The pros and cons of renewable term life insurance
Find out when this type of coverage might make sense — and when it might not
When determining the best life insurance for your needs, it’s essential to weigh the pros and cons of any type of life insurance you are considering. Each will have advantages and disadvantages that will impact your family’s current and future finances, and it’s important to consider your coverage options from every angle.
In shopping for life insurance, you might have come across something called renewable term life insurance. Unlike traditional term life insurance, in which you commit to a multi-year coverage term, renewable term life insurance typically features a shorter term — sometimes as little as one year — and you also have the option to renew your policy for the same amount of coverage at the end of every term, without applying for a new policy.
Suffice it to say there are pros and cons to this type of coverage, especially when compared to traditional term life insurance. Below, we break down what those pros and cons are, to help you determine if this type of life insurance will provide the best financial protection for your family.
In this article:
What is renewable term life insurance?
Like all term life insurance, renewable is a type of term life insurance that provides coverage for a specified period based on the policy’s term. Unlike other forms of term life insurance, it comes with a renewable term clause that guarantees you can renew the policy for an additional term if you so choose, without needing to reapply or undergo a medical exam. The coverage term can be as little as a year or as long as 30 years, depending on the insurer and the policy.
Because renewable term life insurance is for a specific period of time, initial premiums are typically cheaper than those for whole life insurance policies. (A form of permanent life insurance, this type of insurance is designed to last your whole life.)
However, your renewable term premiums will increase with each renewal based on your age, sex, health, and other factors and can ultimately cost more than a permanent policy, depending on how many times you renew and how much your premiums increase.
There are a few potential advantages to renewable term life insurance:
You can get extended coverage without additional medical exams
A medical exam is typically needed to determine your eligibility for life insurance, and how much you’ll pay in monthly premiums. However, with renewable term policy, you can renew it without a medical exam, though you may need to complete a medical questionnaire for some insurers.
Flexible term lengths
Another advantage is the flexibility this type of policy provides, especially if you are interested in a shorter term than, say, the minimum 10-year policy offered by Haven Life.
Who would want a shorter term? Maybe you’re young and unsure what the future brings. You want coverage, but aren’t sure what your situation will be in a few years — maybe you’ll have kids and a mortgage, maybe you’ll be a digital nomad trotting the globe. (Hey, could happen.)
You might also be between jobs, and looking to replace the group life insurance you received from your previous employer. (Just know that, for many people, group life insurance is not enough.)
A renewable policy is ideal for such short-term scenarios.
With insurance commitments, as in other commitments (work, romance), sometimes a short-term, no-strings-attached fling is great. Sometimes, though… it’s not. Here are some disadvantages to renewable life insurance:
It can cost more
The biggest drawback to renewable term life insurance is that your premiums can change every time you renew. Going year-to-year provides added flexibility, sure, but when you renew your term, you’ll be older (definitely) and potentially in worse health, which is why your premiums increase.
With a term life insurance policy that has longer terms, such a 10, 20 or 30 years, your premiums stay fixed throughout the term. They’re known as level premiums.
So if you’re at a lifestage where you just got a new 15-year mortgage, or just got married and had kids, and you know you’ll want the financial protection of life insurance over the long haul, getting a 15, 20 or even 30-year term makes more sense because you’ll pay the same rate — likely a lower rate — over the entirety of your term.
At the end of the day, renewable life insurance might seem more flexible — it’s low-commitment, after all — but it may end up being more expensive overall.
Again, you can think of life insurance as a sort of relationship. Get it when you’re young and healthy, and you can buy life insurance at a lower rate than you’ll pay later in life. This means you can get enough coverage to provide for your loved ones — many people get 5 to 10 times their annual salary — as your family grows and your needs evolve.
Maybe you move into a new house. Maybe you decide to have another kid. Rather than constantly adjusting your policy over the years, getting an adequate amount of coverage from the get-go for multiple years can be a cost-effective way to ensure that even if things change, there’s a safety net there in the form of long-term life insurance.
It can be a hassle
We’re all busy people. Do you really want to have to evaluate whether your newer, likely higher premiums, are a good value?
Getting term life insurance is often a one-time thing. Get it, then go about taking care of the many other things clamoring for your time and energy every day.
An alternative to renewable term life insurance
While renewable term life insurance might make sense for some people, Haven Life doesn’t offer it.
Instead, you can get term life insurance policy terms of 10, 15, 20, 25 and 30 years — long-lasting coverage you can count on in the years and decades ahead, whether you’re starting a family, buying a home, or making other long-term financial commitments that will need to be taken care of in the event that you’re not around to handle them.
Find out how much coverage you might need with our free online life insurance calculator, then find out how much you might pay with our free online quote tool. You’ll be glad you did.
About Andrea NorrisRead more by Andrea Norris
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus
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