Extended Term Life Insurance: What You Need To Know

Extended-term life insurance is a type of insurance that allows you to convert a whole life insurance policy into a term life policy. This option is useful when the premiums for a whole life insurance policy become too expensive for the policyholder. By converting the policy, you can maintain your life insurance coverage and keep the death benefit without cancelling the original policy. The extended term insurance option is a non-forfeiture provision that uses the cash value of a whole life policy to purchase a term policy for the same coverage amount. This allows you to keep your coverage in place without having to pay additional premiums. However, it's important to note that you will lose the perks of whole life insurance, and the extended term option is generally irreversible.

Extended term insurance replaces a permanent life insurance policy with a term policy

Extended term insurance is a way to use the cash value of a permanent life insurance policy to purchase a term life insurance policy. This option is available when you want to cancel your permanent life insurance policy (usually a whole life insurance policy) because it has become too expensive, but you still need coverage.

Most permanent life insurance policies, such as whole life insurance, charge higher premiums than term life insurance policies. Part of the money from these premiums is used to build cash value over time. These policies typically contain a "nonforfeiture" clause, which means that if you cancel the policy or let it lapse, you won't lose the cash value that has accumulated.

Extended term insurance is a nonforfeiture option that allows you to maintain your life insurance coverage for a certain period, even though your permanent policy has ended. It replaces your permanent policy with a term policy, typically with the same face amount, paid for by your accumulated cash value.

The length of the term depends on the amount of cash value in the policy and your age when you stopped making payments. If you have an outstanding policy loan, the insurance company will deduct this amount from the cash value first. They will then use the remaining amount to determine how much term life insurance you qualify for.

The advantage of extended term insurance is that you can stop paying premiums while still maintaining some coverage. If you die during the policy's term, your loved ones will receive a death benefit. However, the downside is that you are replacing permanent life coverage, which is meant to last your entire lifetime or until an advanced age, with short-term coverage. If you outlive the policy's term, it will expire, and your survivors will not receive a payout when you die.

It uses the cash value of a permanent life insurance policy to buy a term policy

Extended term life insurance allows you to replace a permanent life insurance policy with a term policy by using the cash value of the former. This option is useful if you can no longer afford the premiums of your permanent life insurance but still require coverage.

Permanent life insurance policies, such as whole life insurance, typically charge higher premiums than term life insurance. This is because permanent life insurance policies provide coverage for an individual's entire life or until they reach an advanced age. In addition, permanent life insurance policies build cash value over time, which can be used for loans or withdrawals.

Extended term life insurance is a non-forfeiture option that allows individuals to maintain their life insurance coverage for a certain period, even if they can no longer afford the premiums of their permanent policy. It replaces the permanent policy with a term policy of the same face amount, with the accumulated cash value from the original policy being used to pay for the new term policy.

The length of the term policy under extended term life insurance depends on the amount of cash value in the original policy and the age of the policyholder when they stopped making payments. If there is an outstanding loan on the policy, the insurance company will first deduct this amount from the cash value before determining the term policy's duration.

The advantage of extended term life insurance is that individuals can stop paying premiums while still retaining some level of coverage. If the policyholder passes away during the term, their loved ones will receive a death benefit. However, the downside is that permanent life coverage is replaced with short-term coverage. If the policyholder outlives the term, the policy will expire, and their survivors will not receive a payout.

It's a nonforfeiture option that lets you keep your life insurance coverage

Extended term life insurance is a nonforfeiture option that allows you to retain your life insurance coverage for a certain period even if you can no longer afford the premiums. It is a valuable feature that ensures your policy doesn't lapse entirely, providing continued coverage when you're unable to make payments.

When you choose the extended term option, you can use the cash value of your permanent life insurance policy to purchase a term policy. This means you can stop paying premiums on your original policy and still maintain some level of coverage for a specified duration. The term policy will typically have the same face value as your original permanent policy but for a shorter duration.

The length of the term insurance depends on the cash value of your original policy and your age when you opt for the extended term. The higher the cash value and the younger you are, the longer the term insurance will last. It's important to note that any outstanding policy loans will be deducted from the cash value, reducing the amount available for the term insurance.

The advantage of the extended term option is that it allows you to maintain life insurance coverage without having to pay additional premiums. This can be especially useful if you're facing financial challenges and can no longer afford your original policy but still want to ensure your loved ones receive a death benefit.

However, it's important to consider the trade-offs. By choosing the extended term option, you are replacing permanent life coverage, which lasts your entire lifetime or until an advanced age, with short-term coverage. If you outlive the term of the policy, it will expire, and your beneficiaries will not receive a payout upon your death. Additionally, you will lose the perks associated with whole life insurance, such as the potential for retirement income.

When deciding whether to select the extended term option, carefully weigh your options and consider seeking advice from a financial advisor or insurance agent. They can help you understand the pros and cons and make an informed decision based on your specific circumstances.

It's a way to maintain life insurance coverage if you can no longer afford premiums

Extended term life insurance is a way to maintain life insurance coverage if you can no longer afford the premiums. It allows you to convert a permanent life insurance policy, such as whole life insurance, into a term life policy. Permanent life insurance policies typically build cash value over time, and this accumulated cash value can be used to purchase extended term life insurance.

This option is useful when the premiums on your whole life insurance policy become too expensive. By converting to a term life policy, you can lower your monthly insurance rates while still retaining some level of coverage. The term life policy will have the same death benefit as your original whole life policy, ensuring that your loved ones receive a payout if you pass away during the policy's term.

However, it's important to note that extended term life insurance provides short-term coverage, unlike permanent life insurance, which lasts for your entire lifetime or until an advanced age. If you outlive the term of the policy, it will expire, and your survivors will not receive a payout when you die. Additionally, you will lose the perks associated with whole life insurance, such as using the policy as a retirement plan.

When considering extended term life insurance, it's crucial to understand how it works and explore other options available to you. You may also want to consult a financial advisor to make informed decisions regarding your life insurance coverage.

It's a nonforfeiture provision in a whole life policy

Extended term life insurance is a type of insurance that allows you to keep the value of a whole life insurance policy and turn it into a term life policy. This option is particularly useful when your whole life insurance becomes too expensive.

Extended term life insurance is a nonforfeiture provision in a whole life policy. A nonforfeiture clause is included in a permanent life insurance policy to protect the consumer if they surrender the policy or are unable to pay premiums. The clause was created to protect the insured in case the policyholder stops paying premiums. State law forbids companies from keeping the accumulated cash value and cancelling the policy.

Policyholders can choose from four different life insurance nonforfeiture options: cash surrender value, extended-term insurance, loan value, and paid-up insurance. The extended-term nonforfeiture option allows the policyholder to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole-life policy. This allows the policyholder to stop paying the premiums but not forfeit the equity of their policy. The length of the term depends on how much cash value the policy has, as well as the age of the policyholder.

The benefit of choosing extended-term as a nonforfeiture option is that it provides a term insurance policy with the same death benefit for a specified period. This option is beneficial for those seeking temporary coverage without additional costs.

Frequently asked questions