Term Life Insurance: What Happens If You Outlive It?

what happens to term life insurance if you dont die

Term life insurance is a temporary product, which means it has an expiration date. When term life insurance expires, the policy ends, and you stop paying premiums. If you die before the expiration date, your beneficiaries receive a death benefit check from the insurance company. However, if you die after the expiration date, your beneficiaries won't receive a payout.

If you outlive your term life insurance coverage, you can either extend your current policy, buy a new one, or convert it to permanent life insurance.

Characteristics Values
What happens to term life insurance if you don't die? The policy ends, but you can convert it to permanent life insurance or buy a new one.
Can you get your money back? Only if you purchase return of premium life insurance.
What happens when term life insurance expires? Your coverage ends, and you stop paying premiums.

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You can convert your term life insurance into permanent life insurance (with a conversion rider)

If you outlive your term life insurance policy, you might want to convert it to permanent life insurance. Many term life insurance policies have a conversion rider included, which allows you to make this change without undergoing a medical exam or health update. This means that, regardless of any changes in your health, you can ensure long-term security for yourself and your loved ones.

There are several benefits to converting your term life insurance policy. Firstly, it provides flexibility, allowing you to adapt your insurance coverage as your needs change. Secondly, it guarantees coverage for your entire lifetime, as long as the premiums are paid. Additionally, permanent life insurance policies typically have a cash value component that grows over time and can be used as a form of savings or investment. This can provide a financial benefit during retirement or be left as a legacy for your children.

However, there are also potential drawbacks to converting your term life insurance. Permanent life insurance policies generally have much higher premiums than term life policies, so you will need to consider whether the increased cost fits into your financial plan. There may also be a limited time period during which you can convert your policy, and some insurers may restrict the types of permanent policies you can convert to. It is important to carefully review the specifics of term conversion riders, as they can vary between insurance companies and policy terms.

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You can renew your term life insurance on a year-by-year basis (with a guaranteed renewability provision)

If you outlive your term life insurance, you can renew your coverage on a year-by-year basis. Many term life insurance policies have a guaranteed renewability provision that allows you to keep your insurance in effect after the end of the original term as long as you continue to pay the premiums. While your premiums are likely to rise each year, based on your current age, you typically won't have to submit to a new physical exam. Some policies allow you to renew on this basis up to age 95.

Renewing your term life insurance coverage is a good option if you develop serious health issues, as it ensures continued financial protection for your family without needing a new medical exam. The increase in premiums due to age at renewal is usually less significant than the potential increase or inability to secure a new policy if you were to reapply after being diagnosed with a serious health condition. This makes the renewability feature a valuable safeguard against the uncertainties of future health issues.

However, it is important to note that the premiums for renewed policies are typically significantly higher each year. This option may be financially viable if you believe you would be uninsurable otherwise. If you are diagnosed with a severe medical condition, this option can be lifesaving for your loved ones. For example, imagine your term insurance is about to expire, and you are diagnosed with terminal cancer. You can opt to renew your coverage to ensure you don't leave your family with a pile of medical bills.

Renewing your term life insurance coverage allows you to reclaim your coverage at the end of your initial term, keep your policy's original face value amount (or death benefit), and renew your term life policy without starting the application process again. It also exempts you from answering medical questions or undergoing a medical exam to prove insurability.

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You can buy a new term life insurance policy

If you outlive your term life insurance policy, you can buy a new one. This is the least expensive way to continue coverage, especially if your health hasn't changed much. You can choose a different coverage amount and term length from your original policy. For example, if you have a child in college and one in high school, you may want to take out an additional 10-year term policy to ensure your children are independent and no longer rely on you financially.

When buying a new term life insurance policy, it's important to consider your current financial situation and future needs. Do you have any debts or family members who depend on you? If something were to happen to you in the next 20 or 30 years, how much would they need to maintain their lifestyle? You can use a term insurance premium calculator to calculate your premium for the desired sum assured.

Additionally, you can add riders to your policy for extra protection. These include critical illness riders and accidental disability riders, which provide additional coverage and financial security in unexpected situations. You can also choose how your family receives the payout, either as a lump sum or in monthly instalments.

When purchasing a new term life insurance policy, you will need to fill out a proposal form, providing details such as your age, medical history, and lifestyle habits. You will also need to undergo a medical check-up and submit the required documents to activate your life insurance policy.

Finally, when selecting the best term insurance plan, it's important to consider the insurance company's claim settlement ratio, customer experience, solvency ratio, and the specific benefits offered by the policy.

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You can buy a permanent life insurance policy

If you outlive your term life insurance policy, you can buy a permanent life insurance policy. Permanent life insurance policies are designed to last your entire life. They are more expensive than term life insurance policies, but they offer lifelong coverage and the opportunity to build cash value that can be borrowed against.

There are several types of permanent life insurance policies, including:

  • Whole life insurance: This type of policy has fixed premiums and a cash value component that accumulates slowly. The premiums are guaranteed and never change or increase with age. The cash value growth is also guaranteed, but it may be eligible for annual dividends that can boost its growth.
  • Universal life insurance: Universal life insurance offers flexible premiums and death benefits. You can adjust your premium payments and death benefit to fit your needs. The cash value growth is based on current market interest rates, but it is still tax-deferred.
  • Variable universal life insurance: This type of policy offers flexible premiums and a savings component, but more factors influence how the savings can grow. The savings portion grows based on the investment methods that you choose.
  • Indexed universal life insurance: This type of policy is similar to universal life insurance, but the cash value growth is tied to a chosen stock market index. If the chosen index performs well, the account will grow; otherwise, some companies allow it to grow at a minimum rate.

When deciding whether to buy a permanent life insurance policy, consider your financial goals, budget, and how long you need coverage. Permanent life insurance is typically more expensive than term life insurance, but it offers lifelong coverage and the opportunity to build cash value. It may be a good option for those who need coverage regardless of when they die, want to use life insurance to leave an inheritance, or want a policy to cover final expenses.

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You can let your term life insurance policy expire

If you outlive your term life insurance policy, you can let it expire. This means that your coverage will end, and you will no longer have to pay premiums. The insurance company will usually send a notification informing you that your coverage has ended.

If you choose to let your policy expire, it is important to assess your financial situation and future needs to ensure that you no longer require life insurance coverage. You may no longer need life insurance if:

  • Your dependents are financially independent.
  • You have paid off your major debts and have sufficient savings or assets.
  • Your spouse or partner is financially secure and does not rely on your income.

However, if you still need life insurance coverage, there are several options to consider, such as purchasing a new term policy or converting your existing policy into permanent life insurance.

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