Insurance companies have a tendency to get bad press while, the carriers that sell insurance are often portrayed as thieves. Sure, some accusations may be true, but life insurance is exempt to the complaints weighed against other insurance products. Frequently, the negative claim against insurance companies (particularly, health insurance) is that once a patient becomes ill, the insurance company drops his or her coverage.
The way health insurance policies work, it is legal for insurance companies to sell you coverage, only to abandon you once medical expenses start pouring in. Unlike life insurance, health insurance is renewed on an annual basis. Because of this, if you were to develop a serious medical condition, your health insurance coverage may expire long before you have finished your last medical treatment. Therefore, when it is time to renew coverage, either more often than not you will be denied coverage due to your new health status, or they will require a drastic increase in your premiums.
However, life insurance works differently. There are options that allow you to purchase a insurance policy, which is renewed on an annual basis. The difference between the life and the health insurance policy is that when it renews, your physical condition will not be reexamined. You will remain in the same rate class you had when you first purchased your renewable term policy.
This product is annual renewable term insurance (ART). By means of ART life insurance, your rates will increase every year, in order to reflect your advancing age, but this increase takes place on a gradual increase and has nothing to do with your health.
Insurance companies will generally place a cap on how far an annual renewable term life insurance policy can be continued. For example, a company might sell an ART life insurance policy that can only be renewed until the insured turns 50 years old, thus inhibiting the use of term life insurance to protect only against an early death. Even so, a person could get several decades of coverage out of an ART life insurance policy, without ever revealing him or herself to the threat of increasing premiums or of becoming uninsurable.
There are also alternatives to ART life insurance products available that are more secure than health insurance. A typical term life insurance policy is not renewable, but its coverage term is longer than a year. Life insurance carriers often sell term policies of 5, 10, 15, 20, and so on. If you become sick during the term of coverage, the carriers may have to wait a long time before the policy expires (and for the obligation to you to expire), depending on the length of the policy you buy and when you become sick.
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