What Is Renewable And Convertible Term Life Insurance?

Renewable Term Life Insurance

A renewable term clause allows the beneficiary to extend the coverage term for a set period of time without having to re-qualify for new coverage. This clause is beneficial as future health circumstances are unpredictable. Although the initial premiums are likely to be higher, having a renewable term on a term life insurance policy provides peace of mind for the possibility of a worst-case scenario.

Most term life insurance policies are renewable, but not all. Renewability is important because a policyholder will want to renew a policy once the term is up, assuming their life circumstances don’t change drastically, rendering them uninsurable. Renewability enables a policyholder to keep current coverage without having to re-qualify.

In an annual renewable term (ART) life policy, the initial contract is for one year and renews annually. Such policies offer guaranteed insurability for a set number of years, as well as a level death benefit. The policy’s premiums are reassessed annually, and a policyholder is likely to pay more as they grow older. The main reason for choosing an ART would be if someone needs short-term life insurance fast.

Convertible Term Life Insurance

A convertible term clause allows the policyholder to convert term life coverage to whole life coverage at any point during the term or before their 70th birthday (whichever comes first). The insured, regardless of their health, does not have to re-qualify or pass additional screening to convert their policy. This type of insurance offers flexibility, as the policyholder can switch to whole life insurance if their financial situation or insurance needs change.

Renewable and convertible term life insurance policies are similar in that the insured doesn’t have to re-qualify or pass additional screening. They differ in that renewable term life cannot be switched to whole life, while convertible term life can be switched to whole life insurance.

Conclusion

When purchasing a life insurance policy, it’s important to understand the different clauses and terms that come with it. Renewable and convertible term life insurance clauses offer flexibility and peace of mind, respectively, and should be considered when choosing a policy.