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Renewable Term Life Insurance

Updated
David Chang, ChFC®, CLU®

Our Insurance Expert

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

If you're shopping for life insurance, you may have come across the term "renewable term life insurance." But what is renewable term life insurance, and is it right for you? Here's what you need to know about this type of life insurance.

What is renewable term life insurance?

Life insurance is an important tool that can protect your family and give you peace of mind that they will be cared for financially in the event of your death. Term life insurance is a policy that lasts a certain number of years. Term policies only pay a death benefit if the insured dies during the term period.

Renewable term life insurance is a type of life insurance policy that can be renewed after the initial term has expired. The renewal process allows the policyholder to extend their coverage without having to undergo another medical exam. The policy's death benefit will remain unchanged.

Renewable term life insurance policies offer coverage for a set period of time, usually five, 10, or 20 years. They can even be as short as one year. Renewable term life insurance policies are beneficial because they provide flexibility and security for policyholders.

How does renewable term life insurance work?

When you first sign up for a term life insurance policy, you can include a renewable term clause. This will typically add to the cost of the term policy, making it more expensive than one without the clause.

When the term is about to expire, you can renew and extend your term policy for another set period of time without undergoing a new medical exam. You can't be turned down if you have a renewable policy.

The benefits of renewable term life insurance policies

When deciding whether or not to purchase renewable term life insurance, it is important to consider your needs and budget. Here are some perks that come with this type of policy.

No new medical exam

With a renewable term life insurance policy, you do not have to undergo a new medical exam. Renewable term life insurance can be a good option for people whose health has declined or have health conditions that make it difficult to qualify for other types of life insurance.

Cost

Renewable term life insurance policies are often more affordable than traditional whole life insurance policies. This is because they do not build up cash value over time.

Convenience

With a renewable term life insurance policy, you don't have to go through the underwriting process again when the policy renews. You don't have to shop around, get new quotes, and start a new application. This can be a major benefit if your health has changed since you originally applied for the policy.

Flexible

Renewable term life insurance policies are beneficial because they provide flexibility and security for policyholders. These policies can give you the flexibility you need if you still have financial obligations when your insurance expires, like a mortgage or having to pay for children's college education. They can be a good option for people who need coverage after their policy ends, providing peace of mind that their families will be protected.

Disadvantages of renewable term life insurance policies

Renewable term life insurance policies also have some disadvantages.

More expensive than traditional term policy

Renewable term life insurance policies are typically more expensive than non-renewable term life insurance policies. If you don't end up renewing, then you would have paid more than getting an equivalent term policy. You are essentially paying more for the option to renew at the end of the term.

Increasing premiums

The policy premiums will increase at each renewal. Renewable term life insurance can be renewed at the end of the policy term, even if your health has deteriorated. Companies offering life insurance will compensate for this by raising your premiums every time you renew. This can be expensive as you get older, and over time your rates cost several times your original premium.

Renewals available only up to a certain age

Another disadvantage is that some companies may only allow renewals up to a certain age (usually between 65 and 70 years old). So if you want insurance coverage, you may not be able to renew after you hit a certain age.

How much does renewable life insurance cost?

The cost of renewable term life insurance will vary depending on the length of the term, the age and health of the policyholder, and the death benefit amount. When you renew, your life insurance premiums will be based on your current age, along with other factors.

Renewable policies often have higher premiums than traditional policies. This is because the insurer assumes a greater risk by offering coverage without requiring another medical exam. Your insurer will typically tell you the maximum amount your rates will increase if you renew the policy.

When to buy renewable term life insurance

Policyholders should consider renewable term life insurance if they want to extend their coverage without having to retake a medical exam. Those who are healthy and younger and have no pre-existing medical conditions are likely to get the best rates.

Whether renewable term life insurance is right for you depends on your individual needs and circumstances. If you want coverage that will last your entire life, then whole life insurance or universal life insurance may be better options for you. These types of policies don't expire, and as long as you pay your premiums, your coverage will continue.

Permanent life insurance policies, however, are more expensive than term policies. If you can't afford a permanent policy and want to get a term policy with the option to renew, then a renewable term policy may be right for you. Renewal policies are popular among young people looking for shorter-term coverage and affordable premiums. Typically, the earlier you get a life insurance policy, the lower the premium cost will be.

When deciding whether to purchase renewable term life insurance, policyholders should consider their needs and budget. Renewable term life insurance is a good option for those who want to extend their coverage without having to retake a medical exam. However, renewable term life insurance policies have some disadvantages, such as the possibility of increasing premiums and age limits on renewals.

FAQs

  • Renewable term life insurance is a type of life insurance policy that can be renewed after the initial term expires. This means that you can continue your coverage without having to go through the underwriting process again. This can be a major benefit if your health has changed since you originally applied for the policy.

  • Renewable term life insurance allows you to extend your current term life insurance policy after it expires. Convertible term life insurance gives you the option to convert your term life policy into a permanent life insurance policy at any point during the term.

  • Insurers typically raise your premiums every time you renew. When you renew, your life insurance premiums will be based on your current age and other factors.

  • You can renew a renewable term life insurance policy after the term expires. The renewable term can be as short as one year.