Guaranteed Renewable is a type of insurance policy which obligates insuring company to prolong policy as long as dues are paid on the policy. What is guaranteed is an extension of insurance but premiums may rise in order to any sort of injuries, filling of a claim or any other factors which can increase risk of claims made in the future. So it is important to say that renewable policy refers to health plans policies. What it means that insurance once signed, can not be change or cancelled before the policy end date, as long as dues are being paid what is the most important condition which makes the contract valid. The insurer must prolong the contract and the only part he is allowed to change is premium rate.
Because some of professions are considered as dangerous it is fairly possible that insurance company will sign guaranteed renewable policy for those kind of occupancies and only policy they can sign are cancellable contract.
What is the best life time to sign a guaranteed renewable Policy
Those contacts are more profitable when insuser is young and healthy at the time of signing the policy. Any kind of disease, disability or just senility may cause policy not affordable to sign.
Advantages and disadvantages
The issue that must be taken under consideration is that insurance company may bankrupt. There are two ways to prevent this situation:
- The insured may provide company ratings which helps this person to acquainted with ability of the solvency of a given company.
- The second, there are ‘State guarantees funds’ designed to protect insured and his benefits.
It is safer to use than typical cancellable contracts which not only are not automatically prolong each year but also insurance company can not refuse to renew policy.
Types of renewable insurance policies
There are three similar types of insurance policy. One of them is above-mentioned guaranteed renewable but there also is non-cancellable policy. Both of them ensure that the policy will be prolong up to specified in deal age. In non cancellable policies also the premiums cannot be changed in either way. This additional security means that non-cancellable policies are not as cheap as guaranteed renewable because the company must secure some financial security for themselves. Then premiums can be raised for life, health or some kind of disability.
Conditionally renewable limits insurer possibility of termination insurance or refusing to renew policy when it ends. Insurer is also allowed to increase dues. But this is the least common policy.
Guaranteed Renewable is very important when it goes to disability insurance. Even if your income in the moment of claims is much lower than the time you were signing the policy ,the insurance company will pay you the benefits that were promised and signed to you.
Insurance beneficiaries and Tax Benefits
When beneficiaries are using your long term care policy, payments are usually excluded from their income. Other word if insurer receives the benefits, this money is not included to your income. They are not counted as taxable. So they do not have to be afraid of losing other social reliefs because total income does not increase. The tax free value which may be changed each year is also irrelevant in this case.
- Mende J, 2010, page 472
- Marcinko E, 2010, page 104
- Weltman b., 2011
- Marcinko D. E. (2010)., The Business of Medical Practice: Transformational Health 2.0 Skills for Doctors, Third Edition, Springer Publishing Company, New York, page 104
- Mendel J., Bank M. (2010)., Australian Master Financial Planning Guide 2010/11, CCH Australia Limited, Australia, page 472
- Weltman B. (2011)., J.K. Lasser's Small Business Taxes Your Complete Guide to a Better Bottom Line, Wiley, New Jersey, chapter 2
Author: Magdalena Wójcik