Term Life Insurance Articles
Why Renewability Poses A Problem For Some Term Life Insurance Holders
2010-01-26
Renewable term life insurance sounds like a great buy. The plans work like any other term insurance plans--the policy holder pays a premium each month, and if he or she dies within the term of the policy, the beneficiaries on the plan receive the amount of the coverage. The big difference is that renewable plans typically have lower terms than other types of policies, some as short as one year. The policies are sold with the idea that if the buyer wants, he can keep extending the period of the policy, but if his finances change or he wants to cancel coverage for any other reason, there's a simple, logical time to do that--before the renewal. Renewable term life insurance policies are often much less expensive than longer term policies or other types of life insurance (such as whole life and universal insurance policies).
The problem is that when the policy is renewed, the premiums increase. This is because the person is more of a risk than he was when the first term of the policy was purchased. There's a higher chance that the policy holder will possibly die, simply because of his age. The changes in term life insurance quotes that the individual will receive are gradual at first, but over time, they add up. At some point, it costs far much more to buy a renewable term life insurance policy than it would cost to buy one of the other forms of life insurance.
Many consumers buy renewable plans, attracted by the low term life insurance quotes that they see advertised. There's nothing wrong with this, but in the long run, they might find the plans unaffordable when they're needed the most, in the later stages of life. That's not to say that there aren't significant benefits to renewable term life insurance policies for some people. For instance, if a younger person needs a policy with a cheap rate until he or she can afford a different type of insurance, it can be a great buy.
When buying a life insurance policy, it's important to understand how your policy will react over time, and level term life insurance plans might be a much better decision for consumers that can afford them. Other types of policies can also be better investment opportunities, for instance convertible term life plans (which can become whole life plans after a certain point) or return of premium (sometimes called ROP) policies. Life insurance is important in most people's lives. You want to be sure you and your loved ones are protected properly. By taking time and doing some research on the different offerings available, any consumer can find a life insurance policy that matches their situation.
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Renewable term life insurance sounds like a great buy. The plans work like any other term insurance plans--the policy holder pays a premium each month, and if he or she dies within the term of the policy, the beneficiaries on the plan receive the amount of the coverage. The big difference is that renewable plans typically have lower terms than other types of policies, some as short as one year. The policies are sold with the idea that if the buyer wants, he can keep extending the period of the policy, but if his finances change or he wants to cancel coverage for any other reason, there's a simple, logical time to do that--before the renewal. Renewable term life insurance policies are often much less expensive than longer term policies or other types of life insurance (such as whole life and universal insurance policies).
The problem is that when the policy is renewed, the premiums increase. This is because the person is more of a risk than he was when the first term of the policy was purchased. There's a higher chance that the policy holder will possibly die, simply because of his age. The changes in term life insurance quotes that the individual will receive are gradual at first, but over time, they add up. At some point, it costs far much more to buy a renewable term life insurance policy than it would cost to buy one of the other forms of life insurance.
Many consumers buy renewable plans, attracted by the low term life insurance quotes that they see advertised. There's nothing wrong with this, but in the long run, they might find the plans unaffordable when they're needed the most, in the later stages of life. That's not to say that there aren't significant benefits to renewable term life insurance policies for some people. For instance, if a younger person needs a policy with a cheap rate until he or she can afford a different type of insurance, it can be a great buy.
When buying a life insurance policy, it's important to understand how your policy will react over time, and level term life insurance plans might be a much better decision for consumers that can afford them. Other types of policies can also be better investment opportunities, for instance convertible term life plans (which can become whole life plans after a certain point) or return of premium (sometimes called ROP) policies. Life insurance is important in most people's lives. You want to be sure you and your loved ones are protected properly. By taking time and doing some research on the different offerings available, any consumer can find a life insurance policy that matches their situation.
