What Is Renewable Term Life Insurance?

Renewable term life insurance is a term insurance policy with a renewable term clause that 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 than those of a life insurance contract without a renewable term clause, this type of insurance is usually in the beneficiary’s best interest.

Renewable Term vs. Convertible Term Life Insurance

Renewable term life insurance should not be confused with convertible term life insurance. While a renewable term life insurance policy allows you to extend your current coverage, a convertible term life insurance policy enables you to convert term life coverage to whole life coverage at any point during your term or before your 70th birthday (whichever comes first). Renewable term life cannot be switched to whole life, while convertible term life can be switched to whole life insurance.

Renewable Term Life Insurance Policy Types

Renewable term life insurance is available in an annual renewable term (ART) life policy, where 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.

Why Renewable Term Life Insurance is Important

Renewability is important because normally, an insurance policyholder will want to renew a policy once the term is up, assuming their life circumstances don’t change drastically, such as if one’s health deteriorates, rendering them uninsurable. Renewability enables a policyholder to keep current coverage (though likely at a much higher premium) without having to re-qualify. In general, having a renewable term on a term life insurance policy provides peace of mind for the possibility of a worst-case scenario.

Conclusion

Renewable term life insurance is a type of term policy with a renewable term clause that allows the beneficiary to extend the coverage term for a set period of time without having to re-qualify for new coverage. It is usually in the beneficiary’s best interest, as future health circumstances are unpredictable. While it should not be confused with convertible term life insurance, renewable term life insurance policies are available in an annual renewable term life policy, which provides guaranteed insurability for a set number of years with a level death benefit.