Annually Renewable Term Insurance

Renewable term life insurance

Annually Renewable Term Insurance

There are two types of life insurance: Term Life and Permanent Life insurance policy. Permanent life insurance further has two kinds: Universal life and whole life insurance policy. Term life is temporary in nature as it is for a specific time period ranging from 10-30 years, mostly.

One of the types of Term Life insurance is called ART Annual Renewable Term life insurance policy. It is one of the most short-term policies available in the market. The purpose of any life insurance policy is to cover you after your death.

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The sole reason for a life insurance policy is to make sure that your loved ones have a financial cushion after your sudden death. Protection and safety of your family is important. It is always better to sign up for any permanent life insurance policy.

It offers fixed premiums, large death benefit payout, and a cash value component. But a term life insurance is also a sensible solution when you cannot afford any permanent life policy. The term life is affordable with 1-5 times cheaper premiums than whole life or universal life. ART Annual Renewal Term life is the shortest term life policy for certain people. 

  1. What exactly is an annual renewable term life insurance policy?
  2. How does annual renewable life insurance work?
  3. What are the factors that affect the cost of monthly premiums?
  4. Who is the annual renewable term life insurance ART suitable for?
  5. How is it different from traditional term life insurance?

What exactly is an annual renewable term life insurance policy?

An ART life insurance has a time span of only one year and it has fixed premiums for that particular year. The policy covers the policyholder for only 1 year. It has the renewability option, so without giving a medical test or new underwriting, policyholders can renew it every year.

Usually renewable term life insurance has the cheapest premiums and shortest life span. It is a temporary solution which suits only certain cases. It cannot be a replacement for term life, whole life or universal life.

Let’s define it based on its name:

  • Annual: for one year.
  • Renewable: can be renewed.
  • Term: has a specific time period.

How does annual renewable life insurance work?

Basically renewable term life insurance works exactly like a level term life policy. It has a small coverage and keeps your loved ones covered for 1 year only. Premiums are very low cost and easily affordable. If the policyholder dies within this 1 year, his family will get the death benefit payout after claim approval.

What are the factors that affect the cost of monthly premiums?

Like all other types of life insurance, its monthly premiums are affected by:

  1. Age of the policyholder.
  2. Gender of the policyholder.
  3. Health of the policyholder.
  4. State where the policyholder lives.
  5. Tobacco usage history of the policyholder.

However, there are some other factors too for instance if the policyholder bought a smaller term, premiums would be lower. If he is younger, the premiums would be cheaper.

Who is the annual renewable term life insurance ART suitable for?

Only specific cases should go for it since it is a truly short-term solution.

People who are changing their job and employer

If a guy was a 53 years’ old managing director of a firm and was insured with a Group Life Insurance through the employer. And he leaves the job, the group life by employer does not cover him now. A ART annual renewable term life insurance policy is a temporary ad hoc solution for him. While he lands another during the next few months, this is a good option to keep his 3 kids and wife insured.

Instead of going uninsured, it is always better to buy an interim ART life insurance policy God forbid anything happens to him or his family.

People with Risky Jobs

People who have a risky career like a fire-fighter find it nearly impossible to land approval for any type of life insurance. The jobs with occupational hazards limit your reach to a whole life or universal life insurance policy. They can choose this ART life insurance policy.

Smoker Trying to Improve his Habits and Health

If a smoker is trying to become eligible for a whole life or universal life policy, but he has to quit smoking. It can be a cushion for 5-7 years to keep renewing an annual renewable term life. He can become eligible for a permanent life insurance policy. But this is the case where the premiums would become affordable for him due to quitting smoking.

Premiums of term life, universal life, or whole life are considerably higher for smokers and not easily affordable. Using ART life insurance for 5 years and staying insured could be a sensible move.

Person who Lacks Budget

People who cannot afford to buy term life, universal life, or whole life should choose ART life since it is really cheap. Always remember that no matter what this is only a temporary solution. Make sure you buy a good life insurance policy as soon as you become financially stable.

To Repay a Short-Term Small Loan

If a person has to pay back any small loan, this is a suitable option. Always keep in mind that it is affordable only now. With the passage of time, your age and premiums become higher with your age. Every year you are paying higher premiums and you cannot afford it for long.

How is it different from Traditional Term Life Insurance?

Term Life Insurance PolicyAnnual Renewable Term Life Policy
This is for a term ranging from 10-30 years.This is for one year only.
This has somewhat fixed premiums.Premiums become higher with every new year renewal.
This is convertible to a permanent policy.No option for conversion.
Term Life is suitable for some needs.Suitable for only 3-5 types of people.

Bottom line

Generally speaking, Term Life itself is the least preferable option compared to all other types of life insurance. Term life is for 10-30 years and your family will cherish it only if you die within that term. Otherwise there is no coverage or death benefit payout, either you sell your term life, renew it at awfully higher premiums after 30 years, or you convert it into a permanent life policy.

ART Annual Renewable Term Life is worse, in that way. It is so short-term that it should be considered as the last resort to choose. If you’re not insured for any gap, buy it as a temporary solution to at least stay covered. However, it is better for people with occupational hazards, smokers, people indebted by small loans, people who really cannot afford any other type of life insurance, whatsoever! Contact Insure Guardian to get an Annually renewable term life insurance quote.