Throughout the duration of your term life insurance policy, you’ll be paying monthly premiums to keep your cover active. However, what happens to your premiums when the policy expires? At the end of the agreed term, your cover will end and all premiums will have been paid. If you outlive your term, the payout is obsolete.
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. However, there is an exception. Return of premium or ROP as it’s sometimes referred to as gives you back your premiums. Though you will pay higher premiums than a regular term life policy, which is to be expected.
Buy A New Policy
If you’re in good health and still young, buying a new term life policy may be the best option for you. This will more often than not cost less than converting to a permanent policy. But, it does mean you’ll need to take another medical test and your insurer will need to check your medical history to make sure you’re not a high risk for them.
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.
Convert To Permanent Life
Some policies may allow you to convert to a permanent plan (whole-of-life). If you decide to convert, you will have higher premiums due to the fact that your beneficiaries are guaranteed a payout. If you have a decent budget and 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.