Term Life Insurance: What Happens When You Die?

Term life insurance provides coverage for a specific period, typically 10 to 30 years, and unlike permanent life insurance, it ends once the term expires. When a term life insurance policy expires, the policyholder is notified by the insurance company, and their coverage ends. This means that if the policyholder dies after the policy ends, their beneficiaries will not receive a death benefit payout. However, there are several options available to extend or replace coverage, including renewing the existing policy, converting to a permanent life insurance policy, or purchasing a new term or permanent life insurance policy.

Coverage ends, you stop paying premiums

When your term life insurance plan expires, the policy's coverage ends, and you stop paying premiums. If you pass away after the policy ends, your beneficiaries will not be eligible to receive a death benefit.

If you only needed term life insurance for a certain period, you can let the policy expire without getting new coverage. However, if you still require life insurance coverage, you will need to get a new policy.

Once your policy ends, you can't get back the premiums you paid unless you have a return of premium rider. This optional add-on lets you receive a refund of premiums if you outlive your policy term. However, a return of premium rider can increase your premiums, so you must budget accordingly when adding one.

If you want to remain covered after your term life insurance policy ends, you can:

• Convert your policy to a permanent life plan for higher premiums. This policy type lasts for your entire life if you remain current on your premiums. It also comes with a cash value growth component that can serve as a wealth-building vehicle.
• Extend your current policy. Many insurers attach renewal riders to term life insurance. This lets you extend your coverage without new underwriting or medical exams. However, your premiums will be higher since you'll be older when renewing your policy.
• Get a new term life policy. If it's too late to renew or extend coverage, you can buy a new term life insurance policy. This may allow you more flexibility in choosing the policy term, but you'll likely have to take a new medical exam to get coverage. Additionally, you'll pay more in premiums since you'll be older when applying.

Your beneficiaries won't receive a death benefit

When a term life insurance policy expires, the policy's coverage ends, and you stop paying premiums. This means that if the policyholder dies after the policy ends, their beneficiaries will not be eligible to receive a death benefit.

Some policyholders may only need term life insurance for a certain period, such as to help protect a child until they reach adulthood. In this case, letting the policy expire without getting new coverage may be feasible. However, if the policyholder still has dependents relying on their income, they may need to get a new insurance policy.

If you have a term life insurance policy that is about to expire, it's important to understand your options. You may be able to extend your current policy, but this could be expensive as the premium will change to reflect your current age. You can also convert your term life insurance policy to a permanent life insurance policy, which will provide coverage for the rest of your life if you keep up with premium payments. Another option is to purchase a new term life insurance policy, but this will likely require a new medical exam and the premiums will be higher due to your increased age.

It's important to note that permanent life insurance is much more expensive than term life insurance. However, permanent life insurance policies have a cash value component that acts as a forced savings account. This means that you can borrow or withdraw from it under certain circumstances.

You can convert to a permanent life plan

If you have a term life insurance policy that is about to expire and you still need coverage, you can convert it to a permanent life insurance policy. This option is ideal if you've had a change in health, still have dependents, or have more debt than anticipated.

Most term life policies include a conversion provision, but you should check your policy or contact your insurance provider to confirm. Converting to a permanent, whole life insurance policy will give you coverage for the rest of your life, and it may be cheaper than buying a new life insurance policy, especially if your insurer doesn't require a new medical exam.

When you convert your term life policy to a permanent policy, you will pay more because you are older and because permanent policies present more risk to insurers. Your premium could jump significantly because of these two factors. Additionally, some companies may only allow you to convert to certain types of permanent insurance, such as a whole life or universal life policy.

Permanent life insurance policies have a cash value component, which applies a portion of the paid premiums to an investment account that grows tax-deferred. This acts as a forced savings account; you can borrow or withdraw from it under certain circumstances. For these reasons, permanent life insurance typically has higher premiums than term life insurance.

Whole life insurance policies are permanent policies with fixed premiums, with cash value growing at a specified rate. With universal life insurance, the premium and death benefit can be adjusted, allowing the policyholder some financial flexibility if their budget or needs change over time. The cash value component of universal life insurance grows at money market rates, potentially earning you more than a whole life policy.

An indexed universal life policy's cash value growth rate is linked to the performance of financial indexes such as the S&P 500. This option provides the potential for higher returns than a whole life policy.

You can extend your current policy

If you still need coverage when your term life insurance expires, you may be able to extend your current policy. Many term life insurance policies include a guaranteed renewability clause that lets you extend your coverage past its expiration date on a year-to-year basis. While your death benefit stays the same, your premium is likely to increase each year you renew, as it will be based on your current age. This option is particularly useful for those who have developed health issues that make obtaining new insurance challenging.

However, it's important to note that the premium for a renewed term life insurance policy will be higher than the original policy, as the risk to the insurance company has increased. Additionally, the premium may increase every year, which could become costly. Therefore, if you need coverage for longer than a year or two, you may want to consider other options, such as converting to a permanent life insurance policy.

Before your term life insurance policy expires, it's a good idea to review your life insurance options and make plans, especially if your health or financial situation has changed. You may want to consult with a financial advisor or licensed insurance professional to help you make an informed decision based on your specific circumstances and goals.

You can buy a new term life policy

If you still need life insurance coverage after your term life insurance policy expires, you can buy a new term life insurance policy. This option is often chosen by those who are relatively young and in good health, as it is likely to be the most inexpensive life insurance option.

When you buy a new term life insurance policy, you will have to go through the application process again and get a new medical exam. Your premiums will likely be much higher than your original policy because they will be based on your current age and health status. You may also have to take out a shorter policy, depending on your age.

A new term life insurance policy will give you guaranteed level premiums for the length of the term. This option is viable if you need coverage for a specific amount of time, such as to help pay off a mortgage or provide for education expenses.

Before buying a new term life insurance policy, it is important to assess your current financial situation and future needs to determine whether you still require life insurance coverage. Consulting with a financial advisor or licensed insurance professional can help you make an informed decision.

Frequently asked questions