A term life insurance policy is great for you and your family if you need life insurance, but only want it for a certain amount of time, like while you are paying off your mortgage. You buy this kind of coverage to protect you for a certain amount of time that you choose. You can also choose from different kinds of term life insurance. For example, you can choose a level term policy, which may cost a little less than other policies because you have to pass a medical exam to apply for it.
If you are worried about your health, you can look into a term life insurance policy that doesn’t require a medical test. You can also add extra coverage to your insurance by getting “riders.” However, what happens once the term ends? What should you do if you have new debt and your policy is ending? No matter what, when your term life insurance policy ends, you have a few choices.
Examine Your Needs
If your term life policy is coming to an end, the first thing you need to do is decide if you need more life insurance. Your debts may be gone or at least smaller, but you should think about whether you have any new duties, such as helping your children pay for college or taking out more loans. Think about whether you want to leave your family a little extra money when you die, or if you want to leave your spouse a retirement fund. Also, ask yourself if your family will be okay if you die suddenly and they lose your source of income. Will they be able to pay for your funeral, which can cost around $10,000 on average?
Your Options
Renew Your Policy
Your insurance doesn’t have to end at the end of your term because you can renew it. However, you should know that doing so will probably mean paying more in premiums because your premiums will be based on your current age and the results of a new medical exam. This choice is probably best for people who only need a couple-year extension.
Drop Your Policy
If you’ve paid off your debts and have enough money saved for retirement and costs related to your death, you probably don’t need life insurance longer. You can choose not to pay the renewing fee and let your insurance company know that you’re happy to let the policy end.
Convert Your Policy
If your health isn’t great and you don’t want to get a term life insurance policy that requires a medical test, you can change your current policy to permanent life insurance. If you convert it, you’ll pay more than you were paying for your current term life policy, but you can control the cost by buying a smaller policy. This choice will work for you if you don’t need as much coverage, such as if you’ve paid off most of your debts.
Many term life insurance plans include a term conversion rider that lets you change your policy to a permanent policy before the term ends. Permanent life insurance, on the other hand, is generally much more expensive than term life insurance. Think about switching to a permanent policy only if your health has gotten so bad that you can no longer get standard coverage and you only want a permanent policy, like final expense insurance. This kind of coverage doesn’t require a medical test and pays out a small amount to pay for things like a funeral or medical bills at the end of life. If you decide to use the term “conversion rider,” you’ll need to make this change while your policy is still in effect. Start the process no later than the last year of your term.
Buy a Brand New Policy
If you want to still have life insurance but don’t necessarily want to renew your current policy you can choose a new term life insurance policy with a different company. This is best if you’re still in good health because you will have to start the process over with a medical exam. Keep in mind your rates will be higher now that you’re older, and any new health problems that have come up since you first bought your original policy will also affect how much your premium will be.
When you buy a new term life insurance, you can choose a coverage amount and term length that fit your current needs. For example, if you have nine years left on your mortgage, a 10-year policy might make sense. And you don’t have to buy a new term policy; you can choose from a number of other types of life insurance. If you want to go this route, the best way to find a policy with the benefits you want at a price you can afford is to compare all life insurance policies from different companies in your area.
FAQ
Can I get benefits from a term policy if I’m still alive?
Term life insurance isn’t structured with a cash value, so it’s not meant to give you a return on your money. Instead, it gives you peace of mind about your money. One of the reasons term life insurance is so cheap is that it only pays out money if you pass away. Most term policies work the same way as other types of insurance such as health or car insurance. For example, even if you were a great driver, your car insurance wouldn’t give you any money back. There are, however, two situations where you can get money from your term policy while you’re living.
A Return of premium life insurance is a term life insurance policy that will give you back some of the money you paid in premiums if you outlive your policy. These policies can be two or three times more expensive than a regular term life insurance policy though. Most people would be better off putting the difference in payments away or investing it. The other option is a living-benefits rider. This is a rider you can add to your term life insurance policy when you originally sign up. Your premiums will again be higher but if you have a critical or terminal illness you can withdraw from your death benefit to pay your medical bills. This choice is typically used for end-of-life care, but keep in mind it will lower the death benefit your beneficiaries will receive after you pass away.
Can I Just Cancel My Policy?
When you cancel a term life insurance, most of the time your coverage ends, and you don’t get any of your premiums or benefits back. There are no termination fees for term life insurance. You don’t have to pay anything extra if you decide to stop your service. The only other way to get a refund when you cancel traditional term life insurance is to do it during the “free look” time, which is usually 10 to 30 days after your coverage started. Your policy papers will tell you how long you have to look at the policy for free.
How Long Should My Term Policy Last?
Think about how long you will have your current financial obligations and use that as a guide to figure out how long your life insurance policy should be in effect. You should choose a term length that is long enough to cover all of your big financial obligations, but not so long that you end up paying for safety you don’t need.
For example, if you have a 20-year debt such as a mortgage, you have to pay it back over that time. To cover your mortgage payments, you should look for an insurance with a term of at least 20 years. If you have kids, you should think about how many years it will take for them to be able to support themselves financially, as well as how much money you will need to pay for their needs.
Need Help?
While all of this information is helpful, it can be a little overwhelming to sort through when you’re trying to choose what to do. Everyone has different wants, priorities, and limits on how much money they can spend. We at EZ know that you want the best security for you and your family without having to spend a lot of money. We work hard to make it as easy as possible for you to buy insurance. Our staff is always ready to help you and all of the things we offer are free. We can help you with anything, from answering the most basic questions to helping you choose insurance. Our agents can also help you with the sign-up process, and any help you need after that is free of charge. To get started, just type your zip code in the box below or call us at 877-670-3560.
