What Is A.R.T?
Annual Renewable Term is the full name for A.R.T.
Do you know what your term life insurance premium will jump to in the next five, ten, twenty years? It is common for insurance agents to speak of A.R.T. on such a regular basis they forget to explain how it works to the general public. Daily we get calls from people who had no idea what their premium was going to jump to at the end of their level term period and the disappointment becomes evident by their voice inflections.
When the annual renewable term period begins it is common for life insurance premiums to jump thirty times the current price at the end of the level term period, and it continues to go up every year after. Before you blame the insurance company, it is actually designed to protect the policy-owner in case they are no longer insurable, but the rates are extremely higher.
Most people take out level term life insurance policies when they are in their thirties and forties, put the policy in a safe place, and also in the back of their minds. They move on with life, get promoted, pay down the home, save money in their 401k, and never review their life insurance policy. Then one month before the level term period is over a notice comes in the mail, and as they read the letter… the club sandwich they had for lunch starts to churn. “WHAT DO YOU MEAN IT’S GOING TO COST THIRTY TIMES MORE!
Why didn’t I pay closer attention to this? Where did I buy that policy from again? Crap! Guess its times to sit on hold for a half hour and call the company directly and see what my options are”. Bottom line, almost all level term life policies will turn into annual renewable term policies at the end of the level term period. This means if someone purchases a ten-year term policy, in year eleven the policy automatically turns into annual renewable term and the price goes way up. If it were a twenty-year level term the increase would occur in year twenty-one.
Level term life insurance is a great option as long as you understand how the policy works. Do not be like the others who call our office everyday needing advice on what to do next. They still need life insurance, what do they do? Pay more money. Don’t make the same mistake, take the time to match up your actual life insurance timeline to right policy.