Converting Your Life Insurance
Instead of renewing your life insurance policy, you can change the policy into a different type of policy that will no longer expire and that will build value for you. Only some policies are a convertible term insurance policy, so youll need to check first. A permanent life insurance policy will never expire. It will usually be more expensive monthly, but it will also pay out more in addition to insurance premiums, you are paying into an investment account that will grow and that can be borrowed against. You dont need to wait to convert your life insurance policy and, in fact, you usually shouldnt. The earlier you decide to convert a term life policy to a permanent life policy, the better, as youll be able to save more.
Does Term Life Insurance Expire
- Does term life insurance expire? Learn what happens when you reach the end of your policy’s term and explore options for policyholders who still want coverage.
Life insurance can provide peace of mind for anyone worried about what happens to their loved ones after they die, but finding the right policy can be challenging. It can be difficult to choose how much coverage you need, whether to opt for a whole or term plan, and if youll need to add any riders. If youre considering a term life insurance plan, one question that often arises is: Does term life insurance expire? In this article, well answer that question and explore options for policyholders who may want additional coverage.
Buy A Final Expense Life Insurance Policy
The average funeral can cost more than $7,000, and that is without including the end-of-life medical care. If you do not want to shoulder your family with these costs, consider putting a final expense life insurance policy in place. Usually, these policies do not require a medical exam, so you can get one even if you are in less-than-perfect health.
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Schimri Yoyo is a financial advisor with active life and health insurance licenses in seven states. Born in Haiti. Reared in Brockton, MA. Matured in Philadelphia. Schimri is a proud graduate of Arcadia University, having earned both a Masters in Special Education and an MFA in Creative Writing from the castle-riddled campus in Glenside, PA. By personality and by profession, Schimri is an educator… |
Written bySchimri YoyoLicensed Agent & Financial Advisor |
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Benjamin Carr was a licensed insurance agent in Georgia and has two years’ experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms literally on the frontline of journalism. |
Former Licensed Life Insurance Agent |
Finding The Right Life Insurance For You
Whether you want to find a similar life insurance policy or a new policy to secure your estate, your business or make sure that your loved ones are not financially burdened in the event of your death, having life insurance can be extremely important. Many different examples show that most people who have any assets, or financial liabilities would be better off if they had a life insurance policy to provide them with coverage.
At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to create the best solution for you and your needs. Weve been providing expert life insurance solutions since 2007, including no medical life insurance, term life insurance, and permanent life insurance, to build the best package to give you the protection you need at no cost.
Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! Were proudly based out of Hamilton, ON, and service clients anywhere in Alberta, British Columbia and Ontario, including areas such as Oakville, Abbotsford, Grand Prairie, Oshawa and Waterdown.
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What Happens When My Term Life Insurance Expires
Most Term Life plans are renewable to age 90 or older. But the cost of the policy goes up substantially each year once the guaranteed level premium period expires.
However, the affordability and flexibility provided by the long-term rate guarantees of term life plans and the financial achievements you can accomplish during that time period is the reason term life insurance is a much better option than cash-value plans.
Cash-value plans assert that you will need life insurance for your entire life, so to cover the higher cost of insuring you in your later years, they overcharge you in the earlier years of the policy. It is Dave Ramseys opinion that the money you save with term life insurance should be used to pay off debts and grow your wealth so that, by the time youre older and the term expires, you wont even need life insurance anymore. Dont be fooled by the idea that youll need lifelong insurance coverage life insurance is only necessary when your death would cause your family to suffer financially due to loss of income or debt.
What Happens If You Cancel Term Life Insurance
In most cases, if you cancel a term life insurance policy, your coverage ends and you dont get any benefit or premiums back. You might get a partial refund on premiums if youve already paid for future months of coverage in advance.
The only other way to get a traditional term life insurance cancellation refund is to cancel during your policys free look period, which is usually 10 to 30 days from when your coverage began. Your policy will state the exact length of your free look period.
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Sell Your Life Insurance In A Life Insurance Settlement
Converting your life insurance policy can be costly, and sometimes you no longer need your insurance. In these situations, you can sell part or all of the policy instead. A life settlement company may offer to buy part or all of your policy. If you qualify, you could receive a cash payout in exchange for your life insurance policy. This gives you the money that you need today while you are still living, and all future life insurance premiums are covered by the life insurance settlement provider. This is a particularly good option if you no longer need or can no longer afford your insurance.
Its All About You We Want To Help You Make The Right Life Insurance Coverage Choices
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships dont influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
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Can I Convert Term Life Insurance To A Permanent Policy
It depends on your policy. Many term life insurance plans offer policyholders the option to convert coverage to a permanent policy. Because the process typically doesnt require additional underwriting steps and you maintain your initial underwriting class if you convert, this option may be simpler than purchasing a brand-new policy. However, it’s usually governed by terms set forth in your original insurance agreement, so be sure to read through your contract for conversion specifics, such as the ones listed below:
- Conversion periods: If your policy permits conversion, you may need to do so during a specified conversion period. For example, if you have a 20-year policy, you may only be permitted to convert during the first ten years.
- Conversion percentages: Depending on your policy, you may be able to convert the full value of your policy or opt to convert only a portion of it. Converting only a portion of your term life insurance to a permanent policy may result in reduced premiums.
- Premium credits: Some insurers offer policyholders a credit for premiums paid toward their term policy if they convert to a permanent plan within a specified time period. These credits may be used to offset the premiums of the new permanent policy.
- Policy type: Some insurers may specify the type of policy available during the conversion. For example, you may only be able to convert your plan into a universal or whole life policy.
Renewing Your Current Coverage
Typically, you can renew the policy for one year and then revisit your needs and renew again a year later under a guaranteed renewability provision. This can buy you some time so that youre not without coverage while you look for a better option.
Extending your term policy comes at a cost, though. In fact, your premiums will be exponentially higher than the low rate you enjoyed during the policys original term. And, the price will increase each year you renew. When you renew a policy, insurers are assuming that youre paying the heightened premiums because you cant qualify for medically underwritten coverage which could be true.
So why would anyone want to do this? For starters, because you can extend your coverage without going back through the underwriting process. If youre not in great health or have suffered from a significant illness during the term length, renewing your policy may be the only option for maintaining the amount of coverage you currently have. But if youre looking for a several year or lifelong solution, an extension isnt the way to go.
Extending your policy might make sense if you:
- Youre in a situation where significant debts or financial dependents will be around for a short period .
- Are unhealthy or have chronic health issues that would prevent you from qualifying for medically underwritten or simplified issue coverage.
- Need to maintain a significant coverage amount such as $500,000 or more.
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Converting My Term Policy Is Not An Option For Me Should I Consider Getting A Different Permanent Life Policy After My Term Policy Expires
That is an option that many older people choose, because a whole life policy can be a tax-advantaged estate-planning tool. It can also make sense for younger people with children still at home especially for those who want protection they cant outlive. However, the premiums can be higher than they would be for a term policy with the same death benefit. A Guardian financial representative can help you better understand your options.
Level Term Life Insurance
A level term life insurance policy maintains the same premiums and death benefit throughout the term. Rates wont increase as you age and the death benefit is consistent whether you die in the first or final year of the policy.
A level term life policy could be good for someone who wants consistency for many years.
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Dont Fall For The Bells And Whistles
As a final piece of advice, Ostro of PolicyMe says to watch out for specialized insurance you dont need. Like a fully-loaded car, life insurance policies can get jacked up with pricey features that dont always add up to more value for you.
Annual Renewable Term Life Insurance The upside: These policies start off very affordable, because your premium is always based on the risk that youll die in the current year. The downside: The rates increase year by year, and you may end up spending more than you would have with a single, guaranteed rate over the life of the entire term.
The upside: You can decrease the value of your policy over time. For example, you may need $500,000 in coverage today but only $250,000 in five years. The downside: The money you save in premiums is nominal for the amount you lose in the death benefit.
What To Do When Your Life Insurance Expires
Premiums are calculated basis the persons health, age, health condition, and Sum Assured. A health check-up may be triggered depending on the level of risk assessment. Premiums are fixed and payable for the entire length of the policy term. In case of unfortunate demise before the policy expiry date, the nominee gets the Sum Assured, also called the Death Benefit.
In case of demise after the policy expiry date, the Sum Assured may or may not be paid depending on the terms and conditions of the specific policy. You can renew or buy a new term insurance policy if the insurers rules allow however, the new premium will depend on the age and health at the time of renewal.
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Need Insurance Answers Now
A term life insurance policy is usually bought only for short term obligation to provide for dependents until they start earning and pay off pending loans and mortgages. Its possible you wont need the insurance coverage once your term period is up.
But this doesnt always apply to everyones situation. People often end up requiring extended insurance coverage due to unforeseen circumstances. Fortunately, for those who need life insurance upon the expiration of their initial term policy, there are multiple options.
Purchasing A New Policy
If you are in relatively good health and your current term life insurance policy is about to run out, you might consider purchasing a new term policy altogether. When applying for a new term life insurance policy, you will generally need to pass a medical exam. In addition, since you are older now, your premiums may be higher than they were under your old policy. However, you may not need as large a policy as you did when you first purchased term life insurance years ago. It may pay to shop around and compare because premiums can vary among insurers.
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Combine Several Smaller Policies
If you have health issues that make it difficult for you to buy a sufficiently large term insurance policy, you may be able to cobble together a portfolio of smaller policies that will add to what you need.
These policies may not require a physical exam, but they may ask for some health information.
In addition to buying one or more small policies through an insurance agent or directly from insurance companies, you could be eligible for group life insurance through your employer, if youre still working, or through a trade association, college alumni club, or other organization to which you belong.
Converting Your Policy To Permanent Life Insurance
If you have a convertible term life insurance policy, you may be able to convert it to a permanent life insurance policy, such as whole or universal life insurance. Permanent insurance continues throughout your life as long as you pay the premiums. As with term insurance, permanent insurance pays a death benefit to your beneficiary at your death, but it also contains a cash value account funded by your premium dollars. When you convert your policy, you wont need to prove your insurability by taking a medical exam. However, there is usually a conversion deadline, which is the date by which you must convert, typically before your term life insurance is set to expire.
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent on the claims-paying ability and financial strength of the issuing company.
The rules governing 1035 exchanges are complex and you may incur surrender charges from your old life insurance policy. In addition, you may be subject to new sales and surrender charges for the new policy.
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Option One: Let Your Term Life Insurance Expire
The first option is very straightforward: You can let your term life insurance policy expire. This deliberate choice is an act of omission you choose to passively allow the policy to lapse because, for personal or professional reasons, this particular type of term life insurance is no longer what you need or want.
For example: You may no longer be able to afford to renew the poliucy because the premiums are too expensive, or, based on your review of your immediate and long-term goals, this brand of term life insurance is not ideal for you.
Also, if you are in good health you may be able to buy a new term policy at a much cheaper rate.
Youre No Longer Contributing Financially To The Family Let The Policy Expire
Once your life insurance expires and you have come up with a decision that you no longer need coverage therefore when the policy ends, say goodbye as well to your coverage. This means that if you die after the day your policy expires, your dependents will not get any death benefit from your insurance company.
On the other hand, there is a way, you could get back the premiums you paid. Do you want to know how? This is by purchasing the return-of-premium term life insurance, in which the premiums you paid will be returned to you once the term policy expires if you outlive the term policy. The only downside of this premium is the cost since it is more expensive compared to other term life insurance.
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