What is Annual Renewable Term Life Insurance?

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When you set out to purchase an insurance policy, you have to make the first decision about whether you wish to go for a full-fledged life insurance policy, or a term policy. If you wish to go for a term plan, and are not able to go for the options involving a longer duration such as a 15-year or a 20-year policy, you may opt for an annual renewable term life insurance. An annually renewable term policy is designed specifically to cover insurance needs in the short term, and hence should be seen mainly as a contingency device. Although, the mortality tables that are applicable in the case of regular insurance policies shall remain the same, and the underwriting principles shall apply similarly. If you fail to renew the policy within the quoted grace period, the company will not pay the premium.

The key difference between an annually renewable term life insurance, and other common term plans is according to two parameters: it is not level term, and it involves a greater amount of affordability on the part of the insured.

Key Features of Annual Renewable Term Life Insurance in UAE

  • There is a guaranteed period of insurability that is written into the policy of the annually renewable term insurance. A pre-defined period will be stated in the document through which the policy can be renewed annually.
  • The term needs to be renewed annually each year. The insured does not need to take any additional medical exams to do so.
  • A traditional term insurance policy will usually have a level term. It may range from a period of 10 to 30 years. During which, the amount of premium that is payable will remain consistent. In comparison, it has already been mentioned that premiums for renewable policies increase annually.

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Who Should Go for Annual Renewable Term Insurance?

 Annual renewable term insurance is usually recommended for people in unique circumstances, with conventional wisdom directing one to go for traditional term plans. Since the premiums are going to increase with time, it is not advisable to go for annual renewable plans without foresight. It may come in handy, if one is clear that one does not have the resources to afford a full-fledged term insurance. This might be the case in different scenarios. For instance, one is perhaps an early-career professional, and the funds that are coming in do not permit the option of a longer term insurance. Conversely, one might be higher up the ladder, but due to economic downturns or personal economic losses, one might be struggling financially. In some instances, a person may want coverage only in the short run. For example, maybe someone is in the process of switching jobs or making career changes. They may not have coverage at the moment, but they are anticipating better institutional protection once they have completed onboarding formalities at the new company. In case they want to pay premiums for only the interim period, a renewable policy would come in handy. In some other cases, people tend to stall on finalising that comprehensive life insurance they have been eyeing for some time. While the reasons for that can be manifold, they might opt for a renewable measure as a stop-gap measure. For instance, a company might offer better premium rates on life insurance to a client upon proof of improvement of smoking behaviours. Till the time that opportunity opens up, they may seek the protection of a renewable policy.

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