Renewable Term
A type of term life insurance that gives the policyholder the right to renew coverage for additional term periods without providing evidence of insurability. The premium typically increases at each renewal based on the insured's attained age, but coverage can continue regardless of health changes.
Example
“David chose a 10-year renewable term life insurance policy so he could extend his coverage for another decade even if he developed health problems during the initial term.”
Memory Tip
Think 'RENEW without RE-EXAM' - you can renew your term coverage without proving you're still healthy.
Why It Matters
Renewable term insurance protects you from losing life insurance coverage due to health changes that would make you uninsurable. This feature provides peace of mind and continued financial protection for your beneficiaries, even if your health deteriorates during the coverage period.
Common Misconception
Many people assume renewable term premiums stay the same at renewal, when actually they increase significantly based on your older age. Others think renewal is unlimited, but most policies have maximum renewal ages, often stopping at age 65 or 70.
In Practice
Sarah bought a $500,000, 20-year renewable term policy at age 35 for $30 per month. At age 55, despite being diagnosed with diabetes, she exercises her renewal option. Her new premium jumps to $180 per month for the next 20-year term due to her attained age, but she maintains the same $500,000 death benefit. Without the renewable feature, her diabetes would likely make her uninsurable or result in much higher premiums with a new policy application.
Etymology
Combines 'renewable' from Latin 'renovare' (to make new again) and 'term' from Latin 'terminus' (boundary or limit). This insurance feature developed in the mid-20th century to provide more flexibility in term life coverage.
Common Misspellings
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