Yearly Renewable Term
What Does Yearly Renewable Term Mean?
Yearly renewable term (YRT) life insurance refers to a term life insurance policy that is valid for one year only. When purchasing this policy, policyholders initially pay low premiums. However, with each subsequent renewal, the premium for YRT life insurance policies will increase. This is because the insurance company re-assesses the risks to the policyholder at each renewal. As the policyholder ages, the premium for YRT policies also rises.
YRT policies are also commonly referred to as increasing premium term insurance policies or annual renewal term assurance policies.
Insuranceopedia Explains Yearly Renewable Term
nsurers typically offer two types of term life insurance policies: yearly renewable term (YRT) policies and level premium term (LPT) policies. In YRT policies, premiums increase as the policyholder ages, while in LPT policies, premiums remain constant regardless of the policyholder’s age. Anyone weighing these options against a permanent policy should also read about term vs. permanent life insurance to see how the two structures differ over the long run.
YRT policies are attractive because they offer lower initial premiums. Additionally, policyholders do not need to requalify when renewing the policy, meaning the insurer cannot decline renewal if the policyholder becomes terminally ill.
However, YRT policies have several drawbacks. For example, premiums rise with each renewal, and at some point, renewing the policy could become financially burdensome. Buyers comparing the cost of a YRT policy to other options can look at the average cost of a life insurance policy to get a sense of where YRT pricing sits in the early years versus the later years. This is why many people prefer LPT policies, as they tend to cost less over time. However, it is important to note that these policies do not accumulate any cash value. Anyone shopping for either type can compare quotes from the best life insurance companies to see how rates and renewal terms vary by insurer.