What Is Renewable Term Life Insurance And How Does It Work?
Term life insurance is coverage that expires after a specific number of years. When the policy ends, you no longer have life insurance. With a renewable term life insurance policy, often called “guaranteed renewal term life insurance”, you can renew the policy without having to qualify medically.
That means you can continue your coverage without having to answer health questions, take a medical exam, or anything else. All you must do is agree to the renewal.
Now, bear in mind that when you renew, your premium will increase based on your current age. In most cases, and especially for seniors, the rate increase will be substantial.
For renewable term policies, most insurers offer standard term lengths of 10, 15, 20, 25, and 30 years.
Like any type of life insurance, when you die, the insurance company will pay out the death benefit to your beneficiaries. The payment will be in cash, tax-free, and they are entitled to spend it however they wish.
How Long Can You Keep Renewing The Policy?
While it varies by company, most insurers will allow you to renew into your 80’s. Some will even offer renewals through 90, or rarely, indefinitely. Globe Life is one such company that offers renewable term life insurance through age 90.
Keep in mind that the post-renewal term length will likely be shorter than the initial term. It’s very common for subsequent renewal terms to be 5 years in length. Some insurers offer annual renewals (usually called “annual renewal term life insurance”), but it’s rather rare.
Pros And Con’s Of Renewable Term Policies
| Pros | Cons |
|---|---|
| Very low cost premiums initially (often much lower than level term life insurance). | Premiums are much higher upon renewal. For seniors, the rate increases are typically far beyond what most retired Americans can afford. |
| Can continue coverage after the initial term expires without having to re-qualify. | Not a good long-term life insurance solution, since premiums will eventually balloon to an unaffordable level, and most insurers stop offering renewals in your 80s. |
| Allows those whose health has deteriorated since the policy began to continue coverage. In contrast, they would face declines if they tried to buy a whole new policy. | Renewal notices are sent via mail or email. The company will not call you via telephone. Given the unpredictability of mail and the sheer volume of junk mail everyone receives, these notices can be easy to miss. Emails from life insurance companies are often relegated to spam or simply viewed at first glance as non-important promotional material. If you fail to renew (for any reason), the policy is closed and cannot be reinstated. |
Renewable Term Vs Convertible Term Life Insurance
Renewable term life insurance gives you the guaranteed right to continue coverage, with no medical qualification, after the initial term expires. In contrast, convertible term life insurance gives you the guaranteed right to convert from term life to whole life insurance, without having to qualify for the conversion.
If you have a convertible term and you opt for the conversion, the following will happen:
- You will have whole life insurance, which lasts forever and builds cash value, rather than term life insurance.
- The premiums will massively increase since the biggest difference between term life and whole life is the cost.
Renewable Term Life Insurance Vs Level Term Life Insurance
Level term life insurance has a fixed death benefit and premium for the entire term. They are sometimes referred to as “level premium term life insurance policies”.
Level term plans may have the option to renew at the end. They may also have the option to convert to permanent coverage. It varies by company.
Frequently Asked Questions
Most renewable term life policies do not include a rate schedule outlining the premium at each renewal. In most cases, you must call the insurer to request these prices.
The death benefit will remain intact when you renew a term life policy. That said, if the premium increase upon renewal is too much for your budget, you can request the insurer reduce the coverage in order to drop the price. Not all call providers allow this, but many do.
Some life insurance companies will allow you to reduce the amount of coverage so as to drop the rate, and some won’t. If you already have a renewable term policy now, you would need to call the company to ask this question. However, if you’re considering buying a renewable term policy, this is one of the key questions to ask before applying.
Renewable term life insurance is ideal for those on a tight budget, as premiums are typically very low. It’s also good for those with immediate family members who have had high-risk illnesses. People in this circumstance have a higher risk themselves of developing similar health conditions later in life. One of the most significant benefits of a renewable term is that the renewal is guaranteed regardless of your health. So if you developed challenging health issues after you initially bought the policy, it won’t affect your ability to renew it. Ultimately, there are many types of life insurance, all of which work differently. It’s critical to evaluate the pros and cons of each type so you can choose the one best suited to solving your issues.
- Nationally licensed life insurance agent with over 16 years of experience.
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Anthony Martin is a nationally licensed insurance expert with over 16 years of experience and has personally served over 10,000 clients with their life insurance needs. He frequently authors entrepreneurial and life insurance content for Forbes, Inc.com, Newsweek, Kiplinger, and Entreprenuer.com. Anthony has been consulted as an expert life insurance source for dozens of high-profile websites such as Forbes, Bankrate, Reuters, Fox Business, CNBC, Investopedia, Insurance.com, Yahoo Finance, and many more.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
