What Happens To Term Life Insurance At The End Of The Term?
Term life insurance is a temporary coverage that lasts for a specific length of time, usually between 10 to 30 years. Unlike permanent life insurance policies, term life insurance coverage ends when the term expires, and the policyholder does not receive any death benefit if they outlive the term. However, if the policy has a return-of-premium feature, the policyholder will receive the amount paid into the policy throughout its term.
Renewing or Converting Term Life Insurance
When term life insurance expires, the policy becomes invalid, and the policyholder no longer needs to pay the premiums. However, some term policies allow policyholders to renew their policy annually or convert it to a permanent insurance policy before the term expires.
If the policy has a conversion rider, the policyholder can convert it to a permanent insurance policy without taking another medical exam. It is essential to be aware of the conversion policy’s deadlines to ensure that policyholders convert it before the policy expires.
Buying a New Policy or Permanent Life Insurance
If policyholders need further coverage after the term policy expires, they may opt to purchase a new term policy or permanent life insurance policy. However, buying a new term policy may require a medical exam, and the premium may increase if there are new health issues. On the other hand, permanent life insurance policies are more expensive than term policies, but they provide lifelong coverage and a savings component.
Before purchasing a new policy or converting a term policy, it is essential to review policy documents or speak to an agent to learn more about the options available.
Final Thoughts
If policyholders have no dependents or do not want to burden their heirs with end-of-life expenses, final expense life insurance may be a suitable option. However, final expense life insurance policies usually have low coverage limits and high premiums.
It is essential to evaluate individual circumstances and needs before deciding whether to renew, convert, or purchase a new policy or permanent life insurance.
| Pros | Cons |
|---|---|
| Term life insurance is generally cheaper than permanent life insurance policies while young. | Term policies end when the term expires, and there is no death benefit if the policyholder outlives the term. |
| Conversion riders allow policyholders to convert term policies to permanent insurance policies without taking another medical exam. | Conversion policies typically have strict deadlines for conversion, often several months before the policy expires. |
| Buying a new term policy is an option for those who need further coverage after the term policy expires. | A medical exam may be required for a new term policy, and the premium may increase if there are new health issues. |
| Permanent life insurance policies provide lifelong coverage and a savings component. | Permanent life insurance policies are more expensive than term policies. |
| Final expense life insurance may be suitable for those who have no dependents or do not want to burden their heirs with end-of-life expenses. | Final expense life insurance policies usually have low coverage limits and high premiums. |
