What Is Re-Entry Term Insurance?

Re-entry term insurance is a form of renewable term policy that offers low rates for an initial fixed period. After a certain number of years, the policyholder can take another medical exam to extend the coverage. If the insured passes the new exam, they typically qualify for lower rates than the existing guaranteed renewal rates that do not require a medical exam.

How Re-Entry Term Insurance Works

Re-entry term life insurance typically offers low premiums for the first several years of the policy. Like other types of 澳洲幸运5官方开奖结果体彩网:renewable term, those premiums do not change during that time period. The insurance company also does not require the policyholder to provide 澳洲幸运5官方开奖结果体彩网:evidence of insurability (i.e., take a physical examination and provide other information) during these initial years of the contract.

After the initial phase, however, policyholders have the option to again go through the medical 澳洲幸运5官方开奖结果体彩网:underwriting process, including a physical exam. If they pass, they are allowed to re-enter the contract with the same or similar discounted premiums. If they fail, however, their premiums will increase to the policy's guaranteed renewable rates. These new rates are often above those of standard 澳洲幸运5官方开奖结果体彩网:term life policies and well above what they were previouꦛsly paying. Likewise, if they choose not to take a physical exam, they will lose their preferred premium rates.

Regardless of whether the insured passes the medical exam, premiums may still go up during each new time period. While some insurers guarantee premiums throughout the life of the policy, most adjust the premiums based on the insured's 澳洲幸运5官方开奖结果体彩网:attained age at the time of each re-entry. In that case, even if your health remains sound, you can expect some increase in costs.

Re-entry term insurance first appeared during the 1970s in response to increased 澳洲幸运5官方开奖结果体彩网:inflation and consumer demand for lower premium increases on standard term lꦗife contracts. It provided an option to regular term insurance policies that renew annually without a medical exam but at even higher premiums each year.

Benefits of Re-Entry Term Insurance

Re-entry term insurance provides an option whereby if you remain in good health, you are entitled to an insurance policy with lower premiums. Once a policyholder can prove their health is acceptable, they can "re-enter" the policy at the same, low premiums as before.

For the most part, standard term life insurance does not provide any beneficial rates to those who maintain good health after the policy is issued. If you are within a certain age bracket, you will෴ most likely be paying the same rate as people with good health and poor health. Re-entry term insurance provides a cost benefit to those who are in better health.

Re-entry term is also more beneficial to people who need coverage for a short period of time. Premiums are lower than other alternatives during the initial period (such as the first five years after issue). However, the policy can also be seen as a gamble that you will not experience poor health conditions before the next re-entry period.

Special Considerations

Re-entry term insurance may be an attractive option for those who need 🔯insurance for a short period of time since the low rates will stay in effect until a medical examination is required. To qualify for the better rates, you must meet the underwriting limits at each re-entry for such factors as health, height, weight, and smoking status.

Of course, as po༒licyholders age, they will inevitably experience deteriorating health. At some point, most policyholders will not be able to “re-enter” the policy. They must ꧑then either accept higher rates or cancel the coverage.

For this reason, re-entry term insurance is less appealing for certain situations. One example is parents who plan to maintain term-life coverage for the next 15 years as they make mortgage payments and their children grow up in❀ their household. It's likely that ov♚er the next 15 years, one or both parents could develop health issues that drive up the cost of re-entry term.

The parents in this situation may want to instead consider 澳洲幸运5官方开奖结果体彩网:level-premium term coverage. These policies offer an unchanging death benefit and an unwavering premium during the entire term, which can last up to 30 years. In🌜 exchange, leveꦅl-premium term policies charge more at first versus the initial period of a re-entry term policy.

Example of Re-Entry Term Insurance

A single father in his early 40s who is in very good physical shape with no known health problems and who owns his home outright might take out re-entry term insurance to cover ♑himself for the three remaining years while his only child is still in college. If he chooses a policy with a ♌re-entry option after the third year, he could then decide to continue the coverage for the next two years as his child attends graduate school.

Provided the father passes a physical upon re-entry, he will likely be able to keep the coverage at a lower price than he could from a regular or level-premium term policy. If he performs poorly on the exam, however, he will need to pa🍸y an increased premium or find other coverage. If he continues using a re-entry term insurance policy into the future, the likelihoo🐻d of him failing a medical exam and having to pay more increases as he gets older.

The Bottom Line

Re-entry term life insurance can provide a low-cost insurance solution 🎃for temporary financial risks if you are in good health. However, as you age or if your health status worsens, you may find yourself paying more for re-entry term than you would for conventional term life. As a result, most people only choose re-entry term insurance to address short-term insurance needs.