What Happens When Term Life Insurance Expires?

Some people look forward to reaching the end of their life insurance policy because they no longer have to pay their insurance premiums. However, you might look upon it with dread if you still need the coverage. Can you extend your coverage? How else can you stay protected? There are lots of questions about what happens at the end of a term life insurance policy. We’ll answer all of these in this article. 

If you’re at the end of your term of a life insurance policy and you are still alive, then, your policy will expire and you will no longer be covered. However, you can extend your coverage (you can do so up to six months prior to the expiry of your policy). Yes, you can simply renew your coverage if you still need protection at the end of your life insurance policy.

Whether you end up extending your life insurance policy depends on your circumstances. Do you have dependents that you need coverage for? 

You Decide What Happens At The End Of Your Term Life Insurance Policy

Term life insurance ensures that your dependents will receive a sum of money if you die during the term of your life insurance. This gives you some peace of mind because you know that your loved ones will be taken care off financially even though they lose your income after your death.  If you outlive your life insurance policy without extending your coverage, you’ll lose your coverage. So should you extend your life insurance policy? That all depends on whether you need it. Here are some helpful tips to determine whether you need your policy:

You’re No Longer Contributing Financially To The Family – Let The Policy Expire

Once your life insurance expires and you have come up with a decision that you no longer need coverage; therefore when the policy ends, say goodbye as well to your coverage. This means that if you die after the day your policy expires, your dependents will not get any death benefit from your insurance company.

On the other hand, there is a way, you could get back the premiums you paid. Do you want to know how? This is by purchasing the return-of-premium term life insurance, in which the premiums you paid will be returned to you once the term policy expires if you outlive the term policy. The only downside of this premium is the cost since it is more expensive compared to other term life insurance.

Outlive Term Policy: Still Needs A Coverage

If you still need life insurance coverage after your policy’s end date, rest assured you could still manage to get one; either you extend, renew, or convert your coverage.

Extending Your Coverage

If you still want to extend your existing policy after your term life insurance policy expires, you may do it. Just talk to your insurance company six months prior to the expiry date of your policy. Moreover, there are some instances where you will need additional coverage to your policy since there might be slight changes in your initially purchased policy as years passed by. You may check this site for more information.

PROS CONS
·         It is worth it if you need coverage for a short period

·         It is a good choice for people who will no longer qualify for a new policy (due to changes in health condition)

·         The cost will increase

·         It will continue to increase as you age

TIP: Check your policy terms in regards to the estimated annual premiums for the policy term and the years that you should follow

 Renewing your Coverage

Another option for keeping your life insurance policy alive is by applying for a new term life insurance policy. If you are still healthy at the age of 60, purchasing a new term life policy is the best option you can do since it is way cheaper instead of converting to a permanent life policy. Nonetheless, you still need to undergo a series of medical examinations to ensure you are still in your good state. In addition to this, you can talk to your insurance company whether you can apply for Exchange or Re-Entry provision or you can apply for life insurance policy to other companies. For example, the re-entry term insurance can be a perfect option for those who still need coverage for a short period of time and could get a cheaper price compared to buying a regular term policy UNLESS he/she passed the re-entry medical exam. That is why as I am saying a while ago that it is very essential that you are still in a good overall health condition before you apply since there is a high possibility that you will be denied for re-entry or you will be forced to pay higher rates once you have experienced a deteriorating health. Furthermore, you make sure to look for the best rate that is suited for your budget, just like what you did for your initially purchased policy.

PROS CONS
·         This is the least expensive option instead of extending your coverage ·         Make sure you prove that you are still in a good overall health condition since there is a high chance for denial if your health is not in good shape

 Converting your Coverage

Most of the term life insurance today include a conversion option, wherein you can convert your term policy, which is a temporary coverage to a whole term policy, which is a permanent coverage ONLY at specified dates. Consult your insurance company whether your policy does have or see which policies are eligible for conversion

You can see below some of the common conversion guidelines used by a life insurance company.

  •         Specific Age

There are some policies that provide age limits in regard to the life insurance conversion option. For example, Banner OPTerm 15 policy that can be converted to permanent coverage until you reach the age of 70.

TIP: If ever you purchase a term life policy and someday you wish to have permanent coverage, make sure you look at the maximum age limit because just like the saying, “The older the wine, the better.” The same goes for your policy.

  •         Period

This means that you are allowed to convert your policy at a specified time. For example, Ohio National has two types of terms, the regular and the plus. In regular term, which is the 15-year term, you can convert to a policy of your choice whereas, for the 15-year term Plus, you can convert to ANY PERMANENT POLICY.

TIP: If you are shopping for insurance, make sure you ask your financial advisor or your agent in regards to the conversion privileges, so that you can make the most out of your policy.

  •         Entire term

Your insurance company has allowed you to make a conversion of your policy at ANY time during the term of the policy. However, be sure you convert before the expiration of your policy or else it will be invalidated.

PROS CONS
·         No need to provide evidence of insurability

·         No medical exam

·         Policy rate will be based on your age at the time of conversion; therefore, the older the better

·         Limited insurance policy available for conversion

·         Higher cost when converted to a permanent policy

What Happens When Term Life Expires?

As I said, the series of events that will happen once your term life insurance policy expires will depend upon your decision. If your term life insurance policy expires without doing anything, most probably it will be gone and you will no longer be covered; however, if you extend or apply for a new term policy, definitely, you will still enjoy the benefits of the coverage of your insurance company.

You may refer to the above options if at that point in your life you still need coverage for yourself and your family. Otherwise, here are some alternative options you would like to consider.

1. Buy A New Term Life Insurance Policy

If you still have financial responsibility such as payments for a mortgage or to your family, the best possible option is to buy another term life insurance policy. Make sure you start the application as soon as possible to avoid gaps in your coverage.

Even though you bought life insurance coverage before, be sure you are still in good health condition because most probably you will take a life insurance medical exam during the application process or there are some changes in your records that will make your application for a new policy will be disqualified.

When buying a new term policy, there are several options to consider such as the following:

  1.     Level term life insurance: This means that you will pay the same premiums for the whole policy
  2.     Decreasing term life insurance: Usually, this is the cheaper option for a term life insurance policy wherein you will pay the same premium amount each year; however, the benefit amount will be decreasing per year.
  3.     No-medical-exam term life insurance: This is the perfect option for people having a poor health condition, though this option will cost you more to buy.

TIPS:

  •         Buy short term insurance policy such as 5 years or up to 10 years since this is a bit cheaper compared to a 20-year term policy
  •         Look for another insurance company that offer the best life insurance rates aside from your previous insurance company

2. Opt For Annual Renewable Term Life Insurance

Instead of buying a new term life policy for five years or ten years, you can actually take it year by year wherein you can decide whether you will continue the coverage each year. This is the best option if you are anticipating only short-term financial obligations.

However, the rates can increase significantly each year, making this a major drawback. Therefore, ask your financial advisor if you can just extend your current term policy one year at a time. This can help you prevent undergoing a series of medical examinations and this is helpful for people who are terminally ill who need life insurance at any cost.

Takeaway

Remember to keep these options in mind as your term life insurance policy is drawing to its end. Make sure you have consulted your life insurance agent at least a year prior to the expiry of your policy, and together you can make the best possible choice!

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