Annual Renewable Term Life Insurance: What It Is and How It Works

With annual renewable term life insurance, premiums generally start out low but rise with each passing year.
Georgia Rose
By Georgia Rose 
Edited by Katia Iervasi Reviewed by Tony Steuer

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If you’re looking for cheap life insurance or a policy that covers a very short period of time, you may encounter an option called “annual renewable term life” (ART).

Annual renewable term life insurance lets you lock in your rate for a year at a time, and the initial low price can be appealing. But be aware that the cost will likely rise every year, and you may end up paying more than you would with other types of life insurance.

How does annual renewable term life insurance work?

An annually renewable policy is a type of term life coverage that renews every year. You typically lock in a period of insurability, which is the length of time you’ll be able to renew the policy without reapplying or taking another life insurance medical exam. You can renew the policy each year up to a certain age. The maximum age can vary by state. For example, New York law sets the age limit at 80.

The premiums generally start out low and look attractive. However, your premium will rise with each passing year based on your new age. The policy’s face amount — the benefit paid if you die — stays the same.

To compare, many term life insurance policies have level premiums, which means the cost stays the same every year until the coverage ends. Term policies with level premiums are more popular than annual renewable term life.

How much does annually renewable life insurance cost?

Here are annual rates for a $500,000, 10-year annual renewable term life policy for a 30-year-old in excellent health.

Man: Annual premium

Woman: Annual premium

Year 1



Year 2



Year 3



Year 4



Year 5



Year 6



Year 7



Year 8



Year 9



Year 10



10-year total



Source: Quotacy. ART rates are from MassMutual and valid as of Aug. 2, 2023.

To compare, a 10-year level term life insurance policy would cost $1,530 for a 30-year-old man in excellent health, according to Quotacy. A woman of the same age would pay $1,280 for a 10-year level term policy.

Is annual renewable term life right for you?

An ART policy may be a good fit if you need to cover short-term debts or are between jobs and anticipate buying group life insurance through a future employer.

For most people who need life insurance, however, locking in a term life insurance rate for at least five years is a better financial decision. And if you need life insurance to replace your income or cover a long-term debt like a mortgage, buying a 20- or 30-year level term life policy is likely to be your best bet.

The main pitfall of annual renewable term life insurance is that if you renew for many years, you could end up paying more in premiums than you would if you had bought a term policy with level premiums. Therefore, this type of insurance is typically recommended only if you have short-term life insurance needs.

Before you buy, it’s a good idea to compare life insurance quotes and consider your options. For an annual renewable policy, be mindful of how much you’ll pay in future years, not just the first year’s premium.

If you choose an annual renewable term policy and then find that your coverage needs are longer, check with your insurance company. It may let you convert your term policy to whole life insurance or another form of permanent life insurance without taking a medical exam.

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