Unlike permanent* life insurance, term life is considered temporary coverage. And depending on the length of the term policy you purchased, your coverage term could be anywhere from one, five, 10 or even 30 years. But what happens then?
If your term life insurance is coming up close to the final year and you still need to have coverage in force, there are a few options that might be available for you:
Buy a new life insurance policy
You may want to compare rates from different companies and consider replacing your policy with a new one. This will mean a new application and possibly a life insurance medical exam. The downside of this option is that your new policy rates will be based on your current age and health. For example, if the 20-year term policy that you bought when you were 30 expired, your new rates will be based on your current age of 50. In addition, certain medical conditions may disqualify you from obtaining a new policy. So if you're still in good health, shop around and consider applying for a new term or even a permanent policy.
Combine policy types
If owning a permanent life insurance policy that earns cash value appeals to you but won't fit in your budget, consider a combination of term and permanent life insurance. For example, if you need $500,000 of coverage, you may want to buy $250,000 of term and $250,000 of universal life (or any other combination). This way, you have your needs covered while securing a permanent policy. Ask your agent about running various quote combinations to see what works for you.
Convert your policy
Check with your agent about your policy's conversion options. Depending on your type of policy, you may be able to convert all or a portion of your policy into a permanent policy without having to prove your insurability (commonly referred to as a conversion privilege). Some term policies allow you to do this only at certain intervals or dates, so check your policy. These are just a few options that you may have available when your term life policy expires. Remember, when your term policy expires or you stop paying your required premiums, your coverage ends. The following are considerations before you make that initial term life purchase:
- Try to approximate the length of coverage (term) that you may need, and try to buy the longest term you can afford when initially securing a new policy.
- Ask your agent about options for a renewable term policy, as well as policy provisions that allow you to convert your term into a permanent policy.
- Consider buying a permanent life insurance policy such as whole or universal life that won't ever expire as long as premiums are paid.
Don't wait until your term life insurance policy has expired to review your options. If your term policy will be expiring soon, discuss with your agent options that may be available to you.
*As long as required premium payments are timely made.