What Is Renewable Term Insurance and What Are Its Benefits?

 

Every sound financial plan includes a term insurance policy. These plans provide your family with financial stability and security when they need it the most. When you purchase a term insurance policy, you might worry about outliving the plan or losing your life coverage after a certain age. Insurance companies offer renewable term life insurance to help you keep your life coverage. Let’s learn more.

What is Renewable Term Life Insurance?

A renewable term insurance policy allows you to renew your plan regularly without a requalification process. Most term policies come with an annual renewable option. You can pay the renewal premium each year and continue to enjoy the coverage. When you renew the plan, you do not have to undergo any medical tests or requalify for insurance. These policies guarantee renewability.

How does it Work?

We can see how a renewable policy works with an example. Assume Mr Kumar purchases a 30-year term insurance policy when he’s 25 with an annual renewable option. He pays annual premiums to renew the coverage each year. As long as he pays the premiums on time, he will continue to enjoy the promised coverage for the next 30 years.

What Are the Benefits of Renewable Term Policies?

When you opt for a renewable term life insurance plan, you benefit from:

• Easy Renewals

  As the name suggests, renewable plans facilitate quick and easy life cover renewals. You do not have to undergo periodic medical tests or requalify for your life coverage. Instead, you simply need to pay your premiums on time to continue to enjoy the life coverage you selected when you purchased the plan.

• Guaranteed Life Cover

  Renewal term policies do not require you to requalify for insurance, effectively guaranteeing your life cover for the selected period. The only condition for the cover remains premium payment. If you fail to make your payment on time and the policy lapses, all the benefits end, including renewability and life coverage.

• Financial Stability for Your Family

  Crucially, renewable term plans provide your family with the sum assured payout in case something happens to you. The financial benefit they receive from a term policy enables them to repay any pending debts and keep their finances secure even after a tragedy.

Is a Renewable Term Life Insurance Policy Right for Me?

You should choose a renewable term plan if:

• Traditional Whole Life Policies Are Too Costly

  If a traditional life insurance plan is out of your budget, a renewable term plan makes more sense. The premiums for such plans are more affordable initially, allowing you to receive the coverage required.

• You Require Short-Term Coverage

  You may opt for a short-term policy to offset the cost of debt. Say you’ve recently purchased a vehicle with the help of a car loan. You can purchase a renewable term insurance policy for the duration of your loan. Your family can use the payout from the policy to repay the pending debt if anything happens to you while the policy is active.

• You Need a Stop-Gap While Working on Yourself

  Life insurance companies take your lifestyle and habits into account while deciding your sum assured and premium amount. If you’re working on building better habits, you can get a renewable term plan to provide the required coverage in the meanwhile. You can opt for a short-term renewable plan until you improve enough to purchase a traditional policy.

  When browsing for life insurance options, you must not confuse renewable term plans with convertible policies. The former allows you to automatically extend your coverage for a given period. Convertible plans, on the other hand, allow you to turn your term policy into a whole life plan. You must select the policy option that best works for you and your finances.

Similar Articles:

• 10 FAQs on Term Insurance
• What Will Happen When a Term Life Insurance Policy Matures?
• 4 Simple Methods to Calculate : How Much Term Insurance You Need
• Types of Death Not Covered by Term Insurance
• 5 Reasons Self Employed People Should Buy Term Insurance
• What Happens If You Outlive Your Term Life Insurance Policy?

ARN - ED/09/22/29365