Once your term life insurance expires, you have no coverage. You can do something about it. We will show you what to do to stay covered.
SUMMARY
- Term life insurance expires because it is designed to provide coverage for a specific period of time – usually 10, 20, or 30 years. Once that term expires, so does the coverage. Term life insurance policies do not pay out after they end.
- However, there are some exceptions to this rule. If you have a “convertible” term life insurance policy, you may be able to convert it to a permanent policy before it expires. This can be a good option if you find yourself in good health and want to continue your coverage indefinitely.
What happens after your term life insurance ends?
Term life insurance typically provides coverage to the insured’s beneficiaries for a specific time period ranging from 10 to 40 years.
At the end of the term, if nothing is done about it, your coverage will end, and you will be without life insurance. There are, however, some steps that can be taken before and after the expiration date of your term policy to remain covered.
The following information will detail your options when term life insurance ends.
When does term life insurance expire?
Life insurance coverage on a term policy expires as agreed upon in the insurance policy’s contracted term. The term life insurance coverage period ranges from five to 40 years unless you have a yearly renewable policy, which expires every year. Term life is a life insurance product that, unlike permanent policies, does not cover you for your entire life.
Do not wait until the expiration date of your term life insurance to take action, though; let’s review some of your options before and after the expiration date.
What to do when your term life insurance expires
You have some options such as extending your coverage or just purchasing a new policy when your life insurance coverage expires. Here is what you need to know.
Renew the existing term life policy
When you purchased your current term life insurance policy, you may have made some decisions that will make it easier to renew your current term policy. Life insurance companies normally offer a rider that allows you to renew the policy to extend the term.
There are some favorable benefits to this option; For example, you will not have to shop around again for insurance. You also won’t have to prove insurability status or undergo a medical exam. This is great news, especially if your health has deteriorated and you have a health condition that would prevent you from getting life insurance coverage.
You may have some limitations on age when it comes to renewals. Insurance companies will only allow renewals of term life insurance up to a certain age, usually 75 years.
Convert it into a permanent life policy
Term life insurance policies have another rider that can be added to the base policy; a convertible rider. If you chose to add this rider when you bought your original term life insurance policy, you could exercise that option based on the contracted terms.
Converting your existing term life insurance policy to a permanent life insurance policy so you are covered for your whole life. This option also has the benefit of not having to qualify again for insurance.
A couple of things to keep in mind when you convert term to permanent life insurance: your annual premiums will be based on your age at the time of conversion, which means premiums will be higher on the new insurance policy.
You also want to be proactive and review your life insurance policy conversion requirements. Life insurance carriers usually require making the election to convert the policy in advance of the expiration date. You may need to notify them up to a year in advance in some cases.
Purchase a new term life policy
When your term coverage expires, you may decide to just buy a new term policy. There could be many reasons to make this choice, even if you have the option to convert.
One reason to just get a new policy, even if you could convert or extend your old policy, is if you were rated as a health risk which increased your premiums on a short-term policy. Let’s say you were classified as a smoker, but you needed insurance at the time. Maybe you took out a five-year term policy, and now you have quit smoking, and your health is great.
You may find this is a great time to get rid of the old policy and upgrade to a new and better one, maybe even consider permanent coverage such as a whole life insurance policy.
Go without life insurance
The last option, and one that is not recommended, of course, is not to purchase any life insurance products. Doing without a life insurance policy may jeopardize the financial support of those who may need it.
If your term life policy has expired and you are in good health, look into permanent life insurance policies as an alternative offering lifelong coverage.
Frequently Asked Questions
What happens when you reach the end of the term in a term life insurance policy?
Term life insurance expires when the contract or policy expressly states it does. You are no longer covered by the insurance company. If you outlive the policy, no death benefit is paid out. Unlike permanent life insurance, you do not accumulate cash value, so there is nothing tangible for you to benefit from.
Do you get the money after term life insurance expires?
If you outlive the term, term life insurance policies do not pay out after they expire. This is because they are designed to provide coverage for a specific period of time – usually 10, 20, or 30 years. Once that term expires, so does the coverage.
A term life insurance policy has no cash value at the end. Term insurance is temporary coverage at a low cost, and one of the ways costs are reduced is by doing away with the savings component of permanent life policies.
If you want to build cash values within the policy, you need to discuss your financial plan with your insurance agent, and they will recommend options such as a whole-life policy.
Does term life insurance automatically renew?
Term policies do not automatically renew in most cases. Some life insurance companies may offer riders that guarantee renewability. However, you still must make the election known to the insurance company.
What happens at the end of a 20-year term life insurance policy?
Term life insurance expires after the stipulated initial term; it may be renewed by paying premiums as required by the insurance company.
What happens after 10-year term life insurance?
As is the case with any other term life insurance policy, at the end of the term, the term life policy expires, and the life insurance company ends your coverage. It may be renewed by paying premiums as required by the insurance company.
At what age should you stop term life insurance?
If you’re healthy and have a good income, you may be able to cancel your term life insurance policy when you reach age 65 or 70. If you have health problems or a lower income, you may need to keep your policy until age 85 or 90.
Term life insurance policies are very practical and flexible, and have their purpose at almost any age that life insurance allows. They allow you to insure against a broad range of risks covering just a few years or decades up to a certain age. Some people choose to keep their term life insurance policy until they die. This way, their loved ones will have financial protection in the event of their death. Even financially independent people buy term life insurance to serve practical purposes, such as paying estate taxes on the inheritance to the heirs.
Here’s a look at some life circumstances to consider when deciding whether to keep or cancel your term life insurance policy.
Your need for life insurance changes over time
The primary reason to have life insurance is to replace your income in the event of your death. But as you get older and your children become adults, your need for this type of financial protection decreases. You may also have other sources of income, such as a pension or retirement savings, that can help support your family in the event of your death.
Some experts recommend that you review your life insurance coverage every few years to make sure it still meets your needs. If you find that you no longer need the same level of coverage, you may be able to reduce your policy or cancel it altogether.
Your financial goals change over time
As you get older and enter different stages of life, your financial goals will likely change. When you’re young and just starting out, you may be focused on building an emergency fund and paying off debt. But as you get closer to retirement, you may be more concerned with preserving your wealth and passing on inheritance to your children.
These changing priorities can impact whether or not you need life insurance coverage. For example, if saving for retirement is a priority, you may be better off using the money that would have gone towards premiums to invest in a retirement account. Or if passing on an inheritance is important to you, buying a permanent life insurance policy may be a better option than a term policy.
Your health changes over time
Another factor to consider when deciding whether to keep or cancel your term life insurance policy is your health. If you develop a serious health condition after buying a policy, it’s possible that your insurer will classify you as “high risk” and either deny coverage or charge much higher premiums. On the other hand, if you stay healthy, you may be able to qualify for lower rates when you renew your policy.
Can you convert term life to whole life?
Yes, a term life insurance policy can be converted to permanent life insurance in some circumstances.
First, your current policy needs to have the option of conversion. Term life insurance policies offer riders that give the insured person the option to convert to permanent insurance.
Typically the term policy must be converted before the term of the policy expires. In other words, you must keep a close eye on the expiry date and be informed of the requirements for conversion. In addition, the life insurance company may have requirements you must meet before you convert to a permanent policy.
Can I terminate my policy before it expires?
Yes, whether you have term insurance or a permanent policy, you can terminate before the maturity date. However, review your policy documents carefully to find out about policy obligations if you terminate early.
Conclusion
Be aware of your options when term policies expire. There are many ways to keep existing coverage and increase it by converting your term policy or opting to buy a new one. Prudent financial planning usually involves some form of life insurance. Ideally, you want to have lifelong coverage with a death benefit that can support financial obligations for those who depend on your support.
Term life insurance is a great way to get the highest death benefit at the lowest cost. It also offers the benefit that you may not need a medical exam in case your health status could hinder you from being covered.
If you currently have a term policy and would like to review your options, our agents are here and ready to give you guidance so you make the right decision.
