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Annual Renewable Term Life Insurance

By Compuquotes Team on April 14th, 2010

Term life insurance is a type of life insurance that lasts for a specific term. The insured buys a term policy which they know will cover them for that term of their lives. Once the term is over, they may either choose to find a new policy, or continue to purchase their life insurance at an annual rate that usually increases.

For an annual renewable term life insurance policy, the term is one year. This is the simplest form of life insurance policy, because it will only last for one year. The death benefit is paid to the beneficiary if the insured person dies during the one year period of time in which they term lasts for. No benefit will be paid if the person dies even one day after the last day of the term.

The premium that is paid for a one year life insurance policy would be based on the actual probability that the person who has the insurance would die during the year that the term lasts. The likelihood that anyone will die during a one year period is very low, so therefore the insurer doesn't usually accept this kind of policy. In fact, one year coverage is not very common, and the purchase of this type of policy is rare.

When a term life insurance policy is renewable, whether it is a one year term, or a term that lasts longer, there are some problems that a person will encounter. First of all, if a person contracts a terminal illness during their life insurance term, but does not die before their life insurance term expires, they will be left with a terminal illness and no insurance. Because of the terminal illness, they will find that they aren't able to renew the policy, and they also are not able to buy a new policy, because a terminal illness makes someone uninsurable. Some term life insurance policies have decided to fix this problem. They have included a new feature, called re-insurability, which means that if this feature is included in a person's term life insurance, they must be able to renew their insurance for as long as they would like to, without having to provide proof of insurability.

A commonly purchased type of term life insurance is called Annual Renewable Term, or ART. This is similar to one year term life insurance, as the person does buy one year of coverage to begin with. However, there is a guarantee that the policy will be able to be continued each year, for a given period of time. This might be anywhere from 10 years to 30 years, or might even be up until a certain age, such as 95. As the person who has the policy gets older, their premiums will increase each time they renew the policy. Depending on how long they live, it might end up being much more expensive than buying a policy that would last for their entire life. However, the death benefit would still remain as long as they kept paying their premiums.

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