Does Term Life Insurance Expire?
Term life insurance policies are taken for a specific period of time and expire once that term is up. But what happens when your term life insurance expires? Do you need to buy a new policy? In this article, we will look at the options available when your term life insurance policy expires.
Assess Your Financial Situation
The first step is to assess your financial situation. Do you still have dependents? Is your estate sufficient enough to sustain them into adulthood? Is your mortgage still pending? Does your partner depend on your income to maintain their quality of life? Only an honest introspection into your finances can help you understand these future needs.
Options When Your Coverage Ends
If you determine that you’ll need continued coverage then broach this conversation with your insurance advisor or broker 6 months before the maturity date. Any later and you risk getting caught in a coverage gap. This gives you enough time to study all the available options and choose the one that is best for you.
If you’re fortunate enough to not require any more insurance coverage, then all you need to do is pay the last premium and wait out the policy. Once the plan ends, you won’t be covered and nor will your beneficiaries receive any payout upon your death. Of course, that means you no longer need to pay your monthly premium as well.
Renew Your Term Life Insurance Policy
Many term life insurance policies offer the choice to extend the policy term beyond the initially agreed date. This is referred to as a renewability rider and may have been touted as a feature of your policy when you first purchased it. This extension is usually valid until you reach a certain age (generally 75 years), though it varies from company to company.
| Pros | Cons |
|---|---|
| Saved from the hassle of shopping for a new policy | Higher premiums |
| Exempt from displaying proof of insurability | Revised premium can be 5-10 times more expensive than your previous coverage |
Convert Your Term Life Insurance Policy
Convertibility is another rider that some insurance companies offer as part of a base term life insurance policy. Once the term is up, you have the choice to convert your term policy into a whole life insurance plan.
| Pros | Cons |
|---|---|
| Retain your coverage | Higher premiums |
| No proof of insurability required | Converted policies are only eligible for selected permanent policies |
Buy a New Policy
If your financial needs have stayed level or increased, then considering a new policy with the right amount of coverage can be a smart option.
| Pros | Cons |
|---|---|
| Several types of policies available to choose from | Requires work to shop for a new policy |
| Lower monthly premium compared to renewing or converting existing coverage | Medical condition may make a new policy difficult or unaffordable |
| Get as much or little coverage as you need at this time |
Outliving your term life insurance can be considered good news. But it also brings forth the dilemma of considering whether to forego life insurance or not. If your dependents are now self-sufficient and your retirement plans are in place, then you can simply let your policy expire upon maturity. But if this is not the case, you need to consider new coverage.
Speak with an experienced insurance advisor to explore all your options and see where you can save money while maintaining the coverage you need.
