What is Annual Renewable Term Life?
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.
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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.
Summary
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.
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