Annual Renewable Term
A type of term life insurance that provides coverage for one year at a time and can be renewed annually without medical underwriting. Premiums typically increase each year as the insured ages, reflecting the higher risk of death.
Example
“David chose an annual renewable term life insurance policy that allowed him to maintain $250,000 in coverage each year with gradually increasing premiums as he aged.”
Memory Tip
Think 'ART = A Renewable Year-by-year Term' - you get to renew your coverage annually like a magazine subscription.
Why It Matters
Annual renewable term provides flexibility for people whose insurance needs may change frequently, allowing them to maintain coverage without medical exams while adjusting coverage amounts. However, premiums increase annually and can become very expensive at older ages, making long-term planning crucial.
Common Misconception
Many people think annual renewable term premiums stay the same each year, when they actually increase annually based on age. Others believe they can renew indefinitely, but most policies have a maximum renewal age (often 80-85) after which coverage ends regardless of health status.
In Practice
Susan buys a $500,000 annual renewable term policy at age 30 for $200 annually. At age 35, her premium increases to $250, and by age 45, it's $450 per year. At age 50, she decides to convert to a permanent life insurance policy to lock in her premium, as the annual renewable term would cost $750 that year and continue increasing substantially each year thereafter.
Etymology
Descriptive term combining 'annual' (yearly), 'renewable' (able to be continued), and 'term' (temporary period), indicating life insurance that can be continued year by year for a specified term.
Common Misspellings
Compare insurance quotes and save
Related Terms
More in insurance
Other insurance terms you should know
See Also
Need help with spelling?
Instant spelling checker with dialect variants for 2,000+ words.