Renewable Term Insurance
The most basic form of life insurance is term insurance. Renewable Term Insurance is affordable coverage designed to meet immediate needs. Essentially, term insurance is life insurance stripped down to its most basic components: premium and protection. Renewable term insurance has two characteristics that make it the ideal life insurance product in many circumstances:
Because the term plan is not a commitment from the insurance company to cover the life insured for the whole of life (most renewable term policies expire by the life insured’s age 75, at the latest, and the death benefit never has to be paid) it can be made available at comparatively affordable premium rates, and
Because, in the early policy years, in any event, ten-year renewable term plans are so inexpensive, they are ideal products to protect short-term liabilities. The policyowner does not need long-term benefits, so can use renewable term policies to solve liability problems thereby avoiding the need to build up the large policy cash values and reserves required for permanent life insurance solutions.
Under this form of insurance, the insurance company promises to pay the sum insured if the life insured dies within the period specified in the policy. If the life insured is alive at the end of the period, the policy terminates on the expiry date and the life insurance protection ceases.
Term insurance is now available in a considerable array of terms, with a variety of options, with and without values. Two of the most popular term policies are the “10 year renewable and convertible term” and “term to 100”.
Almost all term insurance policies guarantee the right, under prescribed circumstances, to change, or “convert” into a permanent insurance plan without the requirement to prove good health on the part of the insured.