Colorado Life Producer License Practice Test

What is the primary characteristic of annually renewable term insurance (ART)?

1. The policy can only be purchased once

2. The death benefit decreases yearly

3. The policy can be renewed each year without proof of insurability

4. The premiums remain constant throughout the policy term

The correct answer is: The policy can be renewed each year without proof of insurability

Annually renewable term insurance (ART) is characterized by the ability to renew the policy each year without the need for proof of insurability. This means that as long as the premium is paid, the insured can continue to have coverage regardless of any changes in health status that may occur during the policy term. This feature is particularly beneficial for individuals who may develop health issues that could affect their insurability if they were to seek a new policy. The nature of ART allows for flexibility and accessibility, making it an attractive option for those who require temporary coverage. As individuals' circumstances change, they can continue their insurance protection without facing the challenges often associated with obtaining a new policy based on health conditions. In contrast, the other options do not accurately describe ART. Options regarding the policy being purchased only once, the death benefit decreasing, or the premiums remaining constant do not represent the core feature of ART, which is the renewability without the requirement for new medical evaluations.