Which of the following best describes Annually Renewable Term Insurance?

Which of the following best describes annually Renewable Term Insurance?

A) It requires proof of insurability at each renewal.
B) Neither the premium nor the death benefit is affected by the insured’s age.
C) It provides an annually increasing death benefit.
D) It is level term insurance.

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The Correct Answer is D) It is level term insurance.


Annually Renewable Term Insurance

Annually Renewable Term Insurance (ART) is defined as a form of term life insurance which offers a guarantee of future insurability for a set period of years. During the stated period, the policyholder will be able to renew each year without reapplying or taking another medical exam to reaffirm eligibility.

ART is a life insurance product meant to be used in the short-term. One of the benefit of ART is that the policy can be renewed annually without the need to reapply or take another medical exam. They are considered to be the least expensive life insurance policy option regarding the premium.

Annual renewable term life insurance is a short-term policy. Traditional Term life policies are relatively expensive when compared to one-year policies. Term life insurance covers a period of 10, 20, or 30 years and the monthly payment remains the same throughout. Annual Renewable Life insurance does not work that way. You usually pay a higher premium as you age, and it is renewed each year. Fidelity Life says that although your premiums may increase each year based on your age, you won’t have to undergo a physical exam every time you renew.

Over time, annual renewable life insurance becomes more expensive .Annual renewable policies are best suited for younger adults who are healthy because the risk of dying is lower, so the rates will initially be lower than traditional life insurance. However, as you age, your premium rates rise. This is the time to consider a traditional term life insurance policy for 10, 20, or 30 years. The purpose of annual renewable term life insurance is to provide short-term coverage. Eventually, you should switch to a traditional term life policy since a renewable term life policy will end up costing you more in the long run.

The cost of a 10-year term life insurance policy for a 36-year-old non-smoking male at $170 a year can be reduced to $140 per year with a renewable term. After four years, the renewal policy premium becomes more expensive than the 10-year term life policy. Due to renewable life insurance’s annual nature, it is harder to compare quotes online. You will most often be referred to an agent or directed to a traditional term life insurance quote if you use an online portal.

Therefore, it will be necessary to do more research to secure renewable life insurance than can be accomplished with traditional life insurance. It is always advisable to compare multiple insurance quotes when shopping for coverage to find the best affordable one.

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