What generally happens to the premium in an annually renewable term life policy?

In an annually renewable term life policy, the premium typically increases with each renewal. This is primarily due to the fact that as the insured ages, the risk associated with providing life insurance coverage increases. Insurance companies base their premiums on the likelihood of a claim being made, which is influenced by the age and health of the policyholder.

At the end of each term, the policyholder has the option to renew the policy, but because the insured’s age has increased, the insurance company adjusts the premium to reflect the higher risk. This systematic increase in premium aligns with actuarial assessments and the overall principle that as people age, their mortality rate increases. Consequently, each annual renewal results in a higher premium until the policy reaches a certain age limit or the policyholder decides to discontinue coverage. This structure allows for continued coverage without requiring comprehensive medical underwriting at each renewal, which can be beneficial for policyholders who may develop health issues over time.