Buying a life insurance plan is crucial to planning your finances, as it offers safety for your family after your demise. Usually, Life insurance policies have a minimum term length, ranging from 5 years or more, depending on the type of policy and the insurer’s terms. In contrast, this term insurance offers short-term coverage. This article will discuss the annual renewable term insurance policy and how it will benefit you and your family.
What is Annual Renewable Term Insurance?
An annual renewable term insurance policy has a specific design to offer coverage for your short-term requirements. It provides coverage for 1 year and permits you to renew the plan after its maturity to receive coverage for another year. In addition, while renewing the policy, it does not require you to take any medical test and provide insurability evidence.
How Does Annual Renewable Term Insurance Policy Work?
Like longer-term life insurance policies, the insurance companies consider your age, income, occupation, health and other factors to determine the premium rate of your annual renewable term policy. When you buy the plan, it will offer coverage for one year, and at the end of the year, you will have the option to renew the plan or drop the policy.
Nevertheless, when you renew the plan for another year, you may have to pay a higher premium rate than the previous year as you are getting older. The premium rate also increases as the risk of your death increases with your age.
Features of an Annual Renewable Term Insurance Plan
Here are the features of an annual renewable-term insurance policy:
1. Easy Renewal
As the name suggests, an annual renewable term insurance policy features an easy and quick renewal process for life coverage. It offers you more flexibility than other types of life insurance products, allowing you to change the requirements and situations.
2. Low Premium Initially
When you buy annual renewable-term insurance, the premium rate is usually lower than the fixed premium in other types. However, the premium increases gradually every time you renew the plan at the end of each year. You can use a term insurance calculator to determine the coverage amount and the premium rate.
3. Guaranteed Life Cover
With an annual renewable term insurance policy, you get life cover for a specified period, which is one year. You must regularly pay the premium amount to receive the coverage benefit. If you fail to make timely payments and the policy slips, you will not receive the benefits, such as life coverage and renewability.
4. Financial Stability
One of the significant features of annual renewable term insurance policies is that they offer your family the sum insured in case of your sudden demise. It removes the financial burden from your family in your absence and allows them to repay the pending debts and manage their financial expenses even after such a tragedy.
When Should You Get an Annual Renewable Term Insurance Plan?
Here are a few scenarios when you must get an annual renewable term insurance policy:
1. When You Have a Low-budget
If you do not have enough financial support to get a standard life insurance policy, you can consider opting for an annual renewable-term insurance plan. It has a lower premium rate than fixed premium life insurance. In short, it is a perfect life insurance plan until your financial situation changes.
2. When You Require Temporary Protection
If you have opted for a short-term loan and are wondering who will repay the debt if anything happens to you during the tenure, the annual renewable term plan will cover you. It will provide your short-term life coverage, which you can renew annually at the end of the tenure.
3. When You Plan to Improve Your Health
If your health is not in a good state currently and you want to improve it before buying a traditional term insurance, you can opt for this insurance type. The annual renewable term insurance plan allows you to improve your health until you buy a traditional life insurance plan and helps you stay protected by paying a lower premium rate.
Final Word
Henceforth, buying an annual renewable term insurance plan in India provides several benefits, such as lower premium rates at initial stages and temporary coverage. It also enables you to add riders to receive additional coverage and customise the plan according to your requirements. In addition, it is ideal for you when you have a low budget and intend to improve your health before purchasing a regular term plan.
For more details and affordable annual renewable term insurance policies, you can check the official website of ACKO.
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