What Happens After A 10-Year Term Life Insurance?

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Term life insurance is a contract between a policyholder and the life insurance company. In exchange for premium payments, the insurer will pay a death benefit to your beneficiaries if you die while the coverage is in force. A 10-year term life insurance policy guarantees that you lock in rates for 10 years, even if your health changes. If you pass away while the policy is in force, your beneficiaries can collect a death benefit.

What to consider when choosing a life insurance term

Factors to consider Explanation
Your Age Age impacts the cost of life insurance and the length of term you can buy. If you think you’ll need life insurance for more than 10 years, it’s better to buy a longer term life policy from the start.
Length of Term When you buy a term life policy that’s shorter than your actual needs, you risk developing a medical condition that could make new life insurance unaffordable in the future.
Specific Situation A 10-year term life insurance policy can make sense in scenarios where you have a specific situation you want to plan for.
Major Life Changes Major life changes such as a job loss, career change or divorce can have financial implications that might necessitate short-term life insurance.

The amount of coverage you purchase depends on your budget and financial goals. If you die, your loved ones can use the death benefit to cover any expenses, including funeral and burial costs, utility bills, groceries, education expenses or outstanding debts, like a car loan or mortgage.

At the end of the 10-year life insurance term, the period for fixed premiums expires. Assuming you’ve outlived the policy, no death benefit will be paid to your beneficiaries. And you won’t be refunded any of the premiums paid. That’s typical of how term life insurance works, unless you buy return of premium insurance (ROP). With this type of policy, all of the money you paid in premiums is refunded tax-free if you outlive the term.

At the end of your 10-year life insurance term, you might be able to renew your policy, but expect your premiums to increase significantly and continue to do so on an annual basis. Another option is to convert the term life to permanent life insurance. Permanent life insurance is more expensive than term life coverage, but coverage typically lasts a lifetime and can build cash value. If you don’t need permanent life insurance, it would likely be much more affordable to shop for a new term life insurance policy.

A 10-year term life policy can be a great choice for someone who needs coverage for a limited period of time. But it’s still best to buy a term length that matches the length of your financial obligations, rather than plan to re-shop in 10 years.

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