Term Life Insurance Expiry: What's Next?

Term life insurance is a temporary product with an expiration date. When term life insurance expires, the policy's coverage ends, and the insured individual stops paying premiums. This means that if the insured person dies after the policy ends, their beneficiaries will not be eligible to receive a death benefit. However, there are several options to maintain or replace coverage. The insured individual can renew their term life policy, convert it to a permanent life insurance policy, or buy another term life policy.

You can renew your policy for a set period of time

If your term life insurance expires while you are still alive, your insurance company will notify you that your coverage has ended and you no longer need to pay your premium. If you still require coverage, you can renew your policy for a set period of time. Many term life insurance policies include a guaranteed renewability clause that will allow you to extend your coverage past its expiration date on a year-to-year basis. Your death benefit will remain the same, and you won't have to reapply or undergo another life insurance medical exam. However, your premium is likely to increase each year you renew.

Renewing your term life insurance policy is a good option if you only need coverage for a few extra years. For example, if you have been diagnosed with a terminal illness and are unlikely to be eligible for a new policy, you could renew your term policy for a few years to ensure your beneficiaries receive a death benefit.

If you need coverage for longer than a year or two, you may want to consider other options to avoid paying a premium that rises annually. It's important to review your life insurance coverage regularly to ensure it meets your present and future needs. Life events such as getting married or divorced, starting a family, buying a home, or starting a business are all good reasons to review your insurance coverage.

You can convert it to a permanent life insurance policy

When your annual renewable term life insurance expires, you have the option to convert it to a permanent life insurance policy. This is a good option if you want coverage for the rest of your life and don't want to worry about your premiums increasing every year. Permanent life insurance policies also have a cash value component, which acts as a forced savings account that you can borrow or withdraw from under certain circumstances. This can be a good way to build wealth over time.

To convert your term life insurance policy to a permanent one, you will need to check if your policy has a conversion provision or term conversion rider. Most term life policies include this provision, but it's important to review your policy or contact your insurance company to confirm. There may also be deadlines for when you can convert your policy, such as an age restriction or a certain number of years of coverage.

When you convert from a term life policy to a permanent policy, your premiums will increase significantly because you are older and present more risk to the insurer. Additionally, some companies may only allow you to convert to certain types of permanent insurance, such as a whole life, universal, or indexed life policy. Discussing your options with an experienced insurance agent can help you navigate the complexities of converting a term policy to permanent insurance.

It's important to consider your current life stage, financial obligations, and health when deciding whether to convert your term life insurance policy to a permanent one. If you are still in good health and don't anticipate needing coverage for the rest of your life, you may want to shop for a new term-life policy, which may be a more affordable option.

You can buy another term life policy

If your annual renewable term life insurance policy has expired and it's too late to renew or extend coverage, you can buy a new term life insurance policy. This option allows you to choose a different policy term and insurer, but you will likely have to take a new medical exam to get coverage. Additionally, your premiums will likely be higher than before as they will be based on your current age and health status.

If you are still in good health and want a substantial level of coverage, buying a new term-life policy may be the most affordable option to give you substantial coverage. However, if you can't convert your term policy to a whole life policy, then buying a brand-new insurance policy may be your best option.

Generally, a new term policy will be cheaper than a new whole life policy, but either way, your premiums are likely to be higher compared to your old policy. This is because your new policy will be based on your current age and health status.

Many people choose to buy a second life insurance policy well in advance of their current one lapsing to avoid paying a higher premium.

You can let your coverage lapse

If you no longer need your term life insurance policy, you don't have to do anything. You can simply let your coverage lapse. However, if you still require coverage, you should review your life insurance options before your current policy expires.

If you let your coverage lapse, your insurance company will notify you that your coverage has ended, and you no longer need to pay your premium. If you pass away after the policy ends, your beneficiaries will not be eligible to receive a death benefit.

You may only need term life insurance for a certain period, such as to help protect a child until they reach adulthood and start their career. In this case, letting the policy expire without getting new coverage may be feasible. However, if you still need life insurance coverage, you will have to get a new policy.

If you have paid off your mortgage, have no significant debt, have no financially dependent children, and your spouse does not rely on your income, you likely do not need life insurance anymore.

You can review your insurance needs

When your annual renewable term life insurance expires, it is important to review your insurance needs. This is because your life insurance needs may have changed over time. It is a good idea to consider your current life stage, your spouse or partner's financial situation, your children or grandchildren, and any rent or mortgage payments you are making.

For instance, you may have purchased your original policy to protect a child until they reached adulthood and started their career. In this case, letting the policy expire without getting new coverage may be feasible. However, if your circumstances have changed, you may still need life insurance coverage, in which case you will need to get a new policy.

Life events such as getting married or divorced, starting a family, buying a home, or starting a business are all good reasons to review your insurance coverage. Additionally, you should consider whether you require other types of insurance, such as critical illness or disability insurance.

By regularly reviewing your insurance needs, you can ensure that you have adequate coverage to meet your present and future needs. This will help you make informed decisions about your insurance coverage and provide peace of mind for you and your loved ones.

Frequently asked questions