Is Annual Renewable Term Life Insurance Good For You?
Annual renewable term life insurance (ART life insurance) is the ideal product for some insurance shoppers. Are you one of them? Learn how ART works, and then ask yourself the questions at the bottom of the text.
How does annual renewable term life insurance differ from ordinary term insurance?
The primary difference between the two is that ART coverage only lasts for a single year, but the policy can be renewed so that your coverage in effect lasts for many years without a gap. Renewing a policy means that you are offered the same death benefit as before, and you are charged premiums under the same rate class as before. You do not need to prove your insured's insurability when you renew. No more health exams! However, this does not mean that your rates will be exactly the same from year to year; each year, your rates increment marginally as your insured grows older.
The good and the bad
Ordinarily, term policies expire after somewhere between five and 30 years. Because ordinary term insurance does not provide an option to renew, you must apply for new coverage (if coverage is still needed). If your insured's health has failed, you will find yourself paying rates in a more expensive rate class, or you may find your insured simply uninsurable. ART, however, lets you draw out your coverage, under the same rate class, for so long as your insured is younger than the renewal age limit. (Insurers typically set a maximum age for renewing coverage. It may be very old or not so old, depending on the insurer.)
The obvious downside of annual renewable term life insurance is that it is not as simple (and may not be as affordable) as term insurance. With a term policy, you pay a fixed premium for the duration of your coverage. With an ART policy, your premiums increment every year, and the duration of your coverage is less certain, so calculating the cost of your policy is harder.
What may be more significant to you, though, is that annual renewable term life insurance is not so easy to shop for as ordinary term insurance. For term insurance, you can find hundreds of merchants who will let you compare rates from multiple insurers, online, for free, instantly. That makes it easy to choose a product and provider. Finding a website to let you compare ART quotes is quite another matterin fact, if you can find one that makes good on such a promise, you're a better searcher than I.
Is it the right product for you?
You may have already figured out the answer to this question. An important factor in choosing a life insurance product is how comfortable you are. Have you allocated risk to where you are most willing to deal with it? Are you confident in your ability to maintain your policy and collect on it if necessary? Are you willing to go through the steps of even shopping around for your product?
Yes, generally you should consider whether one option is more cost effective than another for you. However, you may be able to rule out some products before you even get to that step. Is annual renewable term life insurance right for you?
Copyright (c) 2010 Mark Manderson
by: Mark Manderson