As we know things in life change, but can your life…
Renewable term assurance (also known as renewable life insurance) is an optional benefit that can be added to some life insurance policies.
This option allows you to extend your policy once it has come to an end, instead of arranging new cover.
It provides a simple and easy way of securing cover should you outlive your original policy.
Premiums may be slightly more for this added benefit and will increase each time you renew.
But exactly how does a renewable term assurance policy work and what are the pros and cons?
Unfortunately, renewable term assurance isn’t something we can secure for you at Reassured.
However, our award-winning team can compare quotes from some of the UK's leading providers to find you a cost-effective policy that meets all of your needs.
Keep reading to find out everything you need to know about the renewable term option…
Put in simple terms, renewable term assurance is a level term life insurance policy that includes the option to renew when the policy comes to an end.
You must choose the renewable term option when taking your policy out, it can’t be added at a later date.
It’s likely that only those in good health will be accepted for the renewable option so that insurers can protect themselves against added risk.
When renewing your policy, the term and sum assured will usually be the same as your original policy, although this may vary between providers.
Some insurers may even allow you to reduce your cover amount if your financial obligations have changed and you no longer require a high level of cover.
You won’t have to undergo any additional underwriting at the point of renewal so you won’t have to provide any new medical information. Your new premium will simply be based on your age.
When you renew, you’ll normally be given the opportunity to add the renewable option to your latest policy.
With most providers, there’s usually an upper age limit with the renewable term option (often this is around 70 years but it will depend on the insurer).
If you’ve chosen to add the renewable option to your policy, the option can be used when your term comes to an end.
For example, if you take out a 10-year policy, at the end of those 10 years you’ll usually be given the opportunity to extend your policy for another 10 years – with the same level of cover.
The renewed term and sum assured may be subject to change depending on the terms and conditions of the insurer.
If you continue to opt-in for the renewable benefit, you’ll be given the opportunity to renew your policy each time the policy comes to an end, (until you reach the upper age limit stated in your policy).
If you no longer want to renew you can opt-out of the renewable option the next time your policy comes up for renewal.
A level term life insurance policy won’t be renewable unless a renewable option is offered by the provider and you choose to add this benefit to your policy.
Not all providers offer this option.
A standard level term life insurance policy without a renewable option will simply expire at the end of the term, after this, you’ll need to find new cover.
The renewable option can only be added to a level term policy, (if this option is offered by the insurer).
However, a level term life insurance policy may not best suit your needs.
Depending on personal factors, such as your age, your health and what it is you’d like to protect there could be a better policy option out there for you.
Below you’ll see the main life insurance policy options and what they’re best for protecting.
Level term life insurance
With a level term life insurance policy, your sum assured remains fixed. This means no matter when you pass away your loved ones will always receive the same amount.
You’ll be covered for a specified period of time (the term) and a pay out will be made to your loved ones if you pass away during the term.
As discussed above (depending on the provider) you may be able to add a renewable option.
This option must be chosen when you take your policy out, it can’t be added during the term.
A pay out from a level term life insurance policy can be used to protect an interest only mortgage, cover funeral costs, cover family living expenses, or can be left as an inheritance.
Decreasing term life insurance
A pay out from a decreasing term life insurance policy will reduce over time.
This makes it ideal for covering a repayment mortgage as you can have your sum assured decrease in line with your mortgage repayments.
You’ll be covered for a set amount of time and your loved ones will receive a pay out if you pass away during this time.
Decreasing term life insurance tends to be the cheapest form of life insurance as your risk to the insurer decreases over time.
You won’t be able to add a renewable option to this type of policy.
Whole of life insurance
Whole of life insurance provides lifetime cover, guaranteeing your loved ones a pay out when you pass away.
You’ll need to pay premiums for the rest of your life in order to keep your cover in place.
Due to this, it tends to be well suited to those who’re later on in life and still in good health.
A pay out from a whole of life policy is typically left as an inheritance for loved ones to enjoy or used to cover funeral expenses.
As cover lasts for life, a whole of life insurance policy won’t offer the option to renew.
Over 50s plan
An over 50s plan provides guaranteed acceptance for UK residents aged 50 – 85, with no need to provide medical information.
This makes it an ideal option for those in this age bracket with less than favourable health.
It’s important to note that over 50s plans my include a waiting period.
This refers to the first 12 – 24 months of the policy where if you pass away due to natural causes, a pay out will not be made.
However, any premiums paid will be refunded.
It’s likely that your sum assured will also be capped at around £25,000.
An over 50s plan won’t offer the option to renew.
At Reassured our award-winning team can talk you through all the options that are available to help you find the right policy, at the best price.
Renewable term life insurance is essentially a level term life insurance policy that can be renewed when the policy comes to an end (if this optional benefit is chosen at the point of application).
Therefore, the initial premium you pay will be worked out in the same way as with a level term life insurance policy.
Your premium will be calculated using the following information:
By using this information, insurers will be able to assess the risk you’ll pose to them.
As this is an added benefit, it’s likely your premiums may be more expensive than if you chose to not have this benefit.
It’s also likely that only those who’re in good health will be able to add this benefit to their policy so insurers can protect themselves from increased risk.
Once your policy comes to an end, if you choose to renew, your premium will increase.
The price of your new premium will then be calculated by your new age.
You won’t have to provide any new medical history and your current health and wellbeing will have no influence on the price of your new premium.
The key feature of renewable term assurance is its flexibility.
When taking out life insurance (especially at a young age) it’s hard to know what might come along in your life that you’ll need to protect.
This can make the flexibility of a renewable policy more appealing as you can take out a large sum assured for a shorter term (for example 10 years) and renew your policy to keep the cover in place for longer.
However, securing cover at a younger age is when you’ll experience the most favourable premiums so securing standard cover may work out more cost-effective compared to renewable in the long run.
At Reassured, our team can help you to compare top insurers to find the highest level of cover for the lowest price.
The other main benefit of renewable term assurance is that you don’t have to provide new medical information at the point of renewal, your premium will just be based on your new age.
Whereas, when taking out a new policy, not only will your age play a factor in deciding how much your premium will be but you’ll also have to tell insurers about any new medical conditions that you have.
|Flexibility to extend your cover when the option is added to your policy||The premium you pay will increase each time you renew due to your age|
|Doesn’t require you to provide medical information when you renew||You will only be able to renew up until an upper age limit (typically around 70)|
|Cheaper than taking out a new policy at an older age with less favourable health||Not guaranteed a pay out|
|Sum assured remains the same each time you renew||Can’t increase your sum assured if you need to due to new circumstances|
As your premium will increase each time your policy is renewed, it may be more cost-effective to take out a standard level term policy with a longer-term.
This is because your premium will remain level throughout the lifetime of your policy, so you’ll always pay the same amount over a longer period of time.
If you’re looking to guarantee your loved ones a pay out, whole of life insurance may be a better option.
If you’re looking for cover that will last longer than a specified period of time, a whole of life policy may be an alternative option.
With whole of life insurance you’ll be covered for the rest of your life, meaning your loved ones are guaranteed a pay out when you pass away.
Your premium will remain fixed throughout the lifetime of your policy so you won’t end up paying more for your cover.
However, taking whole of life insurance out at a young age may lead to you paying more into the policy than it will pay out.
At Reassured we can compare multiple whole of life insurance policies from some of the UK's leading providers to find you the best deal.
Critical illness cover allows you to make an early claim on your policy in the event you’re diagnosed with a life-changing illness listed by the insurer.
If you’re left unable to work, the pay out can be used to replace any lost income.
Most providers who offer the renewable term option will allow you to add this to a life insurance policy with critical illness cover.
This means if you choose to renew your policy, the critical illness cover will also be renewed.
As critical illness is also an additional benefit, you’ll pay more for your premium to have this cover in place.
Having both a renewable option as well as critical illness in your policy may lead to expensive premiums which will only get more costly each time you renew.
Terminal illness cover allows you to make an early claim on your life insurance policy if you’re diagnosed with a life-threatening illness and given less than 12 months to live.
Terminal illness comes as standard with term life insurance policies at no extra cost.
The renewable option can be added to a level term joint policy. Any age limits in the policy will apply to the first named policyholder.
A joint life insurance policy covers two lives simultaneously. As a result, there is only one pay out, this is typically after the first death.
After this, the surviving partner will need to find new cover, as opposed to being able to renew.
We hope this article has given you a better understanding of renewable term assurance.
While we can’t secure you renewable life insurance here at Reassured, we can compare multiple quotes from some of the UK's leading providers to find a policy that meets all of your needs at a cost-effective price.
Get in touch for your free, no-obligation quotes.
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