Renewable term life insurance is an insurance policy that provides coverage for a specified period, with the option to renew the contract upon its expiration, without requiring a new medical examination of the insured. During this period, if the policyholder dies, the designated beneficiary receives the agreed amount. On the other hand, unlike traditional life insurance, note that renewable term life insurance has no surrender value. In other words, if the insured survives the maturity of the contract, he or she does not receive any benefit from it. Renewable term life insurance is not a savings solution. It is in no way a means of growing capital.
How does the subscription of renewable temporary life insurance work?
Applying for renewable term life insurance always begins with a thorough assessment of the potential insured. This step usually includes a medical analysis, a lifestyle review and sometimes even a family health history investigation. This information allows the insurer to assess the level of risk and determine eligibility and the cost of the premium. Thus, although the eligibility criteria vary from one insurer to another, they most often focus on the health, age, lifestyle habits (such as smoking or extreme sports), and sometimes the occupation of the insured. It is based on all of these elements that the insurer offers a contract and a precise rate.
Duration : the contract is established for a fixed period, often between 1 and 10 years. This parameter is defined according to the needs of the insured and the insurer’s offer.
Premiums : This is the amount paid periodically by the insured to maintain coverage. Premiums are generally fixed, but they increase with each renewal. Their cost is influenced by several factors specific to each insured and each insurance company.
Coverage : This element refers to the amount paid to the beneficiary in the event of the death of the insured during the coverage period. Obviously, the higher the amount, the higher the price of the premiums.
When and how does the renewal of renewable term life insurance occur?
The renewal of renewable term life insurance occurs at the end of the initial coverage period, stipulated in the contract. As this date approaches, the insurer informs the insured of the possibility of renewing his policy. In the majority of cases, no additional health examination is required.
Premiums : At each renewal, the rate of renewable term life insurance may increase. This increase reflects the increased risk associated with the insured’s advanced age, and potentially the deterioration of their health.
Coverage : At the time of renewal, the insured also has the option to change the amount of coverage initially chosen. Obviously, this can then affect the amount of the premiums.
Contract conditions : For the insurer, this is a good time to update certain conditions of the renewable term life insurance, such as clauses and exclusions.
The coverage period refers to the interval during which the insured is protected by the insurance policy. This duration is defined when the contract is initially taken out and may vary depending on individual needs and the insurer’s offers. Generally, the coverage periods for this type of insurance are short (between 1 and 10 years) and renewable at the end of each term. On the other hand, during the entire coverage period, the premiums must be paid. Without this, the contract is automatically terminated.
The amount of the benefit paid by the insurer in the event of death is determined when the contract is taken out. It then generally remains constant throughout the life of the insurance.
Each renewable term life insurance policy may include specific clauses and exclusions. Thus, the conditions for payment of benefits must be clearly stated when subscribing. These are written in the contract. For example, it is not uncommon for companies to exclude the payment of benefits for deaths resulting from high-risk activities.
Can the term life insurance contract be modified?
In most cases, the term life insurance contract can be modified. However, the flexibility varies depending on the policy of each insurer. The modifications can then concern several aspects:
When a renewable term life insurance policy expires and is not renewed, the coverage it provides ends. This can happen for a variety of reasons, such as the policyholder deciding they no longer want the coverage or financial constraints preventing them from paying the renewed premiums, which are often higher than the original premiums.
As seen above, upon expiry of renewable term life insurance, no cash value is available. It is therefore crucial for policyholders to be aware of this expiry and to plan their estate strategy accordingly. Indeed, any death occurring after this date does not give rise to any benefit for the beneficiaries. A reassessment of insurance needs before expiry is therefore recommended.
Renewable term life insurance is similar to adjustable protection, particularly relevant in light of the constantly changing world we live in. However, before subscribing, take the time to carefully analyze your personal needs in the short and long term. Also, do not hesitate to seek the help of a specialized advisor, in order to better understand all the specificities, advantages and limits of this insurance policy.
