An annually renewable term policy, also known as ART policy, refers to a type of insurance coverage that offers temporary protection for a specified period, typically lasting one year. This policy allows the insured individual to renew their coverage annually without the need for medical underwriting or re-evaluation of their risk factors.
Under an annually renewable term policy, the insured pays a premium to the insurance company, which provides coverage for a one-year period. At the end of each year, the policyholder has the option to renew their coverage for another year, with the premium amount usually increasing due to factors such as age and changes in the insured's health status.
The biggest advantage of an annually renewable term policy is its flexibility. Unlike other types of life insurance policies, such as whole life or universal life, an ART policy does not require a long-term commitment. This allows the insured to adapt their coverage to changing needs, such as mortgage payments, educational expenses, or other future financial obligations.
However, one drawback of an annually renewable term policy is that the premium increases every year due to advancing age and potential health risks. Consequently, the affordability of this type of policy may decline over time, especially as the insured individual grows older or experiences a decline in their health. Furthermore, if an insured individual develops a significant health issue, the insurance company may choose not to renew their policy.
In summary, an annually renewable term policy provides short-term life insurance coverage that can be renewed each year without medical underwriting. While it offers flexibility, the premium amounts may increase annually, potentially making the policy more expensive in the long run.
