Annual Renewable Term Life Insurance

What is annual renewable term?

Annual renewable term is a type of term life insurance which is renewed every year. Typically locked in a set number of years whereby you can renew a policy without re-qualifications within a specified period. It is also known as yearly renewable term or increasing premium term.

In this type of life insurance, premiums tend to increase each year as your age increases. The policy renewal could be age limited.  Whereby when you reach a certain age you may no longer be allowed to renew the policy again. Usually, medical examination is not required for the policy renewal.

Annual renewable is mostly taken by persons who are in diet or health recovery process before they move to another type of life insurance.

Premiums

This is a fee you pay for insurance policy. In annual renewable term, premiums tend to rise each year as your age. Just like in other forms of life insurance, elders, unhealthy and those who have dangerous habits like smoking, pay higher amount of premiums than others who don't.

Death benefit

Death benefit is a total amount your beneficiaries receive from the insurance company once you die. Usually, in annual renewable death benefits are fixed. This means, death benefit doesn't change through out a coverage period.

Coverage length

An annual renewable term is usually locked in a set number of years like 5 or 10 years whereby you can renew a policy each year without re-qualifications until the end of a specified period.

How does it work?

When you buy an annual renewable term, you will be locked in a period of some years of insurability in which you will be able to renew the policy every year without re-qualification process. Your premiums will also increase each year as your age rises. When you reach a certain age, you won't be allowed to renew the policy again.

Advantages of annual renewable term

1. Annual renewable is cheap compared to other form of life insurance like level term.

2. With annual renewable you can renew the policy without undergoing medical examination or re-qualification process.

3. It guarantees fixed death benefit, this will make you be able to know the exact amount your beneficiaries receive once you die.

Disadvantages of annual renewable term

1. In annual renewable, premiums increase each year as your age increases, so you may find yourself paying huge amount of premiums in your old age.

 2. Annual renewable is age limited, you may not be allowed to renew or to buy it when you reach a certain age.

Conclusion

An annual renewable term is ideal for people who want a shot term cover. For instance a person who is in ongoing process to recover his or her health can consider annual renewable cover first then move to another type of life insurance after recovery.