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A term life insurance policy provides coverage for a specified period, typically 10, 20, or 30 years. If a policyholder dies during the coverage period, the insurance company pays out a death benefit to the beneficiaries. These policies can give you affordable coverage, but what should you do if your term policy is close to expiring? If it’s been a decade or two since you purchased it, chances are your financial situation has changed. It’s a good idea to re-evaluate your insurance needs.
Key Takeaways
- A term life insurance policy lasts only for a defined period, so it may expire and leave you without coverage.
- Consider the changes to your circumstances and finances before adjusting your policy or purchasing new life insurance coverage.
- Some life insurance companies allow you to extend your policy or change it to a permanent one.
Your Options If Your Term Life Insurance Is About to Expire
If you know your term policy is almost up, consider one of these choices:
- Option 1: Let the Coverage Expire and Go Without Life Insurance: If you do nothing, your life insurance policy will expire, and you’ll no longer have coverage. This might be a good option if you don’t have dependents who rely on you. For example, if your kids are grown and financially independent, you might not need a life insurance policy.
- Option 2: Extend Your Current Policy: As your policy’s expiration date draws near, your insurance company may offer to extend it. If you feel like you still need that financial backup for your dependents (maybe they’re teenagers and not independent yet), you might take the extension. Just be aware that your insurance premium will go up.
- Option 3: Convert Your Term Policy to a Permanent Policy: Your life insurance provider might give you the option to convert your term policy to a permanent policy, which you might consider if you want your coverage to continue for your entire life. If you’ve developed chronic health problems and want continued life insurance, converting your policy is a good option if you wouldn’t qualify for a separate permanent policy. Again, you’ll most likely pay higher premiums.
- Option 4: Get a Different Life Insurance Policy: Consider what kind of coverage you need going forward. If you have lifelong dependents or want to build wealth you can leave to your beneficiaries, you may want a completely different life insurance policy with a guaranteed payout. You might also decide to purchase another term policy for a different term length.
Note
If you want to purchase less coverage than your term policy offers but want it to last your whole life, your insurance provider might allow you to convert just as much of your term policy as you think you’ll need.
The Bottom Line
If your term policy is almost up, you might decide that you no longer need life insurance to care for dependents, or you might want a permanent policy to leave behind funds for your beneficiaries. Most insurance providers are willing to extend or convert term policies to a product that suits your current and future needs. If you’re unsure of your options, talk with your insurance company before your policy expires. This way, you can get details and plan ahead.
