In a yearly renewable term policy, how are premiums generally structured?

A yearly renewable term policy typically features premiums that increase with each renewal. In this type of policy, the coverage is renewed annually, and as the insured ages, the risk associated with underwriting increases. Consequently, insurance providers generally increase the premium each year to reflect this increased risk.

This structure makes yearly renewable term insurance a distinct option for policyholders who may desire short-term coverage with flexibility, knowing that premiums may escalate as they get older. Such an approach aligns with how insurance calculates risk, as older age often correlates with a higher likelihood of claims, which necessitates the premium increases at renewal.

Fixed premiums, decreasing premiums, or those based on interest rates do not apply in this context. Fixed premiums imply a stable cost regardless of age, decreasing premiums suggest a diminishing cost over time, and interest rate-based premiums would rather pertain to investment-linked policies rather than term insurance.