Thirty-year-old George wants to protect his family in the unlikely event of his early death. He buys a $500,000 10-year term life insurance policy with a premium of $16 per month. If George dies within the 10-year term, the policy will pay George’s beneficiary $500,000. If he dies after he turns 40, when the policy has expired, his beneficiary will receive no benefit. If he renews the policy, the premiums will be higher than with his initial policy because they will be based on his age of 40 instead of 30.
If George is diagnosed with a terminal illness during the first policy term, he likely will not be eligible to renew once that policy expires. Some policies do offer guaranteed re-insurability (without proof of insurability), but such features, when available, tend to make the policy cost more.
Disclaimer: Names, images and identifying details have been changed to protect the privacy of individuals.