What is a Guaranteed Renewable Policy?
Let me explain to you what a guaranteed renewable policy is—it's a feature in an insurance policy that requires the insurer to keep your coverage going as long as you pay the premiums. You get guaranteed re-insurability, but remember, your premiums can go up if you file a claim, get injured, or if there's anything else that raises the risk of future claims.
Key Takeaways
You need to know that a guaranteed renewable policy means the insurer must continue your coverage if premiums are paid. Re-insurability is locked in, but premiums might increase due to claims, injuries, or other risk factors. Most insurers provide both guaranteed renewable and non-cancellable options, and the non-cancellable one gives you the added security of fixed premiums along with renewability.
Understanding Guaranteed Renewable Policies
Insurers usually offer guaranteed renewable policies alongside non-cancellable ones. If the premiums are close for both, you should go for the non-cancellable policy—it's better because it guarantees both re-insurability and stable premiums. In general, there are three main types of policies: non-cancellable plus guaranteed renewable, guaranteed renewable, and conditionally renewable.
Non-Cancellable and Guaranteed Renewable Policy
With a non-cancellable and guaranteed renewable policy, your premium schedule, monthly benefits, and policy benefits stay the same up to age 65 or another set age, unless you decide to change them. The only time this changes is if you file a claim, have an injury, or some factor increases claim risk—then the insurer can raise your premiums. This is a common choice for disability insurance. You can't predict if your income will drop in the future, but if you have this policy and become totally disabled, the company pays the full benefit you started with, even if your income has decreased. These policies cost a bit more than plain guaranteed renewable ones, but they're worth it because they shield you from big rate hikes announced by the insurer later on.
Guaranteed Renewable Policy
A guaranteed renewable policy isn't as thorough as the non-cancellable version. In the non-cancellable one, you can choose to adjust your premium schedule, benefits, or policy details. But with a guaranteed renewable policy, the insurance company holds that power, and they'll often try to reduce their liability when possible.
Conditionally Renewable Policy
A conditionally renewable policy gives you the fewest benefits compared to the other types. There's no assurance that your benefits will renew the same way each year—the insurer can alter the policy conditions annually if they want.
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