What happens if you outlive term insurance?

Throughout the duration of your term life insurance policy, you’ll be paying monthly premiums to keep your cover active.

However, does term life insurance expire? And what happens to your premiums when the policy expires? At the end of the agreed policy term, your cover will end and all premiums will have been paid. If you outlive your policy term (an agreed set period of time), the payout is obsolete and your life insurance cover will end. 

What is Term Life Insurance?

Term life insurance is a type of life insurance policy that provides cover for a fixed period of time. You’ll pay a pre-determined premium each month. If you die during the term, the policy pays a cash lump sum.

The term length can vary greatly depending on what you are looking for and how much you would like to pay. Despite this, most policies typically last between 5 – 30+ years. Once the term has ended, your cover expires unless your insurer is able to renew it with another policy.

If your insurer isn’t able to renew your policy, then depending on your current health history and need, you could look into purchasing a new plan.

There are 3 types of term insurance:

• Level term life insurance - Provides a fixed amount of cover for a specified amount of time. The cost of premiums is also fixed during the term.
   

• Increasing term life insurance - The payout increases over time, usually in line with inflation. However, your premiums will also increase as a result.
   

• Decreasing term life insurance - Typically used to cover a mortgage. The payout decreases over time, in line with a loan or mortgage repayment. Your premiums are fixed with this type of plan, but are usually cheaper than level term insurance.

What happens at the end of term life insurance?

A term policy ends when the predetermined term length has expired. This may range from 5 to 30+ years, depending on the policy and the needs of the insured.

Once the term ends, the policy expires. Some policies will let you renew the cover - if that’s what you want, be sure to check your terms & conditions and check in with your adviser that the option is available. If you don’t opt to renew your policy, or a renewal isn’t possible, the policy will end.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

Can you renew or convert your policy?

You may be able to renew or convert your expired policy. This means that you could extend the cover for an additional term length. While converting your policy allows you to switch from a term life policy to a whole life policy.

Renewing your policy is typically done by contacting the insurance company and paying any additional premiums required. The new term length may depend on the insurance company and the policy you choose.

Converting your policy is a bit more complicated. It usually requires you to fill out additional paperwork and pay any additional premiums required. Premiums may vary depending on the type of policy you choose.

It’s important to note that not every insurer and not every plan has a renewal or conversion option, so be sure to check the terms and conditions of your policy.

Continuing to Be Covered

You essentially have 4 options if your term life insurance is coming to an end but you still want to be covered:

Renew the policy

Renewing your policy is a smart choice if you’re in poor health. You’ll still be guaranteed coverage but you will be paying higher rates. Insurers will base their premiums on risk, renewing your coverage 10 years later than your original plan means that you’re closer to the end of your life, therefore they’re more likely to have to payout. If you outlive your policy, your payout is cancelled. 

Buy a new policy

If you’re in good health and still young, buying a new term life insurance policy may be the best option for you. This will more often than not cost less than converting to a permanent policy. Some might even want to consider purchasing some life and critical illness cover, to provide an additional financial safety net over a set period of time.

However, it does mean you’ll need to complete another application for cover, as your insurer will need to check your medical history to make sure you’re not a high risk for them. You may also need to undergo a medical screening or nurse appointment before your insurer can offer you policy terms. The insurance provider will keep you informed of any underwriting requirements for your new policy every step of the way. 

With this option, you’ll need to figure out your financial responsibilities all over again. If you did this 20 years ago, then circumstances will have changed. Your mortgage may have been paid off, or your children may not be dependent on you anymore are just a couple of examples.

It might be worth shopping around before buying off the same insurers as you may be able to save money - if you need some help with this process why not consider speaking to an expert insurance adviser here at Cavendish Online.

Convert to a permanent policy

Some policies may allow you to convert to a permanent whole-of-life plan. If you decide to convert, you will have higher premiums due to the fact that your beneficiaries are guaranteed a payout. If you can afford the premiums, then converting to permanent might be a good choice.

Drop life insurance

We’re not saying that this is a wise choice because it isn’t. However, if you have managed to save enough money over the course of your term life plan that you can support your family once you’re gone, then dropping life insurance may be an option.

We advise giving this a huge amount of thought though, as you want to leave your loved ones with enough support when you pass away.

If you want to talk your potential options through with an expert insurance adviser, then consider getting in touch with the Cavendish Online Advice department. 

Alternatives to term life insurance

Term life insurance is a great option for those looking for cover at an affordable price. However, there are other types of life insurance policies that may be better suited to your needs.

Whole life insurance

This is a type of permanent protection that covers you for your entire lifetime. This is so long as you continue to pay premiums.
Your premium rate and payout value remains fixed throughout the policy, unless you choose to index-link your policy and have it increase with inflation. Learn more about indexation.

Joint life insurance

This type of cover provides protection for two people (mainly couples) under a single policy. The policy pays out after the first death or once both members have died. It can be a good idea for couples wanting to protect their partner if they pass away first. Like whole life insurance, your premiums are fixed on this policy, unless you add indexation.

Over 50s life insurance

Designed for those aged 50 and over. It provides a fixed payout amount upon death. It also doesn't require medical exams or health questionnaires, making it an ideal option for those who can’t get cover elsewhere. This plan includes a moratorium period (a waiting period) for pre-existing conditions that’s usually between 6 months - 2 years. Your premiums on this policy are fixed, and indexation isn’t available.

Critical illness cover

Pays if you’re diagnosed with a critical illness, such as cancer, stroke, or heart attack. It can be added to your life insurance policy or taken out as a standalone policy. It's important to note that the payout amount and illnesses covered will vary depending on the insurer. Similar to term life insurance, your premiums are fixed unless you add on indexation.

Death in service benefit

This type of cover is usually offered by employers, paying out a lump sum if you die while employed. It's usually based on a multiple of your salary, so you can help provide for your family or loved ones even when you’re gone.