What is the Renewal Date?

When you buy term life insurance you will know exactly what the period of coverage is. The date the coverage expires is also called the "Renewal date." This means the insurance company has the option of offering you a renewal of the policy. Now, a renewal offer is not guaranteed unless you have a guaranteed renewal clause in your policy. In that case you are guaranteed to be offered a renewal but the premium will be adjusted to reflect any changes in your risk portfolio.

Guaranteed Renewal Offers

The most effective way to explain renewals is through an example and by getting familiar with life insurance terms. Let's say that John Doe buys a term life policy with a guaranteed renewal clause in the policy. He is 20-years-old and the policy runs for a term of 25 years. John Doe reaches the end of his policy. He is now 45-years-old and has been diagnosed with high blood pressure. He is overweight. The insurance company is going to look at his increased age, chronic disease, and overall health when deciding what premiums they will offer in the renewal offer. Their increased risk has to be offset by increased premiums. John would have been better served by requesting a renewal prior to his increased age and health problems. For example, he could have approached the insurance company and asked for a renewal when he was in his late 30's. This would have bought him more time on the policy with lower premiums.

If you do not have a guaranteed renewal clause in your life insurance policy that does not mean you will not get a renewal offer. Likely, prior to the end of your policy, your insurer will want to start a conversation with you to gauge your interest in a renewal offer. They might even send you an estimated offer before you request it. Or, they will terminate the policy as dictated in the agreement and you would have to find new coverage.

Bear in mind that guaranteed renewal clauses usually accompany non-cancel clauses in your policy. You kind of pay for the luxury of renewal by agreeing to see the policy through to the end. With insurance companies there is a constant battle to stay profitable. The entire reason for their existence is profitability. When you look at it that way you can better understand their processes.

Renewing Your Policy

Whether or not you renew is up to you. You have to look at the renewal offer and decide if the premiums are within your reach. You will have time to look to other companies to beat the offer. You can request online quotes from dozens of other insurers and compare premiums. It is important to remember that all quotes are just estimates. Utilize the internet to let other insurers know that you are on the market. Call some agents, tell them what your renewal offer is and ask them if they can beat it. Use the competition in the market to your advantage.

When you purchase a term life insurance policy a guaranteed renewal is a good thing. An even better plan is to renew before the renewal date. This allows the consumer to purchase a longer term policy while they are younger and healthier. This means more affordable premiums. If you wait until the policy is set to expire, you will pay more for your increased age. The renewal date is your last chance to strategically plan your future coverage. Don't hesitate to contact your insurer and ask about renewal prior to the renewal date. You just might get a better offer.

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