What is Annual Renewable Term Life Insurance?

Tricia Christensen
Tricia Christensen

Annual renewable term life insurance is a type of insurance that offers guarantees of renewability over a set term. This term could be defined as the number of years in which a person will be still eligible to purchase the insurance at the beginning of each year, though the premium price paid each year tends to go up as people age. Many people like the fact that this insurance can be renewed unlike basic term life insurance. In the simplest type of term life insurance, people may have no guarantee that they can seek renewal for the next year, and if they suddenly acquire a chronic or life-threatening illness, they could have great difficulty finding any coverage.

Patients who are terminally ill may have difficulty finding life insurance.
Patients who are terminally ill may have difficulty finding life insurance.

When people begin with annual renewable term life insurance, especially if they’re fairly young, premiums usually start fairly low, though this can vary based on personal habits like smoking, high weight level or work in hazardous jobs. Cost is also based on how much coverage a person wants. Predictably, higher amounts of insurance coverage cost more money. These policies generally pay out at full cost should the person die while covered, generally from the first day of coverage, though this should be verified.

Over the long run, having annual renewable term life insurance ends up being more attractive in some ways and less attractive in others. People have a guarantee, for as many years as the term is defined, which sometimes exceeds 20 or 25 years, that they can still have access to the same insurance policy no matter what their status, and provided the policy is kept current. On the other hand, that access gets pricier with each passing year, and toward the end of the term, people like senior citizens who have carried the life insurance for years may find it hard to afford. Additionally, if folks want to change level of coverage, they may change the policy and not have access to renewal anymore, but this can vary, too.

One benefit is if a person is still deemed insurable by various actuary measures, he or she loses nothing by switching to another plan. The insurance is usually only collectable upon death, and people don’t build up a cash value over time. Since annual renewable term life insurance has this feature of paying out fairly immediately, people don’t really lose much by switching, especially if they get a renewable plan that costs less.

There are a number of companies that offer annual renewable term life insurance, and it can be difficult to conduct a comprehensive search for the best ones. A few Internet services allow people to compare rates, and other people seek advice from insurance brokers. There are additionally many employers who offer this form of insurance, a simple yearly term to employees as part of a benefit package, and company insurance is usually one of the least expensive ways to obtain coverage.

Tricia Christensen
Tricia Christensen

Tricia has a Literature degree from Sonoma State University and has been a frequent wiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.

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