Annual Renewable Term (ART) Insurance

Annual renewable term insurance stands somewhere between a long-term contract and a one-year deal for life insurance. For the customer, signing up for a long-term life insurance contract usually represents the best deal, especially if they sign up when they're young and they can lock in low rates. It can be a score for the insurance company as well, since securing the long-term deal comes with a long-term revenue stream.

The danger for the company comes as a person gets older or sicker, and, well, to put it diplomatically, the chances that the customer will remain a long-term revenue generator become less likely.

Meanwhile, for the customer, getting older and sicker can mean not finding a life insurance carrier at all. This circumstance comes as the person gets to the point where his or her projected lifespan, let's just say, starts to get to the dreary side of the actuarial table.

Annual renewable term insurance splits the difference between the customer's need to stay insured and the company's need to raise rates to cover the increasing likelihood that the client might cash in the life insurance policy at any time. The insurance company guarantees that the customer will continue to be allowed to renew their insurance, thus keeping them insured even if things start to get grim. However, the contracts are renewed on a year-to-year basis, allowing the insurance company to adjust rates accordingly.