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Financial Dictionary - ART life insurance
ART life insurance
ART refers to a specific type of insurance: Annual Renewable Term insurance. This means the premium is updated every year and whenever the customer wants.
It is highly recommended, because of its versatility and adaptability: It can be cancelled easily with no penalties, as long as we give the notice stipulated in the contract; it can be converted into permanent insurance in some cases; it also offers an option to redeem some of the premiums paid, meaning we can recover a lot of what we have contributed, although this depends on the conditions of each company.
This is an option that can be associated with life insurance. It is usually arranged at the same time as a mortgage application. ART life insurance covers the death of the insured person. It can be complemented by other cover, such as disability and serious illness.
The amount of principal is decided by the customer, with the premium increasing in relation to the principal insured. The cost usually increases every year, especially as the insured becomes older. There is usually a limit of 65 years of age, matching the retirement age. There is no maturity date, meaning it remains in effect until the policyholder's death.
The main advantage of ART life insurance is its cost, which is very attractive, particularly in the short term. But we have to be careful: unlike the constant premiums for other insurance, we may be in for a surprise. For example, serious illness could increase the premium, and we are obliged to pay this increase if we want to remain covered, as it would be difficult to arrange insurance with another company in such circumstances. The cost of this type of insurance usually increases by between 8% and 10% per year. However, it could rise by as much as 50% at a certain age, depending on the circumstances. And while we might be able to reduce these large increases by negotiating with the bank, there will be a point beyond which we cannot make any further adjustments.
What types of insurance are there?
- Personal insurance: this is arranged individually, guaranteeing the financial stability of the insured's beneficiaries.
- Collective insurance: this is arranged by companies and cooperatives, etc. In such cases, the insurance covers the workforce irrespective of whether it changes. This also offers tax benefits in income tax declarations.