What is true about an annually renewable term policy?

An annually renewable term policy is structured to provide coverage for a specified term, typically one year, with the option to renew at the end of that term. The characteristic of this type of policy is that while it provides a simple way to maintain insurance coverage, the premiums generally increase with each renewal. This increase in premium reflects the increasing age and potential risk associated with the insured as they grow older.

As individuals age, the likelihood of death increases, which is factored into the cost of insurance and hence, the premiums are adjusted accordingly at each renewal. This is essential for insurers as they need to ensure that the premiums collected are commensurate with the risk they are covering.

The other statements describe features that are not typically associated with annually renewable term policies. For instance, premiums do not remain constant over the years; they are not permanent as they only provide coverage on a yearly basis; and they do not automatically convert to whole life insurance, which usually requires a specific conversion option present in the policy terms.