What Happens When Term Life Insurance Expires

Term life insurance provides a coverage for a specific period of years. Unlike a permanent life insurance policy, term insurance provides cover for from 5 years and above depending on the choice of the policy holder. It offers varieties of options to make choices that suits you. It allows you choose the length of years, the coverage amount, and what should happen in case you outlive your insurance policy. Depending on the terms of your insurance policy you might be able to renew or convert the policy before the renewal or expiry date. This article helps you understand what you could do if and when your term insurance policy gets expired.

What is Term Life Insurance?

Term life insurance is an insurance policy that allows the death benefits of the policyholder to be paid to their family members or beneficiaries to the policy if they die within the policy specified term. In the case of the death of the policyholder the death benefits are given to the beneficiaries which serves as a way of financially securing their future. Insurance companies determine the amount to be charged as premium for a term life insurance policy based on the age, gender and health of the policyholder. The premiums charged are much more affordable than a permanent life insurance policy.

How does Term Insurance work?

Basically, term insurance policy lasts for a specific period of time stated in the policy by the insured who in exchange pays PREMIUM. It allows the benefits of the policyholder to be paid if they due within the length of the term but if the policyholder dies after the policy expires then no benefit is paid to the beneficiaries only if it was renewed before the death of the insured (policyholder).

Benefits of Term Life Insurance Policy

Having a term life insurance policy offers you the following benefits as a policyholder:

• Signing up for a term life insurance policy is much more affordable and less expensive. The premium charged by the insurance companies are not expensive like that of a permanent life insurance policy.
• It offers a wide range of options to choose from depending on the number of years you want coverage for. Policyholders can buy a term policy that last as long as 5 to 30 years.
• It provides protection for the future i.e. if the policyholder dies before the expiration of the policy, the family is paid the death benefit which can be used to pay for the children’s tuition fees and other expenses.
• The policy is simple and easy to comprehend. The term life insurance policy is not complex as it provides coverage for the number of years you pay premium for.

What to do when your term life insurance policy expires

In some cases, policyholders outlive their term life insurance policy which does not allow them receive benefits once it has expired. Depending on your insurance company and your term policy you might be allowed to renew or convert your policy to a permanent life insurance policy. Knowing what to do after the expiration of your term policy is important before signing up for a term life insurance policy. You can decide to do the following if your term life insurance policy expires.

• Buy a new term life insurance policy: There are several options to consider when your term life insurance policy expires and one of them is buying a new term policy if you see a need for it. You might decide to buy a new policy if you have young children that are still depending on you, a declining health status or if you want your family members to be financially stable after your death. When buying a new term life insurance policy make sure you check around for offers that allows you pay an affordable insurance premium and also  buy a shorter term policy.
• Switch to a permanent policy: When your term life insurance expires you can decide to switch to or purchase a permanent policy that offers you coverage for a longer period of time till death. Though a permanent policy might cost more but it offers you more coverage and benefits as long as the premium charged are paid. It offers a death benefit and cash value after the death of the policyholder.
• Term Renewal: Your life insurance policy can also be renewed after deciding and weighing the options as to why you should renew your term life insurance. It can be done without any medical examination or rigorous process though the premiums charged might be expensive.
• Annual Renewal: You might decide to do an annual term life insurance renewal rather than buying a new one for 10 to 15 years. It gives you the opportunity to decide whether you what to continue the next year or not. It is a good choice except for the fact that the insurance rate night increase from year to year.
• Sell your policy: A term life insurance policy that is convertible allows you convert your policy to a much more permanent policy that you can sell. The process where you sell your policy to an investor who then pays you is referred to as “life settlement”.

Do you get your money back after the expiration of the policy

The answer to the question is a big No, once the term life insurance policy expires the policyholder has no right to a coverage. If you outlive your policy you will no longer have coverage as the specified time has expired which either requires you to buy a new policy and pay more for it. Though in a case of Return Of Premium term life insurance, you will get your money back even if you outlive the policy but this type of life insurance policy is much more expensive and might not be affordable.

Is life insurance still necessary after it’s expiration?

Getting a new term life insurance policy or renewing it depends on the policyholders and their family members ( whether they are dependent or not). A policyholder with dependents might have to renew or purchase a term policy to relieve their beneficiaries after their death while a policyholder with no dependents might not need a new term policy after it’s expiration. Term life insurance policy might still be necessary if the policyholders:

• Have dependents (young children) who need the death benefits.
• Have debts that needs to be paid off.
• Have partners that needs the benefits to be financially secure.

As a policyholder once the expiry date of the policy approaches you might need to reconsider if you should get an annual, short term or long term renewal.

Conclusion

Knowing what to do if your term life insurance policy expires is important just like signing up for it. It is necessary to know if you need to buy a new one or not and this might only happen if you have dependents or for some other reasons depending on the policyholder.