Renewability

With the rising cost of health care, the plummeting of the nation's health, having insurance is becoming more and more important. Without insurance, even simple treatments, such as flu treatment can mean months of struggling to pay doctor bills. That is for something small, imagine the costs without insurance of a major surgery, terminal illness, etc. Basically getting insurance and maintaining it is important if you want to be able to afford health care.

For almost all policies available today, there is a clause that guarantees it is renewable. It is important that you have this clause in your policy when you purchase it, and even more importantly is that you understand this clause.

First let's look at why you need it: What it means is that even if your health worsens after you buy the policy, it cannot be cancelled. So, if you were to be diagnosed with cancer, your insurance company couldn't bail on you at the end of your term and leaving you hanging. So, do you get why it is essential to have?

Now let's look at why you need to understand it. While they can not cancel your policy, and they must still provide you coverage, no matter what your health, they can raise premiums on guaranteed renewable policies.

Renewability does not mean you will be guaranteed a good price. It only means you will be again offered the policy, although the amount you will have to put up may increase substantially.

For both general insurance and long term care insurance, this is somewhat frustrating. The older you get the greater is the probability that you will be injured or take ill. As a result carriers facing an older customer will routinely increase the amount of the premium to cover their losses, knowing full well that for a customer on a fixed budget the probability the insured will not renew increases as the amount of the premium increases.

The carriers also know with a high degree of probability when the cost of a future year will be declined, at what age most customers give up their coverage and what price increase will cause the most cancellations for those in the highest risk groups. This is the real world and there are no free lunches, but this reality is still troublesome.

So, what can you do about it? Well, almost nothing. You can find insurance with longer terms at a set price, and hope for the best. If your health decreases or your age increases, which is highly likely, your premium will go up.

The catch 22 of the situation is that while you have the option to renew, and your provider cannot legally deny you coverage, they can make the premium amount so high that you can't afford to keep it.