Term life insurance last for a specific amount of time or term. The insured individual purchases a term policy knowing that it covers them for a specific term. After the term has expired, they can either decide to get a new policy or continue to pay for life insurance with an annual rate that normally keeps increasing.
Term life insurance that is renewable annually is life insurance with a one year term. This type of life insurance is the simplest kind. It lasts for just one year. If the insured individual dies within that one year time period a death benefit will be paid out to the beneficiary. If the person doesn’t die during the term no benefit will be paid, even if they were to die one day following the end of the term.
The premium cost on one year policies is based on the probability of the insured dying during the year of the term. The likelihood of anyone dying during a particular one year term is quite low. Insurance companies don’t often accept this type of policy. One year coverage is pretty rare as well as anyone purchasing this type of policy.
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With term life policies that are renewable, whether for one year or longer, there are potential problems an individual can face. If the individual becomes terminally ill during the term but doesn’t die before the end of the term, they will end up having a terminal illness without having any insurance. Their terminal illness will prevent them from renewing or buying a new policy. They will be uninsurable. There are some term insurance policies which fix this problem. There is a new kind of feature which is called re-insurability. If a person’s term life insurance has this feature, they have the ability to renew their term insurance and not have to prove insurability.
One common kind of term life insurance that people buy is Annual Renewable Term (ART). It is similar in some ways to term life insurance for one year. To begin with the individual is buying one year’s worth of insurance coverage. However, this type of policy enables the insured to continue the policy for a certain period of time. It could be from 10 to 30 years or another option would until you reach a specific age like 95. As the insured gets older, the price of the premium will continue to increase. They could end up paying a lot more than they would have if they bought a whole life policy, depending on how long they lived. The death benefit, however, would be in effect for as long as they paid their premiums.
