Is Annual Renewable Term Life (ART) Insurance For You?

Annual renewable term life insurance is perfect for individuals looking for short-term coverage with minimal payments.
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Annual Renewable Term Life Insurance

Written by Brian Greenberg
CEO / Founder & Licensed Insurance Agent

Last updated: September 14th, 2022

What is Annual Renewable Term Life (ART) Insurance?

Annual renewable term, or ART, insurance falls under the term life umbrella. Term life insurance provides coverage for individuals over a period of several years, at the end of which coverage is canceled or expires. ART life insurance, as its name suggests, has a term of one-year yet is renewable at the end of each annual term. Policyholders don’t have to reapply or submit to any additional medical exams to confirm insurance eligibility.

What Are the Benefits of Annual Renewable Term Life Insurance?

For individuals who don’t require whole life or long-term life insurance coverage, an ART policy works. For instance, a person who’s recently been laid off from work or has otherwise lost insurance coverage is a good candidate for ART insurance—especially if they plan to sign up with a future employer’s group life insurance plan once employed again.

Some of the benefits of an annual renewable term life policy include:

  • You can choose your benefit.
    Once you’ve been deemed insurable, you can choose the benefit amount that your beneficiary receives. You can also choose your benefit amount based on the monthly or yearly premium associated with each benefit tier.
  • Policies are renewable.
    Once you’ve established a policy, you can renew that policy every year for as long as you choose, and you never have to fill out another application or submit to another examination. If you decide you no longer want or need your policy or you want to research other types of life insurance, you can drop your ART policy at the end of the term.
  • Premiums are low.
    Especially during your first year of coverage, policy premiums are lower than premiums for long-term policies. That said, ART policy premiums increase annually, and while premium increases are rather minimal during the first few years of your policy, they will rise substantially in subsequent years as you age.
  • Policies are flexible.
    Annual renewable term policies are perfect for individuals who only need to bridge a coverage gap or require coverage for shorter periods.
  • Renewals are fast and easy.
    As long as you always renew for the upcoming term while your current policy is still active, there are no further medical exams necessary.
  • You can customize your coverage.
    Just like a traditional term policy, many insurance providers let you add some of the more common riders to your policy.
  • No medical exam options.
    There are many ART life insurance policies without a medical exam to choose from. By its nature, ART policies are short-term and are less risky to insurance companies.
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What Are the Negatives of Annual Renewable Term Life Policies?

As fantastic as they sound, an annual renewable term life insurance policy might not be right for everyone. Some of the disadvantages of these policies include:

  • Annual rate increases.
    Every year, your policy premium will increase in line with your current age.
  • Age limits.
    As a short-term product, ART policies cannot be renewed past a certain age. This age cap is different from state to state. Once you age out of ART coverage, you’ll have to find a different type of policy. If you are unable to medically re-qualify for life insurance, your only option may be a guaranteed acceptance life insurance policy with no health questions.

What Are the Cost Differences Between Annual Renewable Term Life and Level Term Life?

When your policy provider calculates your premium, they look at the chances you may die during that coverage period. As time goes on, those chances increase, leading to much higher policy premiums the older you get.

Your ART insurance provider will supply you with a premium schedule. This illustrates the highest rates by age for every year of your policy. It helps you plan ahead for upcoming increases in renewal payments. With Level Term policies, your rates do not increase for the life of your coverage.

If you’re young, in relatively good health, and need coverage for a few years, ART policies are more cost-effective. If you need coverage for several years, it might be a better financial decision to opt for traditional term coverage.

Does ART Life Insurance Expire?

Yes, ART policies expire annually. You need to renew your policy with your provider prior to your current term’s expiration date to continue coverage.

As a short-term product, ART policies cannot be renewed past a certain age. This age cap is different from state to state. Once you age out of ART coverage, you’ll have to find a different type of policy.

Is Annual Renewable Term Convertible?

Yes. While the specifics vary depending on your ART policy provider, you can convert your annual renewable term life policy to a whole life policy either in your first few years of holding the policy or when you turn 65. Check with your insurance provider for specific details.

Who Are the Best Candidates for ART Life Insurance?

Many people look at life insurance as a 20- or 30-year need. The individuals best suited for annual renewable term life insurance:

  • Are young and healthy
  • Only require short-term insurance coverage
  • Require instant life insurance for a court order or loan
  • Aren’t concerned about retirement yet or paying off a mortgage
  • Either do not have children or their children are grown and financially independent

Who Should Not Get Annual Renewable Term Life Insurance?

On the other hand, there are better options depending on your personal situation. ART life insurance isn’t the best option for individuals who:

  • Are older or have current health problems
  • Need long-term insurance coverage
  • Those over 65 planning on using the life insurance for final expenses
  • Are planning to head into retirement soon
  • Are still paying on a mortgage
  • Have children still living in the home or otherwise financially dependent

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