Term Life Insurance policies provide life insurance coverage for a specified timeframe, or term. At the completion of the term, insured patrons typically have three options: renew the policy through an optional feature called Renewable Term Life, convert the policy into permanent insurance like AIG Direct’s Universal Life Insurance or Guaranteed Issue Whole Life , or allow the policy to expire and discontinue coverage.
Renewable Term Life Insurance policies and permanent conversions can be completed with no additional medical exams, making them one of the most convenient options for you and your family.
What is Renewable Term Life Insurance?
Renewable Term Life is not a standalone Term Life Insurance policy, but rather, a vested feature that can be enacted towards the end of a Term Life Insurance policy. The Renewable feature of Term Life is also known as Annual Renewable Term Life Insurance, or Yearly Renewable Term Life Insurance, all of which refer to the option to renew coverage each year after the original term expires.
The option to renew your term has the added benefits of no additional medical exam, proof of health, additional underwriting, or the requirement to requalify for coverage. Instead, rates will be adjusted based on the increase to the insured policyholder’s age at the time of renewal. Policyholders will simply pay a renewal premium at the time of renewal and a slightly higher overall premium based on the increase in age at time of renewal.
Consider an example; a policyholder buys a 10-year term life insurance policy with an annual renewable option. After their original 10-year term expires, the policyholder decides they still want life insurance coverage, so they take advantage of their renewable option, paying a renewal premium and extending their coverage by one year. They can then continue to renew their policy every year for however long they want coverage.
Why Renewable Term Life Insurance?
Renewable Term Life Insurance provides a simple and convenient way for customers to extend or maintain their existing life insurance coverage. Renewable Term provides continuation of coverage without the need for an updated medical exam.
For example, consider a customer approaching 60 years old that took out a 30-year Term Life Insurance policy at the age of 30. As the expiration of their policy approaches, they will be given the option to renew the policy each year with no additional medical examination or proof of health as opposed to being subject to a possibly lengthy approval process. The 60-year-old may not want to apply for a new Term Life policy due to new medical issues that did not exist when they were 30. The policyholder will simply pay the renewal premium each year and maintain coverage at a premium that reflects the increase in age.
Renewable Term Life Insurance provides flexibility for customers that are not sure how long they will require coverage, provides temporary solutions for changing dynamics in policyholders’ lives, and remains one of the most cost-effective life insurance policies. Keep in mind that rates will increase to account for the change in age of the policyholder.
Who is Renewable Term Life Insurance For?
The option to renew a Term Life policy is perfect for those who do not wish to seek a new policy or be subject to further underwriting. This can be due to various reasons, the most common of which is a change in health.
If the insured remains in good health approaching the time of policy expiration, it might be in the best interest of the insured to seek a new Term Life Insurance policy or execute a policy conversion* to a more permanent option like Whole Life Insurance or Universal Life Insurance. While they come with higher premiums, Whole Life Insurance policies carry additional benefits like cash value accounts and the absence of a set expiration date. Ultimately, the decision for which life insurance policy is right for you and your family is a personal one, but it is in your best interest to be armed with the information to make an informed decision.
For more information about the insurance options available or to view best practices associated with managing your insurance policy, see the additional resources below speak with an appointed life insurance representative today. To receive life insurance quotes, visit AIG Direct’s online DIY application portal or call (800) 294-4544 to speak with an appointed life insurance sales agent.
*Please see your policy for details
