Renewable Term Insurance
Renewable term life insurance pays out a guaranteed lump sum in the event of the death of the insured person within the term of the plan.
If desired, critical illness cover may be included, at an extra cost. Critical illness cover can normally only be included when the policy is originally taken out.
It is similar to level term assurance, but normally only has a term of 5 years. Some insurance companies offer renewable term insurance for a term of 10 years.
However, immediately prior to the expiry of the 5 or 10 year term, the insurance company will allow the cover to be renewed without any medical evidence and with guaranteed acceptance.
The policy can usually be renewed in this manner every 5 (or 10) years without any medical evidence, up to an age – which would be stated in the original policy - at which the insurer will not allow the cover to be renewed any further.
The premium will be fixed for each 5 or 10 year period, but upon renewal, the premium for the next 5 or 10 year period would be based on the age of the insured person at the time the cover was renewed, and is thus likely to get progressively more expensive.
The cover will end on a specified date, which will be detailed in the policy document. There will be no cash return, except in the event of a claim within the term of the cover.
If the premiums of the renewable term plan are guaranteed, this means they are fixed and will not increase for the duration of the renewable term plan, unless indexation has been selected at outset, in which case the premiums and the sum assured will increase in line with the chosen indexation.
If the premiums are reviewable, your premiums can be increased if your insurance company has heavier than expected claims from its other customers.
