What is the main characteristic of a yearly renewable term insurance policy?

A yearly renewable term insurance policy is designed to cover the policyholder for a period of one year at a time, with the option to renew the coverage each year. This characteristic underscores the nature of this type of policy, which provides temporary insurance protection that is typically less expensive than permanent insurance options. At the end of each term, the policy can be renewed for another year, often with an increase in premiums based on the policyholder's age and changes in health status.

This allows individuals to maintain coverage for as long as they need it without committing to long-term plans. The other options do not accurately describe the features of this insurance type. Lifetime coverage and cash value components relate to permanent insurance policies, while the limitation to 5-year increments does not pertain to yearly renewable term policies, which emphasize annual renewal flexibility.