How Guaranteed Renewable Term Insurance Works
If you are considering the purchase of a term insurance policy you may be wondering what happens if you outlive the life of your original term coverage and still need life insurance protection to continue?
This is an important question to consider when buying a life insurance policy.
Why? Because, your need for life insurance may change as you get older and take on more financial responsibilities; such as, buying a home, or starting a family.
You may have an additional need for life insurance that lasts longer than you expected when you purchased your original term life policy.
So, what can you do if you need protection for a period of time that is longer than the your current "Policy Term"?
That’s where "Guaranteed Renewability" becomes so important.
Guaranteed Renewability means you are guaranteed the option to renew your term insurance policy for an additional "term" (usually up to 10 ) when the original policy term expires.
What Does This Guarantee Mean to You?
It means you can extend your life insurance coverage for an additional period, usually up to ten years.
And, you won’t have to take a medical examination to prove your insurability – that you are in good health and qualify for coverage.
You are guaranteed to get insurance coverage for another "Policy Term" even if you have developed health problems, which might otherwise make you uninsurable for life insurance.
Your new cost of life insurance for the Renewal Policy Term will not be based on your health, but your age at the time you Renew your Term Life Policy.
Essentially, term life insurance means with Guaranteed Renewability means if you have a need for life insurance that is longer than the duration of the term policy you originally purchased, you are guaranteed the option to extend the life insurance coverage should you need to in the future, when your first term insurance policy ends.
What Is Renewable Term Life Insurance?
When you buy a term life policy it will last for a specific term length, usually 5, 10, 15, 20, 25 and 30 years.
At the end of this term period, almost every company gives you the option to renew your policy without having to prove proof of insurability.
So, if you become unable to qualify for a new life insurance policy because of a change in your health, you won’t have to go without insurance.
The downside to this type of coverage is that the policy will renew every year, and you will also see a price increase every year until you choose to end the coverage.
What is Guaranteed Renewable Term Life Insurance?
Basically, guaranteed renewable term life insurance means if you find you have a need for life insurance that is longer than the original term you purchased, you are guaranteed the option to extend the term should you need to in the future, when your first term life policy expires.
Why is it Important to Have a Guaranteed Renewable Term Insurance Policy?
In general, having a Renewable Term on a term policy provides Peace of Mind for the possibility of a worst-case scenario.
For example, if your term is ending soon, but you found out you have a serious health problem and would be unable to qualify for a new life insurance policy due to your health condition, you may find it very important to renew your term life coverage.
That way, you can continue your life insurance with a new Policy Term, and you are not required to prove insurability by taking any medical exam.
You can continue your insurance protection, even though you are unable to qualify for a new policy somewhere else through a different insurance company.
What are There Any Downsides to Renewable Life Insurance?
The biggest downside to a renewable term life policy is that it is costly every month.
Your renewable term coverage will likely cost more that it would to purchase a brand new life insurance policy. That’s because the new policy will require you to take a medical exam, and then the insurer will be able to give you a better rate on your new policy based on your specific health and risk factors, instead of the guaranteed renewable coverage which has to accept everyone, even those with health issues, which is why the rate may be higher to renew your term policy.
Affordability will be an essential factor when you are determining if you want to renew a term life policy or not.
Are All Term Life Insurance Policies Guaranteed Renewable?
As for term life insurance, your policy is only guaranteed renewable until the term has ended. So, if you purchase a 15-year term, your policy will stay in place until that 15 years is up.
However, once those 15 years are up, your insurance coverage expires, and you have a conversion option.
For example, you may be able to convert your expired term policy into a permanent life insurance policy.
Does a Guaranteed Renewable Policy Mean My Rates Won’t Change?
Unfortunately, if your policy is guaranteed renewable, you’re only guaranteed that you won’t have your life insurance coverage terminated.
Even if your insurance policy is guaranteed renewable, you still may experience rate increases, which are based on your age at the time of renewal
What Does Guaranteed Renewable Means?
Guaranteed renewable policy refers to a feature in the insurance contract that compels the insurance company to cover the policyholder regardless of the status of his or her health.
What is a Guaranteed Renewable Policy?
A guaranteed renewable policy is an insurance policy feature that ensures that an insurer is obligated to continue coverage as long as premiums are paid on the policy.
While re-insurability is guaranteed (renewing coverage when the current term policy expires), premiums can rise based on the insured’s age at time of renewal, which would increase the risk of a future claim.
Some life insurance carriers offer both Guaranteed Renewable policies and Non-Cancellable policies; the non-cancellable policy will offer the double guarantee of Re-Insurability and Locked-In Premiums.
Summary of Guaranteed Renewable
If you feel you may have a need for coverage that lasts longer than the duration of your term life policy, make sure your plan includes Guaranteed Renewability.
Because, you never know what new financial responsibilities you may take on in the future, which would increase the duration of your need for life insurance.
In addition, your health may change, and you may find you are uninsurable when you most need the protection, when your term life coverage is about to end.
Guaranteed renewability can protect you from the worst-case scenario, being without life insurance when you most need it.
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