Term Life Insurance: Can You Renew Policies?

Term life insurance is a type of insurance policy that lasts for a set period, usually between 10 and 30 years. Renewable term life insurance is a type of term life insurance that gives the policyholder the option to renew when the policy ends. This article will explore the pros and cons of renewable term life insurance and explain how it differs from convertible term life insurance.

Annual renewable term life insurance

With ART, individuals can lock in their insurance rate for a year, making it a cost-effective solution for the short term. However, it's important to note that the premiums generally start low but increase with each passing year as the insured person ages. This means that if you renew for multiple years, you could end up paying more in premiums than you would with a traditional term life insurance policy.

One of the advantages of ART is its flexibility. It allows individuals to adjust their coverage as their needs change annually. It is also a straightforward and affordable option, especially for those on tight budgets or those who need coverage for a short time, such as when they are between jobs.

However, one of the main drawbacks of ART is the declining affordability as the insured person ages. The premiums can escalate significantly over time, making it unsuitable for those seeking long-term coverage. Additionally, ART has limited customization options and does not build cash value over time, unlike permanent life insurance policies.

Overall, ART can be a good fit for individuals who require short-term coverage due to debt, travel, work, or other life changes. It provides peace of mind and flexibility at a relatively low cost for the initial period. However, it's important to carefully consider your long-term needs and compare different insurance options before choosing an ART policy.

Renewable term life insurance quotes

Renewable term life insurance is a type of policy that lets you extend your coverage at the end of the term without reapplying for a new policy or taking another medical exam. This is especially useful if you still have financial obligations when your insurance expires, such as a mortgage or college tuition payments.

Annual renewable term (ART) life insurance is the type of coverage you’re most likely to find when shopping for renewable term insurance. These policies allow you to extend your coverage every year up to a predetermined age. If you’re looking for a longer term length, some policies will allow you to renew for multiple years at a time.

While renewable term life insurance can be a good fit if you need a short-term policy, it is important to note that your rates will go up based on your age when you renew. If you think you’ll need life insurance after your policy expires, you can often lock in lower rates by buying a longer-term policy.

• EFinancial offers access to high-quality, affordable options from more than 20 providers.
• NerdWallet provides a quote for a $500,000, 10-year annual renewable term life policy for a 30-year-old in excellent health, with average annual rates from three carriers (MassMutual, Prudential, Ameritas) of $468, $505, and $525, respectively.
• Policygenius offers a quote for a $500,000, 20-year term life policy for a healthy, nonsmoking 40-year-old with an average annual rate of $26.

Pros and cons of annual renewable term life insurance

Annual renewable term life insurance is a type of term life coverage that renews every year. It is a flexible option for those who need short-term coverage and is usually more affordable in the early years. However, the premium increases with each passing year, which can make it more expensive than other types of life insurance in the long run. Here are some pros and cons to help you understand if annual renewable term life insurance is right for you:

Pros:

• Flexibility: Annual renewable term life insurance is flexible and allows for adjustments to changing needs and situations. It is a good option for those who need short-term coverage and offers the ability to extend coverage annually up to a predetermined age.
• Affordable early: ART can be very affordable in the early years, making it attractive to individuals and families on tight budgets. The initial premiums are usually low, but it is important to consider the potential increase in cost with each renewal.
• Straightforward: This type of insurance is simple and straightforward. It involves buying insurance for one year at a time, with the option to renew annually.
• Peace of mind: ART provides peace of mind, knowing that your loved ones will receive a payout if you pass away during the coverage period.

Cons:

• Declining affordability: Despite being affordable initially, annual renewable term life insurance premiums can increase significantly as the policyholder ages. The cost of coverage will likely rise with each renewal, making it less affordable over time.
• Limited coverage time period: ART is designed for short-term needs and may not be suitable for situations requiring multi-year or multi-decade coverage. If you need long-term coverage, other types of insurance, such as extended term policies or permanent life insurance, may be more appropriate.

When to buy renewable term life insurance

Renewable term life insurance is a good option if you're unsure about your need for longer coverage. It's also a good fit if you need a short-term policy for debt, travel, work, or other life changes that are hard to plan for.

You're unsure about your need for longer coverage

Renewable term life insurance allows you to decide later when your policy is about to expire. This flexibility is especially useful if you're unsure whether you'll need life insurance after your current policy ends. With renewable term life insurance, you can opt to renew without having to reapply or undergo additional screening. This can be beneficial if your health circumstances have changed, as it may be more challenging to qualify for a new policy. However, keep in mind that your rates will increase with each renewal, and there may be limits on how long you can renew.

You need short-term coverage

Renewable term life insurance is well-suited for individuals who need a short-term policy. This could include situations such as covering a short-term debt, travel, work-related reasons, or other life changes that are difficult to plan for. The renewable option provides the flexibility to extend your coverage if needed. However, if you anticipate needing life insurance for an extended period, a longer-term policy may be more cost-effective.

You're between jobs and need temporary coverage

If you're between jobs and don't have access to group life insurance through an employer, renewable term life insurance can fill the gap. It provides temporary coverage that can be renewed annually or for multiple years, depending on the policy. This ensures that you have financial protection during periods of employment transition.

You have a mortgage or other long-term debt

If you have a long-term debt, such as a mortgage, renewable term life insurance can provide coverage for the duration of the loan. This ensures that your debt can be paid off in the event of your death, providing financial security for your loved ones. By renewing the policy, you can extend the coverage for as long as needed.

You have young children or dependents

If you have young children or other dependents who rely on your financial support, renewable term life insurance can provide coverage during their dependent years. As your family situation evolves and your children become financially independent, you can reassess your coverage needs and decide whether to renew the policy.

Adding riders to annual renewable term life insurance

Riders are additional benefits that can be bought and added to a basic life insurance policy. They allow you to customise a policy and can provide several kinds of protection if you meet their conditions. While buying a rider means paying extra, the additional premium is generally low because relatively little underwriting is required.

• Accelerated Death Benefit Rider: Also called an Accelerated Terminal Illness rider, this rider can allow those diagnosed with a terminal illness to collect a portion of the death benefit while they are still alive.
• Accidental Death Rider: This rider pays out an additional amount of death benefit if the insured dies as the result of an accident.
• Child Insurance: Child riders provide coverage for your children without the high costs of a standalone child life insurance policy.
• Spousal Insurance: A spousal rider adds some coverage for your spouse to your policy, which can be useful if they don’t qualify for an individual policy.
• Waiver of Premium Rider: This rider waives your premiums if you become disabled and can’t work.
• Conversion Rider: This rider allows you to convert your term life policy into a permanent policy at the end of the term.

It is important to note that the availability and specifics of riders may vary depending on the insurance company and the specific policy. It is always a good idea to carefully review the terms and conditions of any insurance policy, including the riders, before making a purchase.

Frequently asked questions