* These 19 statements have been collected from various sources and are for entertainment and discussion. The authenticity of these is for you to discuss and research on your own.
Would it be important to you to know exactly what happens when your term life insurance policy expires? How about if you outlive the policy term?
There are many experts who suggest that you won’t need life insurance longer than a 20-year term. The reason being that if your children will be grown and you will have accumulated enough savings in cash and investments to support your spouse if you die prematurely, why spend the money?
Yes, in theory, it sounds like quite the plan. But it is important to understand that only a few people will have such a defined, and hassle-free life path.
The rest of us, however, should know in advance what will happen when our term insurance coverage expires or we’re fortunate enough to outlive the policy.
If you already have a term life insurance policy, skip this brief section.
Term life insurance is life insurance that lasts for – you guessed it – a specified term.
This term can be 10 to 30 years (a few companies now offer 35 and 40 year term policies), and are generally offered in 5-year increments.
Term life insurance offers affordable life insurance coverage for people who need it.
But there is one challenge owning term life insurance – it expires!
To be clear, term life insurance does not “expire” once your term is completed. Instead, the policy can be renewed, but the premiums will go up significantly on an annual basis until you either cancel the policy or purchase a new one.
Generally, when people buy term life insurance, they rarely give much thought to what would happen when their term runs out. Instead, they typically focus on the cost of the life insurance.
The expiration of term Life Insurance is a little different from the conventional meaning of “expiration.” Fortunately, when your policy reaches the end of its term, your policy won’t just end.
If you look into the details of your policy, there is a table that shows the cost on a year-to-year basis during the term and then annually thereafter should you choose to renew it. This table is commonly referred to as a rate or premium illustration.
For example, if you purchased a 20-year policy, you will notice a relatively higher price increase on the 21st year after your 20-year term has ended. The cost after the 20th year will continue to increase significantly, year after year as you get older.
Knowing if you still need life insurance when your term policy has expired is kind of like figuring out why you bought the life insurance in the first place.
You must still consider how your surviving loved ones will continue financially if you’re not there to do your part.
You can plan ahead as your term policy approaches its expiration date and consider whether it’s best to renew the policy (no medical underwriting), cancel and start a new policy (subject to medical underwriting), or convert some or all of the term policy to a permanent life insurance policy which will cost more but will not be subject to medical underwriting (recommended).
To answer this question, think about how you determined your death benefit when you originally purchased your policy.
If you made a list of your reasons for purchasing the policy, you can revisit that list and then cross off anything that is no longer considered a financial need.
For example, if your mortgage is paid off or almost paid off, cross that off your list. Then consider other financial needs you may have been concerned about like:
If any of the items listed above have been paid off or taken care of over the last 20 years you’ve had your term insurance, you can cross them off as well.
What you’re left with will be your insurance needs going forward and should be considered the minimum amount of coverage that you still need if you convert to a permanent life insurance policy.
This is the easy part of dealing with life insurance policies. If you outlive the policy term and no longer need coverage, you would simply cancel the policy by notifying your agent or company.
In fact, if your policy expired and you do not wish to renew it, simply don’t make the renewal payment and the policy will be non-renewed.
Unless you purchased a Return of Premium Policy or added the Return of Premium Rider, your policy will have no cash value in the policy because Term Life Insurance policies don’t build cash value like a permanent life insurance policy will.
First and foremost, let’s get this out of the way – every year you live makes you a little more of an insurance risk to insurance providers.
When you buy an annual renewable term policy, your premiums will increase annually. This kind of policy is known as an Annual Renewable Term policy (ART).
ART premiums might look like this for the first few years:
Ten years down the line, your premium may climb to $650 per month for coverage! This simple example illustrates why people tend to shy away from Annually Renewable Term.
Because of the low demand for ART, Many Insurance providers offer level term Insurance policy. They can cover you until age 95 but at a fixed premium rate for 10, 15, 20, or 30 years.
To determine your level premium, life insurance providers add up the payments for each year in the 20-year term and divide it by 20.
In most cases, 20-year level term life insurance is the average premium for the first 20 years of coverage.
From the 21st year and above, it reverts to an annual renewable policy (ART).
What you do now is just as important (or maybe even more) than what you did when you originally purchased your policy.
The chances are you consulted with an insurance agent and by all means, you should do that again to get the information you need to make an informed decision.
If your state of health is rock solid or relatively good enough, it is time to shop for a new level term insurance policy. Yes, you will have to pass a medical exam in most cases and pay the standard amount for an individual within your age range. You may not need a death benefit as much as the first one you purchased when you were much younger. This means the price will not be overwhelming.
Hold on to your wallet and look for another insurer who may be offering something less expensive. If you’re shopping around for rates for a new policy, be sure to consider one with Low Renewal Premiums!
A good source for doing your comparison analysis shop is our online term life insurance quote tool. You can find this at the bottom of this post on mobile, or on the right for desktop.
Your choices going forward are important and you have several options to choose from:
If you are still healthy and haven’t gained a lot of weight over the years, this will likely be the best solution.
The renewable term is a good solution for individuals who want short-term coverage.
Decreasing term insurance (decreasing death benefit) is generally purchased to cover a specific debt (credit life insurance), however, it’s difficult to find and premiums are generally higher than level term.
This type of policy is obvious. No medical exam is required during the underwriting process and policies are issued quickly.
Mortgage Protection Insurance policies are generally a term policy with a term that matches or is longer than the time period of your mortgage and the death benefit is at least equal to the mortgage balance.
Return of Premium Term Insurance provides for the company to refund all premiums paid in a tax-free lump sum if the insured outlives the policy term.
If you have a poor health conditions, much older and do not want to undergo any form of medical examination, you can convert your existing term policy to a permanent policy like whole life or universal life.
Your company will offer you different conversion policies to choose from. Converting to a permanent policy like whole life means means you will pay much more than when you were paying for term life insurance (depending on your insurer, it is usually about 2-3 times the cost of your current premium).
The good part is you can control the cost by purchasing a smaller whole life policy to take of expenses that you might pass on to loved ones.. This is a good fit since you are older and don’t need as many years of coverage as you once did.
Time is of the essence. You must convert to permanent life insurance within the period the term policy allows you to. Some insurance providers keep the conversion window open for only 10 years if you had purchased a 20-year policy.
It is also important not to convert to a permanent policy too early. Always stay updated on the details of your policy and check with your agent to be sure you are getting the best coverage at the time.
If you are in a poor state of health and happened to miss the deadline for converting to permanent insurance, there is still an option for you – a rather costlier option.
You can renew your about-to-expire coverage without undergoing a medical examination. You will have to pay much higher premiums and they will keep increasing, year after year.
This option is decent enough if you only need a few years, over 70, or have medical conditions that make it hard to get a new policy so speak with your agent about these options.
You might not be able to sustain the cost of the policy for very long.
Think about future coverage long enough before the expiration of your term. If you think you won’t be able to pass a medical examination, you can convert your term policy to permanent insurance coverage while you still can.
Yes, no medical exam permanent life insurance is recommended for people who are older, or who have a medical condition and the policy is generally issued in a shorter period of time than a fully-underwritten policy.
Many insurance providers will allow a one-time decrease in face value to your life term policy. The result is a noticeable reduction in your premiums. Check with your insurance agent to determine if it’s allowed with your policy
If your policy is still convertible, you may be able to convert the policy to permanent insurance and then sell it. It’s called a life settlement. It is important to identify if selling your term policy is a viable option and when you might be getting shortchanged.
Before you jump into a life insurance settlement deal, you will have to come to terms with the fact that a third party will own insurance on your life and profit from it when you die (no death benefit for your family after death).
Also, some individuals are better candidates for a life insurance settlement than others. For example; Having a term life insurance policy or a universal life policy with a death benefit over $200,000 makes your policy more attractive to investors. You are more likely going to receive a worthy offer.
Yes, you can sell your Term Life Policy.
A life insurance settlement involves the insured and another entity (usually an investor). The buyer or investor becomes the owner of the policy, settles the premium payments, and will receive the death benefit in the event of death.
A life insurance settlement (also known as a viatical settlement) allows you to receive more money than you would have received from the insurer if you canceled or forfeited the policy but less than the coverage value/death benefit of the policy.
Selling a life insurance policy is a good way to get immediate cash for retirement, health bills, or unforeseen heavy expenses. However, it is not always the easiest or best option to raise quick cash at your point of need.
Finding a buyer for your life settlement involves a bit of documentation.
You can do this on your own or use a life settlement broker to look for prospective offers to purchase your life term policy.
You will be asked to provide medical records and your term life policy documents to the potential investor. The settlement provider(s) will make you an offer after reviewing your files based on a range of factors such as:
If you are much older or in a poor health state, you will receive a better cash offer as the face value of your policy is worth more to investors or settlement companies as they are going to sense an avenue to make some profit.
Although your insurance agent is probably not involved in settlements, he or she will likely be able to point you in the right direction.
For more information about Term Life Insurance and your options at expiration, call the insurance professionals at LifeInsure.com at (866) 691-0100 during normal business hours or contact us through our website.[/su_box
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