What Does Yearly Renewable Term Mean?
Yearly renewable term (YRT) life insurance denotes a term life insurance policy that is valid for one year only. On purchasing this policy, policyholders will initially have to pay low premiums. However, with each subsequent renewal, the premium of YRT life insurance policies will continue to increase. This is because the insurance company will re-assess the risks to the policyholder at each time of renewal. Therefore, as the age of the policyholder increases, the premium of YRT policies will increase as well.
People also refer to YRT policies as increasing premium term insurance policies and annual renewal term assurance policies.
Insuranceopedia Explains Yearly Renewable Term
Insurers usually offer two types of term life insurance policies. These include yearly renewable term (YRT) policies and level premium term (LPT) policies. In YRT policies, the premiums keep rising with the age of the policyholder. In contrast, the premiums of LPT policies remain uniform, regardless of the age of the policyholder.
YRT policies are worthwhile because they offer lower premiums initially. At the same time, policyholders do not need to re-qualify at the time of renewing the policy. Therefore, the insurer cannot decline a policy renewal if the policyholder becomes terminally ill.
However, YRT policies have several demerits too. For instance, the premiums on these policies keep increasing with each renewal. So, at some stage, renewing these policies could become quite cost-prohibitive. This is why people usually prefer LPT policies because the LPT policies cost much less over a specified time span. In addition, these policies do not offer any accumulating cash value either.