The good news is that many of the best no exam life insurance companies in the US offer guaranteed renewable term life insurance. However, what does that actually mean and why should it matter?
Because most folks shopping for a term life insurance policy aren’t going to find themselves spending too much time discussing the potential pros and cons of a guaranteed renewable option.
When it comes time to purchase a term life insurance policy, most folks are going to focus their attention on the quality of the life insurance company being considered as well as the how much the term life insurance will cost.
Which is why…
We wanted to take a moment and discuss what a Guaranteed Renewable Option is when attached to a term life insurance policy so that folks will understand how it can affect a policyholder later in life.
Some people may decide to purchase a shorter-term life insurance policy than they may need (think 10 years when they need 12 years over coverage or 15 years when they actually need 18) because they assume that when their policy ends, they’ll either apply for a new term policy or simply take advantage of their guaranteed renewable option.
The only problem is…
Very few individuals are prepared for what they discover when it comes time to take advantage of the guaranteed renewable option.
For this reason, we wanted to take a moment and describe exactly what a guaranteed renewable option is and how it can be useful at times.
Questions that will be addressed in this article will include:
- What is a guaranteed renewable term insurance policy?
- What are the pros of guaranteed renewable term insurance?
- What are the cons of guaranteed renewable term?
- What can I do to ensure that I find the “best” term life insurance policy for me?
So, let’s dive right in!
What is a guaranteed renewable term life insurance policy?
A guaranteed renewable term life insurance policy grants the policy owner the “right” to continue to purchase additional years of coverage (on a year by year basis) without having to show evidence of health or “proof of insurability.”
Which means that…
Unlike a term life insurance policy without this option, which automatically ends after the original term period, guaranteed renewable term policies will offer the insured the option to:
continue their policy by utilizing their guaranteed renewable option versus applying for a new life insurance policy that they must qualify for.
Guaranteed Renewable Pros
It’s fair to say that having a guaranteed renewable option attached to one’s term life insurance policy is probably never a “bad thing” to have because at the end of the day, one never really knows if they may end up needing it.
Imagine if you found yourself or a loved one in a situation where they were diagnosed with a terminal illness with only six months to live while simultaneously owning a $250,000 term life insurance policy that is set to expire in 30 days.
In a situation like this…
It’s not difficult to imagine why having the ability to extend one’s term life insurance policy utilizing a guaranteed renewable option without having to provide proof of insurability might be something you would be interested in.
So interested in, that even having to pay an increased premium for this benefit wouldn’t be something you would object to!
“In cases like these, a guaranteed renewable option is truly a blessing.”
Guaranteed Renewable Cons
The only time this turns out to be a disadvantage is when you take out a term policy with a guaranteed renewable option, thinking that meant the insurance policy actually lasted until the end of the guaranteed renewable period.
And unfortunately, this is what a lot of people with term insurance think!
Let’s take a look at a situation where a woman in her mid-forties wants to purchase $250,000 term life insurance to protect her two children, ages 6 and 10.
Ideally, she would want to purchase a policy that would last until both were out of college and on their own, which means that a 20-year term life insurance policy would probably be her best bet.
The only problem is…
That 20-year term life insurance is over $20.00 a month, and in her mind, she really wanted to keep her monthly premium to less than $20.00. This is why, after hearing about the guaranteed renewable option, she decides to purchase a 15-year term policy instead because she knows she can always extend her policy later on if she needs to.
And here is where…
We can run into some problems because, over the course of 15 years between ages 35 and 50, a lot can happen to someone “medically,” and in this imaginary scenario, our client was diagnosed, treated, and cured of stage 4 breast cancer.
“Which is great!”
But the only problem is that now, as it turns out, she will need her insurance to last beyond the 15 years that she originally purchased her coverage for, which means that she is now going to have to utilize the Guaranteed Renewable Option, year after year for at least five more years after her original policy has expired (due to her pre-existing medical condition).
Each year she chooses to renew, it will renew at a more expensive rate. A rate that one day may become too expensive to maintain.
Which will be very unfortunate for her, because it will likely leave her with little or no options, due primarily to her previous stage 4 breast cancer diagnosis.
“So, in this case, because the client felt they could rely on a guaranteed renewable option later in life, they are now going to be forced to rely on it due to an unfortunate medical diagnosis.”
This brings us to the last topic that we wanted to take a moment and discuss here in this article, which is…
What can I do to ensure that I find the “best” life insurance policy for me?
If you want to make sure that you find the “best” life insurance policy that you can qualify for, the first thing you’re going to need to do is to take your time and consider all of your options.
Don’t get fooled by buying the first life insurance policy that you’re offered at the lowest price!
The first life insurance policy that you look at may be the “best” one, but now you have the information and knowledge you’ll need to make the right decision.
So, ask a lot of questions. Be sure to compare different life insurance companies against one another.
And be sure that the life insurance agent offering you a particular life insurance policy isn’t offering that one because it’s the only “type” of final expense insurance policy that he or she can offer.
The good news is…
That here at IBUSA, we specialize in helping folks find and qualify for a wide range of final expense insurance policies, and since we operate as an independent life insurance brokerage, we don’t have to rely on just one or two options.
Instead, we can shop dozens of different companies for you and help you decide which one might be right for you.
So, what are you waiting for? Give us a call today so that we can show you what we can do for you!