Can Term Life Insurance Policy Rates Be Increased?
Term life insurance is one of the most common forms of life insurance sold in the United States today. It is relatively inexpensive when compared with permanent life insurance, and high death benefits are easy to afford. The number of life insurance companies offering term policies is increasing at an exponential rate every year, and it is extremely important that consumers understand the difference between guaranteed and non-guaranteed premiums to avoid potential problems in the future.
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The Facts
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Many life insurance companies do not guarantee the premiums on their term life insurance policies. These companies often quote an attractive price that is less than the competition's premium in order to gain new clients and increase market share. The danger lies in the fact that the consumers aren't made aware of scheduled premium increases, many of which are not scheduled to occur until several years into the future.
Types
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There are two basic types of premiums for term life insurance policies -- guaranteed and non-guaranteed. A guaranteed premium is one that is contractually set at the specified level for the entire duration of the term. The premium paid by the policy owner will not increase during the original length of the term, typically between 10 and 20 years. A non-guaranteed premium is one that may be increased by the life insurance company during the course of the term.
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Identification
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When comparing term life insurance quotes, it is very easy to identify whether the premium is guaranteed or not. One of the required pages in any term life insurance illustration is a premium breakdown page, where premium payments are displayed in columns. This page will clearly define the current payment and the maximum payment for the entire duration of the term. Multiple columns often exist on this page, illustrating guaranteed and non-guaranteed premiums.
Misconceptions
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Many consumers are misled by term life insurance policy descriptions that state the policy is guaranteed to be renewable. This fact has nothing to do with the premium the consumer will pay. Instead, this describes a feature where the policy owner has been contractually granted the ability to continue coverage. Unless a term life insurance policy contract clearly states that the owner's premiums will remain guaranteed for the entire duration of the term, then the insurance carrier retains the right to increase them.
Potential
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Owning a term life insurance policy that has non-guaranteed premiums may be a cause for concern. If the life insurance company increases term premiums, the owner may be unable to pay the increased prices and be forced to cancel the policy, leaving himself uninsured and his family without adequate income protection. Further, non-guaranteed policies may be problematic if a number of years have passed since the issuance of the policy, or if the insured person's medical situation has become such that he would otherwise be uninsurable.
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