Premiums for YRT are predetermined at time of issue. Quality YRT contracts provide both a renewability and convertibility clause. Simply stated the policyholder may renew the contract annually by simply paying the premium. Further they may convert the contract to any cash value or universal life contract by merely completing a form provided by the carrier. As with whole life contracts, the best YRT contracts have been dividend producing contracts.
Dividends reduce premiums, resulting in lower premiums for the insured.
Term policy dividends are not guaranteed but have historically been paid on a regular basis. Because there are no cash values in the contract, premiums for YRT are dependent on mortality alone. Therefore the premium increases annually in accordance with the increasing probability of death, and becomes extremely expensive in later years. Finally, YRT contracts are usually renewable only until age 70 and are therefore unsuitable products for estate planning, pension maximization techniques or for post retirement planning. Can provide large blocks of insurance for short term needs.