Mar 28
When would someone buy annually renewable term (ART) life insurance?
We’re seeing less and less of annually renewable term (ART) life insurance. Let’s look at what it is first. Annually renewable term is term life insurance policy which has premiums that are adjusted upwards each year to reflect the increasing probability of your death in any given year.
Currently, guaranteed level term policies are the most popular. This is a type of coverage has premiums that are designed to remain level for a period of 5, 10, 15, 20, 25 or even 30 years. So, why would one buy ART if after the first year the policy will be more expensive than if you were to buy a guaranteed level term policy? Most of the time these types of policies are purchased when the need for life insurance is only a year. Most of the time, this happens in some sort of business deal. However, even then, I would recommend buying a 10 year level term. It usually doesn’t cost more and you could always keep the policy if needed. Remember, we can’t predict the future so you never know what your future insurability will be.
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March 28th, 2007 at 11:44 pm
With ART, what other reasons (aside from a business deal) would there be for selling insurance policies like this? And at what age do the premiums begin to increase? Is the risk of death really that much higher from age 30 to age 35? Thanks for the information, it is interesting.
Jerry<
March 29th, 2007 at 8:47 am
Jerry –
In today\’s market, almost never. The price of ART is usually higher, even in the first year, than 10-year level term. As such, one would have to be a fool to buy it, even if you only needed it for one year.
March 29th, 2007 at 5:42 pm
Right on target. Why would anyone buy ART? It just doesn\’t make sense.