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A renewable term life insurance is a regular term plan that allows you to renew your existing term plan after the end of the policy term without a prequalification process. Most term plans come with a yearly renewable option. With these plans, you can pay the renewal premium amount every year and continue to enjoy the term coverage. At the time of renewal, you don’t have to undergo any medical examination or re-qualify for insurance. These plans offer guaranteed renewability.
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Note: Know more about what is term insurance first before reading this article.
Let us understand this with an example:
Suppose a 25-year-old male has purchased a renewable term plan providing coverage till the age of 60. When the person turns 60 years old, he decides that he needs coverage for another 20 years. Now, the person has two options: either renew the existing term plan or purchase a new plan. In case the person buys a new term plan, the premium rate for the new policy would be way higher than the premium rate for the renewable term plan and he would have to undergo the verification process again. When the person renews his existing life insurance policy, he does not have to go through any verification process but just pay the increased premium and get coverage for an extended period.
Term Plans
Let us take a look at the term insurance benefits of renewable term insurance:
Family’s Financial Security
In case of the policyholder’s unfortunate death during the policy term, the sum assured will be paid to the family of the policyholder.
Short Term Solution
Purchasing renewable term insurance allows you to secure your family’s future for the short term without making a long-term commitment. You can extend the coverage duration if you need it in the future.
Lower Premium Rates
The premium rates for a renewable term plan start low and increase gradually with each renewal. You can also use the term insurance premium calculator to determine the approximate premium rate for your desired policy.
Easily Renewable
The biggest perk of term insurance renewal is that you can extend coverage without giving a medical exam or verification process all over again.
Renewable Term Insurance offers several important features that make it a flexible and popular choice for long-term life coverage:
Automatic Renewal:
The key feature of renewable term insurance is that you can renew your policy at the end of the term without needing to go through a new underwriting process, making it convenient if you still need life coverage.
Flexible Term Lengths:
With renewable insurance, you can renew the policy for various term lengths, such as annually, to fit your changing needs. This allows you to adjust your coverage over time as your life circumstances evolve.
No Need for New Medical Exams:
Unlike some other policies that require a re-evaluation of your health at the time of renewal, renewable term life insurance often allows you to renew without additional medical exams, simplifying the process.
Increasing Premiums with Age:
While premiums may increase as you age, the option to renew ensures that you can continue your coverage even as you grow older and your health may change.
Here is a list of people who can consider buying renewable term life insurance.
People looking for short-term coverage: People who want a short-term solution and do not want to purchase a term plan for a longer tenure can buy this plan to secure their family in the meantime.
Individuals uncertain about their retirement: Today a lot of people are uncertain about their retirement age. Some continue to work into their 60s and 70s whereas others opt-out at the age of 50. A person can increase the plan tenure in case they continue to work for a longer term.
People with a low budget: In case the premiums for a traditional term plan is unable to fit in your budget, you can purchase a renewable term plan and can get covered for as long as you want.
Individuals with improving health: If you are working on your health and have faith that in a few years, you can get healthier, then a renewable term plan might be a good temporary option for you. You can stay covered under the plan until you get healthy and buy a new term plan later.
Several factors influence the premium of your renewable term insurance:
Age:
As you age, the cost of your premiums will increase due to the higher risk of mortality. Premiums tend to rise significantly after each renewal, especially once you hit middle age.
Health:
Your health plays a crucial role in determining your premium. If you develop any serious health conditions during the term, the premium at renewal may increase to reflect the higher risk.
Policy Term Length:
The longer the term for which you renew your renewable term policy, the higher the premiums. A short-term renewal (e.g., annually) might be cheaper than a 5- or 10-year renewal.
Coverage Amount:
The sum assured or coverage amount you choose will directly impact the premium. A higher coverage will lead to higher premiums.
Lifestyle Factors:
Factors such as smoking, alcohol consumption, and occupation can also influence the premium, as these can affect your health and mortality risk.
| Feature | Renewable Term Insurance | Regular Term Insurance |
| Policy Term | Can be renewed at the end of the initial term | Fixed term (e.g., 10, 20, 30 years) without renewal options |
| Medical Exam for Renewal | No new medical exam required for renewal | No renewal option after term expiry, new policy requires underwriting |
| Premium Structure | Premium increases with each renewal due to age | Fixed premium throughout the policy term |
| Flexibility | Offers flexibility to extend coverage without reapplying | No option to extend without starting a new policy |
| Cost | Initially lower premiums, but increases significantly at renewal | Stable cost over the term, often higher than initial renewable term cost |
| Ideal For | Those unsure of their long-term needs or who may require extended coverage | Those with a fixed-term need for life coverage |
| Eligibility Criteria | Details |
| Age | Typically available for applicants between 18 and 60 years old; some insurers allow renewals up to age 75 or 80. |
| Health | Initial application may require a health check, but renewals often do not need further medical examinations. |
| Premium Payments | Regular and timely premium payments are required to maintain eligibility for renewal. Missed payments may result in policy lapse. |
| Policy Type | Only certain term life insurance policies come with a renewable option, so it's important to check if the feature is included when purchasing. |
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Renewable term life insurance is often mistaken for convertible term life insurance because of their minute similarities. Both types of plans increase the policy duration, but while a renewable term plan only increases the coverage for a limited period, a convertible term life insurance converts your current term plan into a whole life term plan i.e., provides coverage till 99/100 years of age.
Both plans do not require you to reverify your profile or clear your medical exams again. It is important to note that a renewable term plan cannot be converted into a whole life term plan, but a convertible term plan can be switched into whole life at any point.
A renewable term plan offers several advantages like low premiums, short-term coverage, and the option to save on yearly taxes. Young individuals or people with low income who do not want to make a long-term commitment can buy a renewable term life insurance plan online by comparing plans from different insurers.
Note: Check out the best term insurance plan in India and choose one that suits your requirements.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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