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. Renewable Term

    A renewable term is an insurance clause that allows the beneficiary ...
  2. Term Life Insurance

    Term life insurance, also known as pure life insurance, is life ...
  3. Yearly Renewable Group Term Insurance ...

    Yearly renewable group term insurance is a type of life insurance ...
  4. Annual Renewable Term (ART) Insurance

    A form of term life insurance that offers a guarantee of future ...
  5. Convertible Insurance

    Convertible insurance allows a policyholder to change a term ...
  6. Universal Life Insurance

    Universal life insurance is permanent life insurance with an ...
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. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  3. 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.
  4. Insurance

    How Much Life Insurance Should You Carry?

    Before purchasing life insurance it is important to decide if you really need it, what type of policy is best, and how much coverage you should get.
  5. Insurance

    Life Insurance: putting a Price on Peace of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  6. Insurance

    5 Life Insurance Questions You Should Ask

    Confused about $1 million dollar insurance advertising claims? Learn what they mean and decide whether they'll pay off for you.
  7. 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.
  8. 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.
  9. Insurance

    4 Reasons Why Waiting To Buy Life Insurance Is a Bad Idea

    Understand the benefits of applying for and securing life insurance coverage while you are young and healthy, and learn the cost of waiting to get coverage.
  10. Insurance

    For Life Insurers, Making Money Is A Numbers Game

    Life insurance is a data-driven industry that relies on complex financial models to predict future expenses and income from premiums and investments.
Hot Definitions
  1. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  2. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  5. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
  6. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained in a company’s financial statements.
Trading Center