healthy people than elders and unhealthy people.