Guaranteed renewability protects policyholders from reclassification risk. Being an important characteristic of social health insurance, the potential for private insurance markets is high given its property of competing with risk selection. Without regulation—because health care expenditures increase strongly near death—it seems questionable whether insurers will be able to sustain guaranteed renewability in the long run, rather than investing in risk-selection activity. Extending the seminal model of Pauly et al. (1995) to include policyholders with improving risk status and the high cost of dying, we show that the actuarially fair guaranteed renewable premium in realistic conditions becomes lower, suggesting that prior studies have overestimated the economic cost of guaranteed renewability, making it more affordable and accessible in practice. Our findings illustrate the potential to overcome the common market failure associated with risk selection by introducing guaranteed renewability into an existing risk-based system.