Life Insurance Expiry: What Happens When Policies End?

Term life insurance is a policy that covers an individual for a specific period, typically between 10 and 30 years. When a term life insurance policy expires, the coverage ends, and the policyholder is no longer insured. This means that if the insured person dies after the expiration date, their beneficiaries will not receive a payout. However, there are several options available to extend coverage or purchase a new policy if the insured person still requires life insurance.

Term life insurance policies can be converted to permanent life insurance policies

Term life insurance policies are temporary and provide coverage for a specific period, such as 10, 20, or 30 years. If the policyholder outlives the term, the policy ends, and there is no payout to beneficiaries. However, term life insurance policies can often be converted into permanent life insurance policies, which offer lifelong coverage.

Converting a term life insurance policy to a permanent one can be advantageous in several scenarios. Firstly, it allows policyholders to extend their coverage without undergoing a new medical examination or underwriting process, which is beneficial if their health has deteriorated. Secondly, permanent life insurance policies accumulate cash value over time, providing a savings component that can be accessed for retirement or other financial goals. This feature can be particularly useful for individuals who want to leave an inheritance for their heirs while still having the freedom to spend their retirement savings. Additionally, permanent life insurance guarantees a death benefit for beneficiaries, making it a preferred option for those seeking long-term financial planning tools, such as paying final expenses or supporting a surviving spouse.

When considering converting a term life policy to a permanent one, it is important to review the specific terms of the original policy. While many policies offer conversion options, they may have deadlines or age restrictions. For example, some policies may allow conversions only during the first 10 years, while others may impose an age limit of 75. It is also important to note that converting to a permanent policy will result in higher premiums. Policyholders should carefully evaluate their financial situation and long-term goals to determine if the increased cost is feasible, especially during retirement.

Before making a decision, individuals should consult with a financial advisor or insurance professional to understand the potential benefits and drawbacks of converting their term life insurance policy to a permanent one.

You can extend your current policy or buy a new one

If your term life insurance policy is expiring and you still require coverage, you can extend your current policy or buy a new one.

Extending your current policy

Term life insurance policies often include a guaranteed renewability provision, which allows you to continue coverage after the initial term ends, provided you keep paying the premiums. While you typically won't need to undergo a new physical exam, your premiums are likely to increase each year, and these hikes could become unaffordable. Some policies allow you to renew on this basis until you're 95.

Buying a new policy

If you're in good health, you may be able to find an affordable new policy. Some insurers write policies for applicants up to the age of 90. You will usually need to undergo a medical exam, especially if the policy is for a significant amount. However, some lower-value policies don't require a physical.

You won't get your money back at the end of a term life insurance policy

Term life insurance is a type of insurance that covers you for a specific period, typically between 10 and 30 years. Unlike permanent life insurance, which offers lifelong protection, term life insurance is temporary and will expire at the end of the term. So, what happens if you don't die before your term life insurance policy ends?

In most cases, you won't get your money back at the end of a term life insurance policy. Term life insurance is designed to provide coverage for a specific period, and if you outlive the policy term, the coverage will simply end without any refund of premiums paid. This means that if you die after the policy has expired, there will be no payout to your beneficiaries.

However, it's important to note that there are some exceptions and alternatives to consider. Firstly, some term life insurance policies offer a return-of-premium feature, which means you will receive a refund of the premiums paid during the term if you outlive the policy. Additionally, some companies allow policyholders to renew their coverage on a year-by-year basis after the initial term expires, although this option can be expensive due to age-related risk increases.

Another option is to convert your term life insurance policy into a permanent life insurance policy, which provides lifelong coverage. Many term policies include a conversion rider that allows you to make this change without undergoing a new medical exam. However, conversion riders have expiration dates, and not all policies allow conversions up until the end of the term. It's important to review your policy or consult your insurance company to understand your specific options.

While you won't get your money back at the end of a term life insurance policy in most cases, there are alternatives to ensure continued coverage or receive a refund of premiums paid. These options include renewing your policy, converting to a permanent policy, or choosing a policy with a return-of-premium feature.

You can use your term life insurance while you're alive

Term life insurance is a type of insurance that covers you for a specific period, typically between 10 and 30 years. It is designed to provide financial protection for your loved ones in the event of your death during the specified term. While term life insurance does not offer any benefits if you outlive the policy, there are still options available to utilise your insurance while you are alive.

Extending Your Current Policy

If you still have dependents relying on your income, you may consider extending your current term life insurance policy. Many policies have a guaranteed renewability feature, allowing you to renew annually until you reach 95 years of age. This option does not require you to undergo a new medical exam, which can be beneficial if your health status has changed. However, the insurance company will adjust your premium, typically resulting in higher costs.

Converting to a Permanent Policy

Another option is to convert your term life insurance policy into a permanent life insurance policy. Permanent life insurance provides lifelong coverage and often includes a cash value component. By converting, you gain access to the benefits offered by this type of policy, such as the ability to borrow money against the policy's cash value or use it to supplement your retirement income. Additionally, converting your policy can be done without providing evidence of insurability, making it a viable option if your health status has changed.

Living Benefits

Some life insurance policies offer living benefits, which provide access to funds from the policy's death benefit while you are still alive. These benefits are typically added as riders to the policy and can be useful in cases of chronic or terminal illness, hospice care, or general medical care. Living benefits may also include premium refunds if you outlive your policy or the option to waive premiums if you are diagnosed with a long-term disability.

Group Term Life Insurance

If your term life insurance policy is provided by your employer, you may have the option to transition to a group term life insurance plan. This type of insurance is offered as an employee benefit and often includes a base amount of coverage at no additional cost, with the option to add more coverage as needed.

Final Thoughts

While term life insurance is primarily designed to provide benefits in the event of your death, there are still ways to utilise your policy while you are alive. By understanding the options available, you can make informed decisions about extending or converting your policy to ensure continued protection for yourself and your loved ones.

If you outlive your policy, your coverage will expire

If you outlive your term life insurance policy, your coverage will expire. This means you will no longer be insured and will not be able to continue paying premiums to keep the policy active. However, you will not owe anything to the insurance company and will not be required to pay back any premiums you have paid over the years.

When a term life insurance policy expires, it is possible for it to convert to a whole life policy. This means that you can convert your term life insurance policy into a permanent one, even if health issues would make it difficult or impossible to qualify for a new one.

Some insurers also offer "return of premium" policies, which means you will get all your premiums back if you outlive your term. However, these policies typically have higher premiums than a traditional term life policy, so it is essential to compare the costs before deciding on this type of policy.

If your term insurance policy is expiring and you still have dependents relying on your income, you may need new insurance. You might be able to continue your current policy on an annual basis, but that could be expensive.

Many term 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—perhaps considerably—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.

Frequently asked questions