Term Life Insurance and Guaranteed Renewable Status

What happens if you have qualified for and purchased term life insurance but your health significantly changes? The good news is that the term life insurance plans we quote on this site (we cannot speak for other sites out there) are guaranteed renewable. Let’s find out why this is so important to the basic idea of life insurance protection to begin with.

We get the question almost daily, ”What if my health changes…can they cancel me?”. We can quickly calm the fears by letting them know that their coverage is guaranteed renewable. This means that as long as they pay their premium on time according to the policy requirements, the coverage cannot be cancelled. It would defeat the purpose of coverage to begin with if a term life policy could be cancelled due to health. Keep in mind that you have to be in good health in order to qualify to begin with.

The only kink has to be do with the contestability clause. The carrier may be able to cancel the policy fraud or misrepresentation of material (i.e. important or having bearing on the decision) information can be shown during the application/enrollment process within two years of the life policy effective date. This a strong reason to be honest and complete when filling out the application and during the enrollment process. If you are honest and forthright, you can then rest assured on the the principle of guaranteed renewable protection.

The only other issue is if the company itself goes bankrupt. There are two protections on this front. First, we provide life insurance companies ratings which guides you on their ability to pay life insurance benefits in the future. Secondly, there are State guarantees funds designed to protect you up to a certain level of benefit.

The protection of guaranteed renewal extends through the term or length of the policy. By definition, this only applies for your chosen term period with term life insurance. For example, if you apply for 10 years term, the coverage is only guaranteed renewable for 10 years. After this period, there may be options to renew for a term life rate but not subject to underwriting. Term life rates are primarily based on age at the time of enrollment and guaranteed for the chosen period of time. After that period, you will likely pay quite a bit more. This is why it’s so important to plan out how long a period of coverage to choose up front at your younger age. We have an entire article on how to view this question.

Rates can be increased for an entire class of guaranteed renewable policies. This means they can’t target you for your specific health status but can change rates for everyone in a demographical group. This is rare with term life insurance and much more common with health insurance (much to the irritation of health insurance subscribers).

The key to guaranteed renewable is that your responsibility is to pay the premium. We strongly recommend an automatic deduction in order to make sure the policy doesn’t lapse due to lack of payment. Carriers may also have grace periods to pay premium. It’s important to check your life policy or with us as your licensed life insurance servicing agent to know what the payment grace period is. There may also be re-instatement clauses that allow you to re-instate a lapsed policy after paying the back premiums. You never want to be in this situation and in order to keep your guaranteed renewable status, make sure to abide by the policies requirements for payment.

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