Does A Term Life Insurance Policy Expire?
A term life insurance policy provides coverage for a specific term or period of time, usually between 10 and 30 years. Unlike universal and whole life insurance policies that offer permanent coverage with a cash value component, a term policy is designed to provide a pure life insurance product that pays your beneficiaries a payout if you pass away during the term.
What Happens When a Term Life Insurance Policy Expires?
If your policy’s term is coming to an end, you have a few options. You can let the coverage expire and go without life insurance, but if your family still needs financial protection, you have three basic choices:
|Extend your current term policy||You can usually renew your policy on a year-to-year basis until you are 95 years old. However, the insurance company will change your premium if you extend.|
|Convert your term policy to a permanent policy||You can convert your term policy into a permanent policy without having to provide evidence of insurability. Different insurance companies have different ways of handling term-to-permanent conversion, so you’ll need to look at your policy to see what your available options are.|
|Get a different life insurance policy||You can shop around for a new term-life policy or consider combining a permanent policy with a term policy to get the higher death benefit and additional coverage you need for a limited period of time.|
Advantages and Disadvantages of Extending or Converting Your Term Policy
Before extending or converting your term policy, it’s important to understand the differences between term life insurance and permanent life insurance. A permanent policy is designed to provide coverage you can’t outlive, as opposed to a limited term of, say, 10 or 20 years. Unlike term policies, permanent (universal and whole) life policies are not a “pure life insurance” product – they include a cash value component.
If you are still in good health and want a substantial level of coverage, you can shop around for a new term-life policy. However, if you want protection you can’t outlive, a permanent policy may be a better option. The premiums can be higher than they would be for a term policy with the same death benefit, but a whole life policy can be a tax-advantaged estate-planning tool.
Talk to your life insurance company, agent, or broker well before your policy expires to find out about the types of life insurance policies available, costs involved, and if you’re thinking of conversion, what specific options are available to you. A Guardian financial professional can help you better understand your options and calculate how much coverage you may need.