What Is Annual Renewable Term Life Insurance

Is annual renewable term life insurance the right choice for you? Deciding which type of life insurance to buy is an important decision. At first, it may feel overwhelming to discover just how many different types of life insurance there are. But while having a lot of options means the decision making process is more complicated, it also means you’ll be better able to get a policy that fits your specific needs. Keep reading to learn about one option—annual renewable term life insurance—that could be the right choice for you.

What Is Annual Renewable Term Life InsuranceAnnual Renewable Term Life Insurance

Annual renewable term life insurance is a type of term life insurance. Term life insurance lasts for a specific period of time (term). The policy holder is covered within the limits of the term. After the term is up, coverage ends and the policy holder either must renew or find another policy to continue having coverage. Generally a term life insurance policy may last from five, to ten, or as much as 30 years.

Annual renewable term life insurance has a term limit of one year. Should the insured die within that one year, the beneficiary would receive the death benefit. However, if the policy holder lives longer than the one year (even by as little as one day) then the beneficiary receives nothing. You can renew an annual term life policy should the need arise after the first year. However, the premium rates would most likely rise as the risk rises.

How Does Annual Term Compare to Traditional Term Life Insurance?

The length of time of the term is obviously one way that annual term life differs from other types of term life insurance. Basically in order for the benefit to be paid out, the insured must die within one year. The premiums for an annual term life insurance policy are also typically higher than many regular life insurance policies. While there is the option to renew after the first year, the premiums aren’t guaranteed and will change. Because of the limitations involved, annual renewable insurance policies are pretty rare.

Who Should Consider Annual Renewable Term Life Insurance?

Persons who are ill and do not suspect to live for more than a year are good candidates for an annual renewable term life insurance policy. This is especially true if the sick person does not have any other type of life insurance policy. It’s not a good option for those who are very young or who are in good health no matter what the age.

Even those who are getting up in years or with a health condition that has yet to become life-threatening would be better off opting for a term life insurance policy with a longer limit—say five or ten years. In the end, which life insurance policy is best for you will depend heavily on your particular circumstances, so be sure to look around and be as informed as possible before you decide.