There are two types of life insurance policies: term and permanent.
One of the most significant differences between the two is that term life insurance is a temporary product. It has an expiration date.
What happens when term life insurance expires? Your coverage ends, and you stop paying premiums.
In this guide, you’ll learn how long term life insurance lasts, what happens if you outlive your term life insurance, and if you can extend your coverage.
Do Life Insurance Policies Expire?
It depends on the type of policy you own:
- Permanent life insurance products don’t expire. These policies, including whole and universal life, are designed to last your entire life.
- Term life insurance does expire. It’s designed to be temporary.
When life insurance coverage expires, you are no longer insured. If you die before the expiration date, your beneficiaries receive a death benefit check from the insurance company. If you die after the expiration date, your beneficiaries don’t receive a payout.
Do you need term life insurance or whole life insurance? Learn more about the differences between the two in our guide.
How Long Does Term Life Insurance Last?
Term life insurance offers fixed rates that last 10-40 years. So, if a 40-year-old buys a $500,000 20-year term policy for $30 per month, the cost remains $30 until it expires at age 60.
Ideally, you buy term life insurance to financially protect your loved ones during their most vulnerable years. The years when, if you were to die unexpectedly, they would struggle financially due to losing your income.
During these years, you may be:
- Raising children
- Saving for retirement
- Paying off a mortgage
- Running a business
If you were no longer around to provide for your loved ones, what would they do? This is why families should have term life insurance. It’s planning for the what-ifs.
Not sure how much life insurance you need?
What Happens at the End of Term Life Insurance?
At the end of your policy’s term, you no longer have to pay any premiums, and your coverage ends. The insurance company will typically send you a notice informing you that your coverage has officially ended.
Can You Get Your Money Back?
If you outlive your term life insurance coverage, you only get a refund if you purchase return of premium life insurance. Because you get a refund if you don’t die, ROP term life insurance is more expensive than traditional level term life insurance.
For example, a healthy 40-year-old male can buy a traditional $500,000 term policy that lasts 20 years for $28.42 per month. The return of premium version would be $141.24 per month.
Most people choose the cheaper term policy since investing the difference over those 20 years often makes more financial sense.
What to Do When Your Term Life Insurance Is Expiring
If your term life insurance policy is ending and you want to continue to make sure your family is protected, you have some options:
- You can buy a new policy.
- You can convert the policy into a permanent one.
- You can renew your term coverage.
- You can go without life insurance.
Buying a New Policy
If your health hasn’t changed much, buying a new term policy will be the least expensive way to continue coverage. You don’t need to buy the same coverage amount or term length as your original policy.
For example, you purchased a 20-year term policy when your first child was born. You now have two children, one in college and one in high school. Perhaps you just want an additional 10-year term policy to ensure all your children are independent and no longer relying on you financially.
Converting Your Term Policy
Many term life insurance policies have a conversion rider automatically included. The rider would ensure you can convert your term policy into a permanent one regardless of your health status as long as you convert before the deadline.
The benefits of converting a term policy:
- You don’t have to go through underwriting or take a medical exam.
- You maintain the original health rating from the term policy.
- You can decide how much of the coverage to convert.
- You get life insurance coverage for your entire lifetime.
If you decide to convert, your premiums will increase drastically. You’ll no longer have a term policy. Instead, you’ll have a permanent policy, and permanent insurance is much more expensive.
If you’re interested in converting, check the conversion expiry date listed on your policy.
Renewing Your Term Coverage
Many insurance companies have renewability options on their term products. This means you can extend the coverage term year after year without having to re-qualify.
The catch is that renewable premiums are far higher than your initial fixed premium.
For example, you purchased a $500,000 20-year term life insurance policy when you were 30. Your annual cost is $244.
You’re now 50, and your policy expires this year. You can choose to renew the policy to extend the coverage another year. This means you’ll keep your $500,000 in coverage but no longer qualify for the $244 annual premiums. To renew the coverage, the annual premium is $2,989. Each year you renew, these premiums increase.
For people who are diagnosed with a severe medical condition, this option can be life-saving for your loved ones. Imagine your term insurance is about to expire, and you’re 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.
The benefits of renewing a term policy:
- Allows you to reclaim your coverage at the end of your initial term.
- Allows you to keep your policy’s original face value amount (or death benefit).
- Permits you to renew your term life policy without starting the application process again.
- Exempts you from answering medical questions or undergoing a medical exam to prove insurability.
No Longer Have Life Insurance
If your expiration date is approaching, you can simply let the coverage run out. Depending on your situation and the stage of your life, you may not need life insurance anymore.
You likely do not need life insurance if:
- You have paid off your mortgage.
- You have no significant debt.
- You have no financially dependent children.
- Your spouse does not rely on your income.
- You’ve retired (or are retiring soon) and have sufficient savings.
If you currently own a term life insurance policy, check when the conversion period expires, when your term expires, and if it can be renewed. If you aren’t sure how to find this information on your policy, contact your life insurance agent or broker.
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