As we discussed previously, riders are optional features to life policies. The renewable term rider helps to increase the death benefit of a life policy through a type of secondary policy. It is less expensive than obtaining a second policy, while it preserves insurability for years to come. Let’s look at some situations when you need a renewable term rider.
Need For Extra Protection
No matter what your age is, a whole life policy will always have higher premiums than a term life policy. Why? The cash value and the length of coverage. Whole life is just what it sounds like. It will be with you for the rest of your life. Term policy is used to cover a need. It is pure protection. No cash value. As you grow older, your income and health status change. You decide to get a whole life policy say for 250K, but in reality you may still need to cover some extra credit card bills or a mortgage. A 250K policy may not cover that. You need 750K. And if you can’t afford a 750K whole life, then the smart thing is to get an extra term coverage for as long as you expect to have this extra need.
Renewable Term Rider vs Term Policy
The solution for you is to get an extra 500K in term life insurance. You can of course get straight 750K term insurance, but remember, there is no cash value. Getting a 250K whole life policy and an extra 500K term life policy, as some agents may suggest, will definitely pile up fees. It is an advantage to the life insurance agent, because he gets 2 policies, but for you, it means two policies with fees. The renewable term rider offers you the extra coverage, less policy fees. And you can also convert it later despite any possible health status changes. Meaning you already preserved a good chunk of insurability and over time, your monthly loans payments will go away, and you more than likely will be making more money. This would allow you to increase your 250K whole life to say 500K in an affordable way.
The renewable term rider preserves later flexibility in a cost efficient manner.