What is temporary reinstatement insurance?
Term reinstatement insurance is a type of life insurance contract that offers reduced rates for a fixed period, and which will continue to offer reduced rates if the insured person undergoes periodic medical examinations.
Key points to remember
- Term re-entry insurance is a type of life insurance policy that offers low rates for a set period of time and will remain low if the insured has periodic medical exams.
- Reinstatement term insurance first emerged in the 1970s, due to rising inflation and demand for lower premium increases on standard term life insurance contracts.
- The older an insured gets, the less benefit reinstatement term insurance offers, as it starts out cheaper but becomes more expensive with age.
How Term Reinstatement Insurance Works
Reintegration term Insurance generally offers low premiums for the first few years of the policy. In many cases, policies will not require the policyholder to undergo a physical examination during this initial policy period.
After the initial phase of the policy, however, the insured must undergo a physical examination and they are allowed to re-enter the contract with the same or very similar premiums if they pass. If they fail, however, their premiums will increase, often at higher than standard rates. lifetime policies and well above what they were paying before.
Term reinstatement insurance first appeared in the 1970s in response to the increase inflation and consumer demand for lower premium increases on standard term life insurance contracts. This was in major contrast to regular term insurance policies which were renewed each year without the need for a medical examination, but which also included higher premiums in each successive year.
Benefits of term reinstatement insurance
Back-to-school term insurance offers an option that if your health remains good, you are entitled to an insurance policy with lower premiums. Once an insured can prove that their medical condition is acceptable, they can “reinstate” the policy at the same low premiums as before.
In most cases, standard term life insurance does not offer any favorable rates for people in good health. If you are in a certain age bracket, you will probably pay the same rate as healthy and unhealthy people. Term reinstatement insurance offers a cost-benefit ratio to those who are in better health.
Term reinstatement insurance can be an attractive option for those who need coverage for a short period of time, as the low rates will remain in effect until a medical exam is required.
Of course, as reinstated term policyholders age, their health inevitably deteriorates. This means that at some point almost all policyholders will no longer be able to “re-enter” the policy and will be forced to accept higher rates.
For this reason, reinstatement term insurance is less attractive, for example, to a group of parents looking to maintain term life insurance for the next 15 years as they expect to earn mortgage payments and while their children are growing up in their home.
Parents in this situation may instead wish to consider higher level temporary cover, which offers an immutable death benefit, as well as an unshakeable premium. However, this peace of mind will likely result in a higher premium price than the initial period of a reinstatement term insurance policy.
Example of term reinstatement insurance
For example, a single father in his early 40s who is in very good physical shape with no known health problems and who owns his home can take out temporary re-entry insurance to cover himself for the remaining three years that his only child is still living. To college. If he chooses a policy with a re-entry option after the third year, then he can choose to continue coverage for the next two years when his child plans to attend college.
Provided the dad passes a medical when he returns home, he’ll likely be able to keep coverage for less than he could get with a regular or level premium term insurance policy. If he does poorly on the exam, however, he will have to pay a premium increase. If he continues to use a term reinstatement insurance policy, the likelihood of him failing a medical exam and having to pay a higher premium increases as he gets older.
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