Term Life Insurance Articles
The Benefits Of An Annual Renewable Term Life Insurance Policy
2010-12-08
Life insurance policies come in two basic types, both of which have several variations. The first, which was the original life insurance policy first written years ago, is called a term life policy. Variations of this include annual renewable term and level term life insurance. The other basic form of life insurance is called whole life, of which there are six traditional forms.
While a whole life policy is designed to cover the policyholder for his or her entire life, a term life policy only covers the insured for a specific 'term'. This term is explicitly spelled out in the wording of the insurance contract. Common terms are one year, five years, 10, 15, 20 or 30 years. Annual renewable term life insurance, or ART, is, as the name suggests, a one-year contract.
A common feature of every term life policy is the fact that it is considered pure protection, unlike whole life which is associated with not only a death benefit but also an accumulating cash value. If someone covered by a term life policy dies during the term and all premium payments are current, the insurer will pay the face amount of the policy to the named beneficiary. If the insured does not die during the term of the policy the coverage simply terminates and there is no payout.
One of the main appealing factors of term insurance is that premiums are lower than those for a whole life policy with an equal death benefit. Policy cost is based primarily on the age of the policyholder and the term of the coverage. A one-year term policy has some of the lowest premiums of any policy, especially if the policyholder is at a young age, since the risk of the insured dying in the next year is relatively low. The older an applicant for term insurance is, the higher the premium will be since, statistically, an older person is more likely to die than a younger one.
Annual renewable term insurance is simply pure protection for a one-year period with a guaranteed ability to be renewed each year, for a set number of years, when each one-year term has expired. Although the cost of the coverage can be expected to rise each year, it's the guarantee to renew that is the main benefit.
To qualify for term insurance, one must show proof of insurability, which normally involves a medical examination. With annual renewable, this proof is not required for subsequent renewals. Even a terminally ill policyholder is guaranteed renewal up to the stated cutoff date, which is spelled out in the policy and may be 10, 20 or even 30 years down the road.
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Life insurance policies come in two basic types, both of which have several variations. The first, which was the original life insurance policy first written years ago, is called a term life policy. Variations of this include annual renewable term and level term life insurance. The other basic form of life insurance is called whole life, of which there are six traditional forms.
While a whole life policy is designed to cover the policyholder for his or her entire life, a term life policy only covers the insured for a specific 'term'. This term is explicitly spelled out in the wording of the insurance contract. Common terms are one year, five years, 10, 15, 20 or 30 years. Annual renewable term life insurance, or ART, is, as the name suggests, a one-year contract.
A common feature of every term life policy is the fact that it is considered pure protection, unlike whole life which is associated with not only a death benefit but also an accumulating cash value. If someone covered by a term life policy dies during the term and all premium payments are current, the insurer will pay the face amount of the policy to the named beneficiary. If the insured does not die during the term of the policy the coverage simply terminates and there is no payout.
One of the main appealing factors of term insurance is that premiums are lower than those for a whole life policy with an equal death benefit. Policy cost is based primarily on the age of the policyholder and the term of the coverage. A one-year term policy has some of the lowest premiums of any policy, especially if the policyholder is at a young age, since the risk of the insured dying in the next year is relatively low. The older an applicant for term insurance is, the higher the premium will be since, statistically, an older person is more likely to die than a younger one.
Annual renewable term insurance is simply pure protection for a one-year period with a guaranteed ability to be renewed each year, for a set number of years, when each one-year term has expired. Although the cost of the coverage can be expected to rise each year, it's the guarantee to renew that is the main benefit.
To qualify for term insurance, one must show proof of insurability, which normally involves a medical examination. With annual renewable, this proof is not required for subsequent renewals. Even a terminally ill policyholder is guaranteed renewal up to the stated cutoff date, which is spelled out in the policy and may be 10, 20 or even 30 years down the road.
