On this page
One year at a time
Annual renewable term (ART) is term life insurance sold one year at a time. You buy a year of coverage with a level death benefit. At each anniversary you can renew for another year without a new application, new health questions, or a new medical exam. The insurer cannot turn you down for renewal even if your health has collapsed. The catch is the price: every renewal reprices the premium at your new attained age, so the cost climbs every year.
What the price climb looks like
The first year is the cheapest life insurance you can buy. A healthy 30-year-old man might pay around $28 per month for $500,000 of ART in year one, rising to about $32 by year five, $58 by year fifteen, and $110 or more by year twenty. Annual increases typically run 5 to 8 percent, accelerating after 50. By the 60s and 70s the premiums become prohibitive, which is why most carriers cap renewals somewhere between ages 70 and 95 depending on the contract and state.
Compare that with level term: the same 30-year-old pays a higher premium in year one but the same premium in year twenty. For any need lasting longer than about five years, level term’s cumulative cost almost always wins.
When ART is the right tool
ART fits short, defined needs of one to five years. The classic case is bridge coverage: you have applied for a fully underwritten level term policy that takes six weeks to issue, and you want something in force now. Other fits include a temporary business loan, a single year of elevated risk such as a hazardous work assignment, or the gap between jobs before a new employer’s group coverage starts.
Most people actually meet ART without choosing it: when a level term policy reaches the end of its level period, many carriers convert it to an ART-style annually renewable policy by default, which is why renewal premiums after term expiry look so shocking. Our guide to term expiry and renewal costs explains that transition. If your ART policy has a conversion option, you can usually convert to permanent coverage without new underwriting; see our explainer on converting term to permanent. For needs longer than five years, start with our guide to choosing term length instead.
