Renewable Term Life Insurance
A renewable term is a term life insurance policy clause that allows you to extend coverage even if your health has declined, usually on an annual basis and without a medical exam. You won’t have to re-qualify for a new policy or new underwriting, but your extended renewable term coverage may raise your current policy rates. The premium of your renewed policy may also rise as you age.
- Written by Rachel Christian
Financial Writer and Certified Educator in Personal Finance
Rachel Christian is a writer and researcher for RetireGuide. She covers annuities, Medicare, life insurance and other important retirement topics. Rachel is a member of the Association for Financial Counseling & Planning Education.Read More
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Matt Mauney is an award-winning journalist, editor, writer and content strategist with more than 15 years of professional experience working for nationally recognized newspapers and digital brands. He has contributed content for ChicagoTribune.com, LATimes.com, The Hill and the American Cancer Society, and he was part of the Orlando Sentinel digital staff that was named a Pulitzer Prize finalist in 2017.Read More
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Eric Estevez is a duly licensed independent insurance broker and a former financial institution auditor with more than a decade of professional experience. He has specialized in federal, state and local compliance for both large and small businesses.Read More
- Published: August 20, 2020
- Updated: November 1, 2022
- 4 min read time
- This page features 5 Cited Research Articles
- Edited By
What Is Renewable Term Life Insurance?
A renewable term is a clause in many term life insurance contracts that lets you extend coverage without buying a new policy.
Term life insurance guarantees a death benefit to your beneficiary for a set time, such as 10, 20 or 30 years.
If you pass away during this time, your beneficiary receives money from the life insurance company. If you die after the term ends, your beneficiary receives nothing.
When you first sign up for life insurance, you can include a renewable term clause to the contract.
This added protection will likely result in higher premiums when compared to a nonrenewable term life insurance contract.
Renewability allows you to keep your current coverage without undergoing a new medical exam.
However, if you renew, your life insurance costs are likely to increase based on your current age and other factors.
Insurance companies often limit premium hikes, but the new price is usually more expensive than your previous rate.
Renewable term life insurance can be beneficial if you need short-term coverage for a debt or other financial obligations that may be difficult to plan for.
How Does Renewable Term Insurance Work?
A renewable term clause allows you to extend coverage even if your health has declined.
Insurers usually compensate for this increased risk by raising your premiums. The policy’s death benefit will remain unchanged.
You can’t be turned down for coverage if your contract includes a renewable term clause. Many policies let you keep renewing your coverage, although your premiums will likely increase each year.
A renewable term clause is different than an annual renewable term policy, which offers an initial one-year contract and the option to extend annually. You can renew each year up to a certain age.
These policies offer guaranteed insurability for a certain time, along with a level death benefit.
Annual renewable term premiums are reassessed each year, and you’re likely to pay more as you age.
Advantages of Renewable Term Life Policies
Renewable term life insurance may be attractive to many people — especially if you still have financial obligations when your insurance expires, such as a mortgage or dependent children.
- Life doesn’t always go according to plan. If your term life insurance is set to expire, you might enjoy peace of mind knowing it can be easily extended to protect your family.
- In the short term, it is often cheaper to renew your current term life coverage than to purchase a new policy or convert to a permanent life insurance policy.
- You do not need to start a new application or shop for quotes from other insurers if you utilize the renewable term clause in your current contract.
- No New Medical Exam
- Renewable term life insurance exempts you from answering additional medical questions or undergoing a new exam. This can be beneficial if your health declined since you first purchased your policy.
Long-Term Costs May End Up Higher
Many experts agree that renewable terms can be beneficial as short-term coverage solutions.
For example, if you only have three years left on your mortgage, you may consider extending your life insurance coverage for three more years.
But if you think you need coverage for five years or more and you are relatively healthy, it may be cheaper to purchase a new level term life policy.
You may face higher premiums now that you’re older, but purchasing a shorter term — such as 10 or 15 years instead of 30 — can help save money.
- Buy a new term life policy
- Renew your current policy on a year-by-year basis (if your contract includes a renewable term clause)
- Convert your term life policy to a permanent life policy
- Buy a permanent life policy
Another option is converting to a permanent life insurance policy. Your rates will increase but you won’t need to take a new medical exam.
However, if you’re still in good health, it might be cheaper to get quotes for a new permanent life policy from other insurers.
5 Cited Research Articles
- Danise, A. (2020, June 23). 10 Quick Tips For Term Life Insurance Shoppers. Retrieved from https://www.forbes.com/sites/advisor/2020/06/23/10-quick-tips-for-term-life-insurance-shoppers/
- Danise, A. (2020, June 22). Top 5 Things To Know About Term Life Insurance. Retrieved from https://www.forbes.com/sites/advisor/2020/06/22/top-5-things-to-know-about-term-life-insurance/#190d52f52273
- Kinney, J. (2020, January 17). What Is Term Life Insurance? Retrieved from https://www.usnews.com/360-reviews/life-insurance/term-life-insurance
- American Council on Life Insurance. (n.d.). Types of Life Insurance. Retrieved from https://www.acli.com/Consumer-Info/Life-Insurance/Types-of-Life-Insurance
- Life Happens. (n.d.). Term Insurance. Retrieved from https://lifehappens.org/life-insurance-101/term-insurance/