Annual renewable term life insurance (ART), also referred to as yearly renewable term or YRT, is term life insurance that has a fixed rate for a one year period with rates that increase each year as you get older. You may choose to continue or “renew” coverage annually without proving your health but must pay an increased annual premium commensurate with your age. In other words, as you get older, the cost for an ART policy gets more expensive.
Yearly Renewable Term: For the Short Run
If you are shopping for life insurance, you will likely find that annual renewable term is the cheapest type of coverage you can buy. ART policies are great for situations where you need protection for the very short run. However, if you are in need of protection for more than 3-4 years, a 10-year level term insurance policy will in most cases be cheaper.
ART: Renewable and Convertible
Once an ART policy is effective, it is guaranteed renewable meaning that as long as you pay the premiums, the coverage can be continued. With most life insurance companies, annual renewable term policies can be renewed up to age 95. However, because rates increase significantly over time, most yearly renewable term policies are discontinued after only a few years.
Additionally, most annual renewable term policies offer a conversion feature that allows you to exchange a term policy for a whole life or universal life policy without proof of health. The conversion privilege protects your insurability and is a valuable feature in circumstances where health changes affect your ability to qualify for competitive life insurance in the open marketplace.
Annual Renewable Term: A Thing of the Past?
Not too long ago, yearly renewable term was a popular policy choice but the introduction of level term life insurance in the 80’s has dramatically reduced its effectiveness. The reason is that level term is only slightly more expensive than ART while offering a guaranteed level rate for 10, 15 or 20 years. In fact, if you are a male age 45 and in great health, you can buy a 10-year level term policy for only $50 more a year than yearly renewable term policy.
Annual renewable term offers inexpensive life insurance protection with the option to renew coverage every year at an increasing premium. Most ART policies can be renewed up to age 95 without proof of good health by simply paying premiums. If your need for life insurance is very temporary, ART is a great solution. However, if insurance is needed beyond 3 years, level term insurance is going to be cheaper over the same 3 year period. If you have term life insurance questions or would like a custom annual renewable term quote, call MEG Financial today at (877) 583-3955. We will provide you a free personalized comparison of YRT and level term life.