![Burial Insurance Pro 2024 & Funeral Insurance Plans [No Waiting Periods]](https://burialinsurancepro.org/wp-content/uploads/2017/01/burial-insurance-pro-logo.png){kind=logo}
Menu
What Is the Process of Renewable Term Life Insurance
By Matt Schmidt
Some people might view life insurance as an unnecessary expense. However, for those who have a long-term perspective and are thinking about their financial health, life insurance can be their savior. It can deliver an array of benefits, but the latter largely depends on the type of insurance you have. Among others, one that you might want to consider is renewable term life insurance.
While renewable term life insurance is a good financial product, it should NEVER be used for burial insurance or funeral insurance plans. Due to it being geared towards a shorter duration product, it would not be wise to be used to address final expenses due to the premiums of insurance increasing every year. Clueless about renewable term life insurance and how it works? Read on and learn from the insights we’ll share in this quick guide.
Before we talk about how it works, let’s first have a quick renewable term life insurance overview. As the name implies, it’s a kind of term life insurance, but the main difference is that it’s renewable. The process is also easier because there’s no need for underwriting or a medical exam. Hence, it can be a great way to prepare for the uncertainties that can come your way.
Now, to make it even easier to understand, let’s define term life insurance. The latter is a type of life insurance policy that has fixed coverage. In most cases, it can range from 10 to 30 years. When you die within such a period, your family receives a payout. In turn, they can use it for their financial needs. They can also use it for your funeral, although you might want to consider purchasing burial insurance to prevent a financial burden on your loved ones.
We’d like to point out that your life insurance premiums are only guaranteed for the length of the term duration you choose initially. As an example, let’s say you opt for a 15 year term policy. At the end of the 15th year, you could continue coverage on an annually renewable term. However, the life insurance premiums will be much higher than the original term premiums you were paying. Also, the premiums will increase every year, and may become unaffordable at some point in time.
Because of all this, we do not feel this type of policy is the best option for seniors wishing to address their final expenses. We feel that a permanent whole life insurance policy will typically be the best solution to make sure your final expenses can be met. Whole life insurance plans will have guaranteed premiums, cash value accumulation, and most importantly they’ll provide coverage over your entire life span.
If you buy renewable term life insurance, you will be paying a life insurance premium monthly or annually, depending on the policy. When the term ends, you have the option to extend. You can renew in increments of one year or multiple years if you prefer.
At the end of the term, you will receive a notification from the insurer. If you are still within the maximum age limit the insurance allows, you can renew the policy. However, your premium might change. In most cases, the premium amount is higher. If you don’t accept the new terms, you can shop around for new life insurance suitable for your budget and needs.
For those that have suffered health issues since originally being approved, you may find a new policy difficult. Being diagnosed with Diabetes, HIV/AIDS, Alzheimer’s or other health conditions may lead to declinations or higher rates on life insurance. Pre-existing conditions are NOT an automatic decline when applying for life insurance or burial insurance, but they may make it quite a challenge. Or in some cases they may lead to a guaranteed acceptance policy being your only option. A company like Gerber Life may be your only choice.
In addition, your renewable term life insurance can come with riders, which can expand its coverage. Doing so might make you qualify for higher death benefits and have an additional safety net from unfortunate life circumstances.
While you can renew this type of term life insurance, take note that it is non-convertible. Hence, you are not allowed to shift into whole-life coverage, if you prefer.
If you’re wondering if renewable term life insurance is worth it, you must be familiar with its benefits. Below are some advantages worth noting:
One of the best things about renewable term life insurance is it does not require underwriting upon renewal. In addition, it does not warrant a new medical exam, which makes it convenient.
Renewable term life insurance is flexible since you can choose the limit when it expires. For instance, it could expire in one year or 20 years. Regardless, you do not need a new medical exam or underwriting, as previously mentioned.
While it may not work for all situations, a specific instance when renewable term life insurance is good is when you need short-term coverage. For example, if you just graduated from college and you expect to find a job that offers life insurance, you can get a renewable term for the time being.
Despite its benefits, renewable term life insurance also has shortcomings, including the following:
The premium can get higher upon renewal. Such can be especially unfavorable if your term policy renews annually. It can be more expensive compared to a non-renewable policy.
While you can renew this type of term life insurance, it has a limit. Such will depend on the insurer. For instance, some may no longer be renewable when you turn 70 years old.
Another disadvantage of renewable term life insurance is that it does not build cash value over time. If you want an alternative that offers the latter, then you might want to consider whole life insurance instead. Again, we feel very strongly that a cash value based policy is the best option for burial insurance.
Wrapping up, renewable term life insurance is a type of term life insurance that you can renew after a specified period. It can be one year or multiple years, depending on the policy. Renewing the insurance will extend the coverage. It will not require underwriting or medical exams upon renewal. Nonetheless, your premiums might change based on certain factors, such as your age.
For certain individuals, renewable term life insurance can be a valuable financial product to protect their family. However, it most likely is not the right solution if you’re wishing to address burial and funeral expenses.