Annual renewable life insurance refers to an insurance policy with a one year contract that you renew every year. Your insurance company guarantees you insurability for some years, and your premium is reevaluated every year. Hence, your premium rises every year as you get older.
Annual renewable life insurance is a great option if you need life insurance for a short time. It is also a good policy if you are not sure on how long you will need life insurance.
We will look at the pros and cons of annual renewable life insurance to help you decide if this insurance policy will suit your needs.
Pros of annual renewable life insurance
- You can renew your contract every year without medical tests for the period you have guaranteed insurability.
- The fees you pay at the beginning of your life insurance contract are affordable.
- This is a great policy for people trying to quit smoking. Here, they can buy life insurance at non-smoker rates. After a year, they can buy permanent life insurance as a non-smoker.
- Annual renewable life insurance is great for short-term needs. This insurance policy is useful for periods when you have a high death risk. Also, if you owe a debt that you have to pay back in a short time, this insurance policy is useful.
- You can change to a permanent life insurance policy at any time. You are not bound to this policy for a long time.
Cons of annual renewable life insurance
- The premium for this policy gets higher every time you renew your contract. As a result of your fee increasing as you get older, this is not a good long-term insurance policy.
- It is important to note that there is no cash value to grow with this policy.
- You cannot negotiate or fix your insurance premium.
- The price of this insurance plan is affordable in the beginning. However, it is still more expensive than some permanent life insurance plans.