If you want to buy a life insurance policy it’s easy to feel bewildered at first by the range and complexity of products available. To protect your interests, remember, each type of policy has advantages and disadvantages. Renewable term life insurance is no exception though it’s one of the simpler form of insurance offered it’s fairly easy to list it’s good and bad points and it’s advantages are very real.
What works well about this type of insurance
As the term renewable implies, the policy owner of this type of life policy can renew the policy yearly rather than making a lifelong commitment. This is a real advantage if there are special periods in your life when it’s important to have a life policy. Your priorities will change with age and changing responsibilities and then you can drop the policy or keep it going.
Like all term policies, you can specify how long you want your renewable term policy to last, so you can make it annual or for a much longer period. While annual renewal makes it possible for you to avoid a long commitment it does lock you into continually rising premiums. The reason for this is insurers look after their own interests as well as yours and you are at greater risk of dying the older you get. Taking out a term policy for a long time keeps your premiums lower but each time you renew your premiums will increase.
Your insurer will set the premiums for your renewable term life policy with regard to how healthy you are at the time the policy is taken out. However no matter what medical conditions you develop subsequently you will still be fully covered. In other words as an existing policy owner you then have a big advantage as you may not get insurance from another insurer once you develop a serious medical condition.
As the policy owner of a renewable term policy the nature of the insurance contract works very much to your advantage. As long as pay your premiums you continue to own the policy. As stated previously this very much works to your advantage if you develop a serious medical condition.
In working out whether you want a renewable term life policy there is another advantage to take into account. Find out if the policy you are taking out can be converted from a term policy to a permanent life policy as this is a common feature of this time of term policy. Sometimes this is possible but only during a specific period, so get as many details as you can before you purchase.
The disadvantages of this form of life insurance
There is a definite downside with a renewable term life policy. Whole life policies give the heirs of the policy owner not only a death benefit but also most of the accumulated value of the premiums paid. If at any time you stop paying premiums you get nothing. and when you die your heirs will receive only a death benefit and nothing from the premiums you have paid.
A renewable term life policy is a flexible policy and it is useful to get a quote from a good insurance company about the premiums you would pay. Insurance firms provide very competitive quotes for this type of policy so make sure you get a good price. Watch out for the relationship between the premiums you will pay related to the term of the policy.
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