What is a key difference between term life and renewable term life?

What is a key difference between term life and renewable term life?

• A. Renewable term allows extension at the end of term, often at higher premium.
• B. Term life provides coverage for a fixed term; renewable term allows extension at the end of term, often at higher premium.
• C. Term life accumulates cash value; Renewable term does not earn cash value.
• D. Term life requires medical exam; Renewable term does not.

Answer: (B)

The key idea here is how renewal works. Term life covers you for a fixed period with level premiums for that term. Renewable term, on the other hand, lets you extend the coverage when the term ends, without showing medical evidence, but the new premium is usually higher because you’re older. So the main difference is the option to renew the policy and the accompanying increase in price at renewal, versus a straightforward fixed-term coverage with no renewal option. Cash value isn’t part of term or renewable term, so that feature isn’t what distinguishes them.

The key idea here is how renewal works. Term life covers you for a fixed period with level premiums for that term. Renewable term, on the other hand, lets you extend the coverage when the term ends, without showing medical evidence, but the new premium is usually higher because you’re older. So the main difference is the option to renew the policy and the accompanying increase in price at renewal, versus a straightforward fixed-term coverage with no renewal option. Cash value isn’t part of term or renewable term, so that feature isn’t what distinguishes them.