In annually renewable term policies, the annual premium is based on what?

In annually renewable term policies, the annual premium is based on the insured’s attained age. This means that each year when the policy renews, the insurer recalculates the premium based on how old the insured is at that time, rather than their original age when the policy was first established. Since the risk of mortality increases with age, the premium will typically increase each year as the insured gets older.

Policies like these are designed to be flexible, allowing the policyholder to renew coverage without the need for a new health assessment, but the cost reflects the increased risk associated with age. The premium adjustments are a fundamental characteristic of these types of policies, which is why understanding the basis of the premium calculation is crucial for assessing long-term insurance costs.