The biggest concern that people generally have when it comes to buying term life insurance – as opposed to whole life insurance – is renewing the policy at the end of the term. This is a legitimate concern, but it actually has two parts to it:
- A Higher Premium – Because you will be older by the time the initial term ends, you will have to pay a higher annual premium in order to renew the policy, and
- The Policy May Not Be Renewed – You may not be eligible to have the policy renewed due to health conditions that either did not exist at the time you took the initial policy, or have gotten worse since.
There’s not much that can be done to address the first concern. After all, life insurance is based on risk factors, and the older that you are the greater the risk you present to the insurance company of dying within the term of the policy. That will require the life insurance company to charge a higher premium to adjust for that risk.
Addressing the Second Biggest Concern People Have About Term Life Insurance
The second concern – deterioration in your health – is far scarier. Not only will it represent an additional risk factor that will raise your annual premiums, but it can also result in you’re being denied for a renewal of the term when the original policy comes to an end. After all, if you are in poor or declining health, the insurance company may decide that you represent too great a risk and choose not to renew your policy.
That is a very legitimate concern, however there is a very simple workaround to deal with that issue. It’s called the guaranteed renewal clause, and it will prevent the condition of your health from having your renewal request denied.
How the Guaranteed Renewal Clause Works
The guaranteed renewal clause is a provision in your term life insurance policy that guarantees you will have the right to renew your policy when the term expires. Essentially, it guarantees that you will have the right to renew the term without being subject to a life insurance medical examination.
Your premium rate will still be adjusted higher for your age, and very likely for the condition of your health. However, the guaranteed renewal clause will ensure that you will have coverage despite your health situation.
This is a critical inclusion in a term life insurance policy, since it is entirely possible that you may otherwise be deemed un-insurable due to a severe health condition. There is never a time when life insurance coverage is more important than when you’re in poor health. The clause will guarantee that you will be able to continue with your current life insurance policy even after the term expires.
The Good News – Most Term Life Insurance Policies Include the Provision
If you already have a term life insurance policy, it is more than likely that a guaranteed renewal clause is included. And if you are shopping for a term life insurance policy now, having this clause included in the policy should be a priority.
If you are purchasing a time life insurance policy, be sure to request inclusion of the guaranteed renewal clause. And when your policy is issued, carefully review the entire document to make sure that the provision is included.
Guaranteed Convertible Clause – Another Good Option to Have
This provision is similar to the guaranteed renewal clause. It gives you the right to convert your term life insurance policy to a whole life policy, either at any time during the initial term, or at certain points during the term. Similarly, it also allows you to apply for a whole life policy without having to take a life insurance medical exam.
None of this means that the life insurance company will not be aware of the current state of your health. Even if you don’t have to take a medical exam, the company will do a deep background check on your current and previous medical history. This will include a search of medical records, and even pharmacy records, that will enable them to know what the state of your health is. For this reason, your policy may be rated in recognition of the state of your health.
This is another provision that is common in term life insurance policies, and may very well be included in the term life insurance policy that you have right now. And once again, if you are now shopping for term life insurance policy, be sure to ask the agent to have this provision included, and make sure that it is written into the policy when you receive it.
Both provisions take at least some of the uncertainty out what will happen once the initial term of your policy expires. At a minimum, you’ll be guaranteed that you will be able to renew your current term insurance policy, or you will be able to convert it to a whole life policy – without being subject to a medical exam.
