Final answer:
Annual Renewable Term (ART) or Yearly Renewable Term (YRT) is a type of term life insurance that is renewable annually with increasing premiums based on age and other factors. It provides flexibility to the insured to adjust or maintain coverage as needed without new medical exams.
Step-by-step explanation:
An Annual Renewable Term (ART) or Yearly Renewable Term (YRT) refers to a type of term life insurance policy that offers coverage for one year at a time. The policyholder has the option to renew the policy annually, without having to provide evidence of insurability. The premium for the policy may increase each year with the renewal, as it is recalculated based on the insured's current age and potentially other factors like health status and lifestyle changes. Despite the increasing premium, one of the advantages of ART or YRT is the flexibility it provides; the policy can be maintained for as long as the insured needs it, until a certain age, typically specified by the policy.
For instance, if a person purchases ART at the age of 30, they will pay a predetermined premium for the first year. Upon renewal for the subsequent year, the insurer will recalculate the premium based on the person now being 31 years old. The pattern continues annually, potentially making the policy more expensive as the insured ages. However, because the policy is renewable annually, the insured has the opportunity to adjust or cancel coverage as their life circumstances change, without having to reapply and undergo medical exams each time.