Term Life Insurance: Outliving And Navigating The Next Steps

Term life insurance is a type of insurance that provides coverage for a specific period, typically ranging from 10 to 30 years. Unlike permanent life insurance, term life insurance does not offer lifelong protection, and it ends once the term expires. If you outlive your term life insurance policy, you will no longer have coverage, but there are options available to extend or replace your coverage. You can either convert your term policy into a permanent policy or purchase a new term policy. The decision depends on your coverage needs and financial situation.

You can convert to a permanent policy

If you outlive your term life insurance, you can convert it to a permanent life insurance policy. This is a good option if your health has declined to a point where you won't be eligible for a new term life insurance policy.

Many term life insurance policies come with a built-in term conversion rider, which allows you to convert your policy to a permanent one before the term expires. The advantage of this is that you won't have to go through underwriting again. You'll skip the medical exam and keep your original health classification, even if your health has worsened, which could save you money on premiums.

However, permanent life insurance is usually much more expensive than term life insurance. Consider converting to a permanent policy only if your health has declined to a point where you won't be eligible for traditional coverage and you only need a small amount of coverage, such as final expense insurance to cover end-of-life expenses.

The process for converting your term life insurance to a permanent policy will depend on the specific policy you have, so be sure to check with your insurance company or agent to understand your options and any deadlines for making the switch.

You can buy a new term policy

If you outlive your term life insurance, you can always buy a new term policy. This is the most inexpensive option for those who are relatively young and in good health.

However, it is important to note that the older you are, the more you will pay in premiums. A medical exam will also likely be part of the underwriting process for any new term policy, and if there are new health issues since the first policy, the rate will increase.

If you are looking for a shorter term and a lower death benefit, this could be a good option. For example, if you only need to cover a child through college, an additional 10-year policy might be sufficient.

If you are considering this option, it is important to start evaluating other options far in advance of your current term policy's termination date. This will give you time to take advantage of any conversion riders that are offered and make a smooth transition to a new policy.

You can get permanent life insurance

If you outlive your term life insurance, you can get permanent life insurance. Permanent life insurance policies, such as whole life insurance, are more expensive than term life insurance—sometimes up to ten times more costly. However, the cost can vary based on personal factors and policy choices.

• Lifetime coverage: Permanent policies provide coverage for the policyholder's entire life, as long as premiums are paid. This typically falls between the ages of 95 and 121, the maximum coverage age range set by insurers.
• Cash value component: Permanent life insurance policies include a tax-deferred cash value component that grows over time. The cash value can be used as collateral for a loan or withdrawn.
• Safe investment: While the cash value component may not earn as much interest as some other investments, it is generally considered safe and can be an important part of financial planning.

There are several types of permanent life insurance policies:

• Whole life insurance: Offers fixed premiums, a guaranteed death benefit, and a cash value component that grows at a guaranteed rate.
• Universal life insurance: Provides flexible premiums and death benefits, with a cash value component that earns interest based on current market rates or a fixed rate.
• Indexed universal life insurance: Similar to universal life, but the cash value component is tied to a stock market index, providing the potential for higher returns.
• Variable universal life insurance: Combines the flexible features of universal life insurance with investment options for the cash value component, allowing policyholders to invest in various sub-accounts.

You can extend your current policy

If you outlive your term life insurance and still need coverage, you can extend your current policy. Many insurers attach a renewal rider to term life insurance, allowing you to renew your policy without new underwriting or medical exams. However, you will have to pay higher premiums since you will be older when renewing your policy. You may also have to stick with the same term length as the original policy.

Some term life insurance policies can be converted into permanent life insurance. This allows you to change your term policy into a permanent one without needing to go through underwriting again. The premium on the new policy will be higher than what you have been paying for term insurance, but you may have the option to convert to a policy with a smaller death benefit in return for a lower premium.

It is important to note that policies differ in terms of when you can make this switch, and there may be age limits. You will need to check your policy or contact your insurance company or agent to find out.

You can get final expense insurance

If you outlive your term life insurance, you will need to explore other options to ensure your loved ones are financially protected. One option is to get final expense insurance, also known as burial insurance, which is a whole life insurance policy that covers end-of-life expenses, including funeral arrangements and any remaining medical or legal expenses. Here are some reasons why you should consider getting final expense insurance:

Affordable Option

Final expense insurance is one of the most affordable types of life insurance available. The approval process is usually quick and easy, and coverage can be issued in days, or even on the same day you apply. For example, a RAPIDecision Final Expense policy through eFinancial offers coverage ranging from $5,000 to $40,000, with rates starting at just $63 per month.

No Medical Exam Required

Most final expense insurance policies do not require a medical exam for qualification. Instead, they are issued based on the applicant's responses to health questions on the application form. This makes it easier for individuals with pre-existing health conditions or those who have been denied standard life insurance in the past to obtain coverage.

Whole Life Coverage

Final expense insurance is a type of whole life insurance policy, which means it does not expire as long as the premiums are paid. This is in contrast to term life insurance, which only covers a specific period. With final expense insurance, your loved ones will have financial protection for end-of-life expenses, no matter when they occur.

Cash Value Accumulation

Final expense insurance policies can build cash value over time. Once the cash value reaches a certain level, you can withdraw cash from it, use it to borrow money, or even pay your premiums. This feature adds a wealth-building component to your insurance policy.

Flexible Payment Options

Final expense insurance providers often offer flexible payment options to align with your financial situation. You may have the choice to pay your premiums monthly or annually, and in some cases, you can even align your payments with your Social Security deposit.

Peace of Mind

Final expense insurance can provide peace of mind for you and your loved ones. It ensures that your family will not be burdened with the financial challenges associated with your death and allows them to focus on healing during a difficult time.

Frequently asked questions