The Pros and Cons of Renewable Term Life Insurance

You must evaluate the pros and cons of every kind of life insurance you are considering when deciding the best life insurance for your needs. Each will have benefits and drawbacks that will affect your family’s current and future finances, so you must step ahead by analyzing your coverage options from all angles.

You may have come across renewable-term life insurance while looking for life insurance. Unlike traditional term life insurance, which requires you to commit to a multi-year coverage term, Renewable Term Life Insurance typically has a shorter term — sometimes as little as one year — and the option to renew your policy for the same amount of coverage at the end of each term without having to apply for a new policy.

To summarise, there are advantages and disadvantages to this type of coverage, particularly when compared with conventional term life insurance. We break down the pros and cons of this type of life insurance below to help you decide if it can offer the best stability for your family.

What is Renewable Term Life Insurance?

Renewable term life insurance, like all term life insurance, provides coverage for a set period based on the policy’s term. Unlike other kinds of term life insurance, it comprises a renewable term clause that ascertains you can renew the policy for another term if you so willing to, without having to reapply or endure a medical exam. Depending on the insurer and the policy, the coverage term can be as short as a year or as long as 30 years.

Since renewable term life insurance is only valid for a set time, the initial premiums are typically lower than for whole life insurance policies. (This is a type of permanent life insurance that is intended to last your entire life.)

Your renewable term premiums, on the other hand, will rise with each renewal based on your age, gender, health, and other factors, and can eventually cost more than a permanent policy, contingent upon how much your premiums rise and how many times you renew. 

Pros of Renewable Term Life Insurance

There are a few potential pros of renewable-term life insurance:

You can get Extended Coverage without Additional Medical Exams

A medical exam is usually required for assessing whether you’re eligible for life insurance and the amount of monthly premiums you’ll pay. However, with a renewable term policy, you can renew it without a medical exam, though some insurers may require you to fill out a medical questionnaire.

Flexible Term Lengths

Another benefit is the flexibility that this sort of policy offers, especially if you want a shorter term than, say, Haven Life’s minimum 10-year policy.

Who wants a shorter term? Perhaps you are young and unsure of what the future holds. You want coverage but aren’t sure what your situation will be in a few years — perhaps you’ll have children and a mortgage, or perhaps you’ll be a digital nomad traveling the world. (Hey, anything is possible.)

You may also be between jobs and seeking an alternative to the group life insurance provided by your previous employer. (However, keep in mind that group life insurance is insufficient for many people.) A renewable life-term policy is apt for such short-term scenarios.

Cons of Renewable Term Life Insurance

When it comes to insurance commitments, as with other commitments (work, romance), a short-term, vide-strings-attached fling can be ideal. But sometimes… it’s not.

The following are some drawbacks of renewable life insurance:

It Can Cost More

The most significant disadvantage of renewable term life insurance is that your premiums may change each time you renew. Sure, going year to year gives you more flexibility, but when you renew your term, you’ll be older (definitely) and possibly in poorer condition, which is why your premiums will rise.

Your premiums for a term life insurance policy with a longer term, such as 10, 20, or 30 years, remain fixed throughout the term. Level premiums are what they’re called.

If you’re in a life stage where you’ve just gotten a new 15-year mortgage, or if you’ve recently married and had children, and you know you’ll need the financial protection of life insurance in the long run, getting a 15, 20, or even 30-year term makes more sense because you’ll pay the same rate — likely a lower rate — for the duration of your term.

Life Happens

At last renewable life insurance may appear more flexible — after all, it is low-commitment — but it could end up being more costly overall.

Again, consider life insurance to be a type of relationship. If you get it when you’re young and healthy, you can get life insurance at cheaper rates than you would later in life. This means you can get sufficient insurance to provide for your loved ones as your family grows and your needs change (many people get 5 to 10 times their annual salary).

Perhaps you are moving into a new home. Perhaps you’ve chosen to have another child. Rather than continually altering your policy over time, getting adequate coverage from the start for multiple years can be an affordable means to make sure that even if things change, there is a safety net in the form of long-term life insurance.

It can be a Difficulty

We’re all swamped with work. Do you really want to assess whether your newer, likely higher premiums, are a good value?

Buying term life insurance is often a one-time thing. The first thing you need is to get it and then take care of other related things that would be clamoring for your time and energy every day.

Life-term insurance is certainly a big help to individuals especially who are salaried persons or elderly people. There could be more pros and cons that you must hunt down before considering it. But, we have tried to get at least a basic knowledge of buying life term insurance, so that when you are going to buy it, you’re confident enough to talk to the company’s executives.

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