What is 'Yearly Renewable Term (YRT)'

A yearly renewable term is a one-year term life insurance policy. This type of policy gives policyholders a quote for the year the coverage is bought. When someone buys a yearly renewable term insurance policy, the premium quoted is for a one-year term, starting in the current year. At the same time next year, the insured will pay another annual premium for a person in their same situation, but one year older. In the following year, the premium increases again as it will be for the same person, two years older. Premiums increase annually in order to cover increased risk with age. This type of insurance is also referred to as increasing premium term insurance or annual renewal term assurance.

BREAKING DOWN 'Yearly Renewable Term (YRT)'

Actuaries are in charge of figuring out what premium will be charged for a yearly renewable term, based on different risk variables. Using a specific formula for these variables, actuaries can predict at what age a policyholder will likely die. As the policyholder grows older, premiums to the policy can be added. These polices tend to be attractive to young insurance seekers who want to start out with a low cost, flexible premium. It also pays a death benefit to any named beneficiary if the policy holder passes away within the one-year term.

The primary drawback of yearly renewable term life insurance is that if a policyholder renews for many years, they could end up paying more in premiums than if they'd bought a level term life or permanent life insurance policy. If someone buys a yearly renewable term life policy and later figures out their coverage needs are longer, the insurance company may let a policyholder convert the policy to whole life insurance without taking another medical exam.

Why Choose a Yearly Renewable Term

Yearly renewable term life insurance enables a policyholder to lock in a period of “insurability,” which is the length of time someone can renew the policy annually without reapplying or taking another medical exam. The policy is renewable 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 will rise with each passing year, based on the policyholder's new age and their increased statistical chance of dying. The policy’s face amount — the benefit paid if someone dies — stays the same. A yearly renewable term life policy policy will include a “schedule of premiums” chart that shows the maximum possible premium for each year. An insurer will inform the insured of the exact amount each year at renewal time.

RELATED TERMS
  1. Yearly Renewable Group Term Insurance ...

    A type of insurance policy purchased by employers to cover several ...
  2. Conditionally Renewable Policy

    A conditionally renewable insurance policy provision allows the ...
  3. Re-Entry Term Insurance

    Re-entry term insurance offers a low rate for a fixed time period, ...
  4. Life Insurance

    Life insurance is a contract in which the insurer guarantees ...
  5. Decreasing Term Insurance

    Decreasing term insurance is a renewable term life insurance ...
  6. Guaranteed Renewable Policy

    A guaranteed renewable policy obligates the insurer to continue ...
Related Articles
  1. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  2. Personal Finance

    The Best Life Insurance for Military Families

    Two of the most common types of life insurance are term and whole life. Here's why the latter isn't a good idea for most military families.
  3. Insurance

    What's Better: Whole Life or Term Insurance?

    Life insurance can be a difficult decision to make, especially for a young adult. Here's a look at the benefits and costs of getting whole life insurance.
  4. Retirement

    Beware the Sneaky Math of Universal Life Insurance

    Universal life insurance's cash value can be a cash cow – if there's any left. Read on to see if it'll work as an income source after you've retired.
  5. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  6. Financial Advisor

    Index universal life versus whole life insurance: A comparison

    Consumers have choices when it comes to life insurance. Knowing your future needs for cash or retirement can make the difference in what you select.
  7. Insurance

    What Is the Best Age to Get Life Insurance?

    Learn about the optimal time for purchasing personal life insurance and why delaying the buying decision may have costly consequences.
  8. Insurance

    3 Easy Ways to Save Big on Life Insurance

    Buying life insurance can be a tricky process. Here is some guidance for new and existing policies.
Hot Definitions
  1. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  2. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  3. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  4. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  6. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
Trading Center