renewable life insurance policy

About Guaranteed Renewable Life Insurance

I am drawing special attention to the phrase “Guaranteed Renewable” in life insurance contracts because it is easy to misinterpret. When heard in a TV commercial: “Our policies’ rates are guaranteed for the first 20 years and are guaranteed renewable thereafter to age 100”—or something similar.

This is not a false statement, but it is only partially true. The policy is guaranteed renewable after 20 years but not at the same rate you have paid for the first 20 years. The policy is not guaranteed to renew at your same or original rate. It is guaranteed renewable, but usually at a rate many times what you paid for 20 years.

Will My Renewable Life Insurance Be Renewed at the Same Rate? No.

TRUE: the policy is guaranteed renewable.

FALSE: the policy is guaranteed to be renewed at the original rate.

And premium increases after 20 years can be staggering.

What to do? Do your homework. Determine carefully how many years you need insurance coverage (err on the long side). Buy a guaranteed-rate policy that lasts the entire period of time so your rates are locked in for all those years.

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