Term life insurance is a useful tool for safeguarding your finances and ensuring your dependents have a regular source of income. However, term life insurance has a time limit of 10, 20, or 30 years.
So the question naturally arises: What happens if you outlive your term life insurance? With that in mind, the team at Medical Profiles is here to discuss options for what to do when your life insurance expires.
How Term Life Insurance Works
First, a brief recap on term life insurance and how it works. With term life insurance, you pay a monthly premium, and the insurance company will pay a death benefit if you die. The policy is then active for a specific period of time. Most term policies are active for either 10, 20, or 30 years. Any death benefit paid to beneficiaries is tax-free.
Term life insurance is a popular option because it is affordable and simple to use. However, what happens if you outlive your term life insurance and it expires?
What Happens When Term Life Insurance Expires?
When term life insurance expires, policyholders typically have three options.
First, you can just let your policy expire and cancel it. You won’t have life insurance anymore and can stop making monthly premiums. If you have a return of premium rider on your policy, the insurance company will return all your premium payments to you tax-free after the term life insurance expiry. So for example, if you paid $7,000 in premiums over the term, you’ll get all that money back after coverage termination. Otherwise, you will not get your premiums back.
The second option is to renew the policy. Many insurance companies let you renew your term policy on a year-to-year basis without requiring a separate underwriting process or another medical exam. However, there may be a brief period of term life insurance lapse. You may also have to pay a higher premium to compensate for the additional risk with renewal options.
Third, if you have a policy conversion rider, you can convert your term insurance to permanent life insurance once it reaches policy maturity. The death benefit will remain the same, and you won’t have to take another medical exam. However, premiums will likely go up as permanent life insurance is more expensive than term life insurance. Permanent life insurance also has a cash-value investment component that grows tax-free.
Can I Buy a New Policy When My Life Insurance Expires?
If you don’t want to renew or convert your existing policy after outliving term life insurance but still need coverage, you can shop around for a new life insurance policy. Even if you are older, many insurance companies provide policies for individuals up to 80 years old.
Note that if you apply for a new life insurance policy after your old one expires, you will have to take another medical exam and fill out another health questionnaire. If you feel that you are in too poor health to qualify for traditional life insurance coverage, there are options that don’t require a medical exam, such as no-medical life insurance or simplified life insurance.
Another option is to compile coverage from several smaller plans. For example, many employers offer optional group life insurance coverage, and there are specific life insurance policies for specific expenses, such as final expense coverage or mortgage life insurance coverage.
Book a Life Insurance Paramedical Exam Today!
Now that you know what happens if you outlive your term life insurance, take the next step. Contact Medical Profiles online or call today at (832) 251-3926 to schedule an appointment!
