MR. WATSON: But you've got to have the option to renew on there when you first purchase the policy. In my example, did he have it on there?

STUDENTS: No.

MR. WATSON: Not all term policies have the ability to renew. Does that make sense?

STUDENTS: Yes.

MR. WATSON: You can renew a policy up to a certain number of times or a certain age, depending on each company.

MR. WATSON: When you buy a renewable term policy, the premiums look like a staircase. In this case, we have a ten-year term. A guy age 30, for ten years, he will pay $200 per year. From 30 to say 40, he'll pay $200. From 40 to 50, he's going to pay, I don't know, $300 per year. These are just concepts, the numbers don't matter. At age 50 he's going to pay maybe $500 per year. Up here at age 60, you can see the premiums starting to become prohibitive. It's $750 for the same amount of insurance. Why? We have more people dying at age 55 than 25. Remember, if you bought a ten year term policy, the premiums are level for ten years, and then they go up only because you are older, not because of your health. Y'all agree?

STUDENTS: Yes.

MR. WATSON: Say you can renew this policy all the way up to age 70 or who knows, age 80. At age 60 the premiums are starting to become prohibitive. The premiums go up each renewal but only because of age, not health.

Re-entry Option

Some insurance companies have a re-entry option . A re-entry option offers the opportunity to renew with lower rates, IF you can qualify. For example: If at age 55 they offer this benefit to you, you will have the choice to re-qualify, get another physical examination and if you pass this examination, they will lower your renewal premiums.

MR. WATSON: If you fail the medical exam, your premium, which was guaranteed to you originally, cannot be taken from you. If you pass the exam, the company will renew the policy at this lower rate.

MAN: Is the re-entry option only available at the end of the policy's term?

MR. WATSON: Generally at age 55.

MAN: Who pays for the exam?

MR. WATSON: The insurance company.

WOMAN: Is it automatic to renew? I mean, the policy states it's an automatic renewal?

MR. WATSON: In this case it would have to be, because you’re renewing for a lower rate than you otherwise would have had. If you buy a term policy, the policy will state if it is renewable or not. But if you buy a term policy, the policy will state if it is renewable or not, and whether or not you have a re-entry option.