What Happens After 20-Year Term Life Insurance?

Term life policies provide coverage for a specified period, with level payments for the duration of the coverage period. A 20-year term policy is a popular choice since it is affordable and provides coverage during a critical time when many people have young families and dependents. This article will discuss what happens after 20-year term life insurance and options available to policyholders.

What Happens After the 20-Year Term Expires?

When a 20-year term policy expires, the policyholder will no longer have coverage. There is no residual value, and unlike permanent life insurance, there is no cash value beyond the death benefit. For the policyholder to continue coverage, they will have to apply for a new policy, which will come with higher premiums since they will be 20 years older, and their life expectancy will be lower.

Convertible Policies

Many life insurance companies offer convertible term policies that allow policyholders to change their coverage to permanent whole life without getting a new medical exam. This is an attractive option for those who may have a serious health problem or want permanent life-long insurance protection. Guardian, for example, offers an optional Extended Conversion Rider that enables policyholders to convert their policy for the duration of the insurance term.

Permanent Life Insurance

Permanent life insurance offers coverage that lasts the policyholder’s entire life as long as premiums are paid. These policies include a wealth-building component, the policy’s cash value, which helps make coverage last indefinitely while providing other financial benefits. Whole life insurance and universal life insurance are the two main types of permanent policies. Whole life insurance is simpler, with a guaranteed premium, death benefit, and cash value growth rate. Universal life insurance can be less expensive, but the premiums, benefit, and cash value growth rate can vary. Permanent policies are more complex than term policies and require a financial professional to tailor the policy to the policyholder’s needs.

Renewability

Technically, most term life policies have a guaranteed renewability feature that lets policyholders extend their coverage without going through a new underwriting process and getting another medical exam. However, the insurance company will typically raise the premium significantly. This type of extension is rarely used and is usually done by otherwise uninsurable people.

Conclusion

A 20-year term policy is an affordable option for those with young families and dependents. After the term expires, policyholders have to apply for a new policy, which will come with higher premiums. Convertible policies and permanent life insurance are options available for policyholders who want to continue coverage beyond the 20-year term. Renewability is possible but is not financially viable for most policyholders.