Why Enroll in Annual Renewable Term Life Insurance?

Annual renewable term life insurance is coverage that is renewed every year. As with term coverage, a person is covered only for a specified period of time. The majority of plans last from five to thirty years. After the expiry of the term a you have to renew the coverage or the coverage expires.

In the case of annual renewable term life insurance, the coverage is provided only for one year, and the policy holder has the option to renew it after that. The benefit of enrolling in this plan is that it provides flexible options in life insurance. Since the policy can be renewed every year; the insured person does not have any long term commitment to the policy.

This is a good option for people who need coverage for a short period of time: For example, while they are switching from one job to another. Another big advantage of annual renewable term life insurance policies is that they are affordable. Initially, the premiums are much lower than long term coverage.

Statistically it is less likely that a person will die within an year of taking the policy. There is a higher risk associated with enrolling a person for five, ten or thirty years. However, premiums increase with age, and this happens every year. Unlike standard term coverage, a person has to pay more for a longer period instead of a fixed premium for life policy.

Drawbacks of Annual Renewable Term Life Insurance

The features that are beneficial in some situations may be a draw-back in other situations. The comparatively short period during which the protection is provided can be an issue. The policy holder may not be able to afford the year on year increase in premiums, for example.

If the policy holder is diagnosed with a medical condition it will become difficult, if not impossible, to renew the policy. Some states make it mandatory that insurers should renew insurance plans.

Should a person Choose Annual Renewable Term Life Insurance?

If you cannot afford to pay large monthly premiums for a long time it is better to enroll in annual renewal term life insurance. It can be a sensible move if you expect your salary to increase. As your income increases you are in a better position to pay the premiums for a longer period of time.

People who were covered through an employer benefit program but are out of work temporarily also benefit. You can have coverage for a short period of time through annual renewable term life insurance until you are able to purchase a permanent plan or get enrolled by your new employer.

Working of Annual Renewable Term Life Insurance

The low probability of dying during a one year policy forms the basis of annual renewable term life insurance. In some cases the policy can be renewed automatically, which can be guaranteed every year until the you reach a certain age.

If you are between jobs or experiencing a temporary lapse in the insurance coverage, annual renewable term life insurance is for you.  Annual renewable plans are offered with the lowest premiums. The length of the term is short and there is very low amount of risk for the insurance provider.

Even though the initial premiums of renewable plans are low, they can be quite expensive in the long run.  Level term plans premiums remain the same throughout the term, the premium for annual renewable term life insurance increases every year. In some cases the cost may be more than permanent life coverage.