Term life insurance provides temporary coverage for a specific length of time, which often ranges from 10 to 30 years. If the policyholder outlives the term, the policy simply expires, unless there is a term conversion rider on the policy. In this case, the policyholder may be able to convert the term policy to a permanent insurance policy, without taking another medical exam. However, this option typically has strict deadlines for conversion, often several months before the policy expires, so it’s important to plan ahead.
Alternatively, with some term policies, the policyholder may have the option to renew the policy on an annual basis after the initial term expires, but the premium will likely increase each time it is renewed. If the policyholder needs further coverage after the term policy expires, they may want to start evaluating other options six months to one year before the policy expires.
One option is to purchase a new term policy, which may be cheaper for those who are relatively young and in good health. Another option is to purchase a permanent life insurance policy, such as whole life insurance, which provides coverage until death as long as the premiums are paid. Permanent policies also have a tax-deferred cash value account, which can be used as collateral for a loan or withdrawn. However, permanent policies are more expensive than term policies, and may not be the best option for everyone.
For those who do not have a term conversion rider on their policy, final expense or burial insurance may be an option to consider. Final expense life insurance usually has low coverage limits capped at around $25,000, so it’s not the best option for income replacement. Additionally, the premiums tend to be very expensive because a medical exam is not required and the insurance company assumes more risk.
Ultimately, it’s important to review policy documents or speak to an agent to learn more about the options available and make an informed decision based on individual needs and circumstances.
| Pros | Cons |
|---|---|
| Term life insurance policies are generally cheaper than permanent life insurance policies while you are young. | Term policies expire and may not provide coverage when it is needed later in life. |
| Permanent life insurance policies provide lifelong coverage and a savings component. | Permanent policies are more expensive than term policies. |
| Final expense or burial insurance may be an option for older adults whose primary goal is to prevent their beneficiaries from facing financial challenges associated with their death. | Final expense insurance usually has low coverage limits and expensive premiums. |
Burial Insurance
Article Sources
- Bankrate. Term Life Insurance: What It Is, Different Types, Pros And ...
- The Guardian Life Insurance Company of America. Life Insurance
- Investopedia. Life Insurance: What It Is, How It Works, And How To Buy A ...
- Investopedia. Qualifying Life Event (Qle) - Glossary
- Forbes. Term Vs. Whole Life Insurance