If you’re nearing the end of your term life insurance policy, you have a decision to make. Do you shop around? Keep paying? Convert to something else?
We believe it’s important to know all of your options and choose the one that makes the most sense for you and your family. Depending on your health, your age, and the amount you want to spend, you may discover that one alternative is better than the others.
Remember, the only thing that really “expires” at the end of a term life insurance period is the low rate you’ve been paying.
Options to Consider When Your Policy Expires
As you approach the end of your policy, you may decide that your life insurance is still valuable. Depending on your personal needs, you can choose to extend your policy, convert your policy to something else, or renew coverage. There are pros and cons to each method, and we outline them below.
Generally, people make their choice based on cost, health, and years they expect to need coverage.
- Option 1 – Extending Coverage
Extending coverage may be as simple as continuing to pay on your policy. Most term policies don’t actually expire until the insured person(s) reaches age 95. So, if you continue to pay premiums regularly, you can keep your existing policy.
This option is best if you decide you need coverage for just a short period. It may also be a beneficial option if you have experienced a dramatic change in health and cannot quality for a new or better policy.
There is, however, a major con to this option. The cost to extend this policy will increase, and it will continue to increase year after year. So, extending it beyond two or three years may not make sense for you financially.
- Option 2 – Converting Coverage
Often, your term life insurance policy will include a conversion option or an exchange option. This option will allow you to convert your policy to a permanent or Universal Life policy.
Guidelines vary, so it’s important to check with your insurer to see if this is an option for you. Typically, you’ll see one of the following conditions:
- Entire Term – This allows the insured to convert to a permanent policy at any time during the term before it expires.
- Period – This allows the insured to convert to a permanent policy only during a specific period. For instance, during the first five years of the policy.
- Specific Age – This condition refers to your age, not your term length. It allows you to convert your policy to a permanent policy until you reach a particular age, like age 70.
It’s important to remember that you need to consider your options before your term life insurance expires. Generally, there’s a limited window of time for you to research costs and make the best choice about a permanent life insurance solution.
The biggest benefit of this option is the fact that you don’t have to go through the entire process of getting insured, including the dreaded health exam. You simply convert your policy. Clearly, this is ideal for individuals who have developed health problems over the years.
A downside to this option? Some life insurance companies limit the number of Universal Life policies you can choose from. That means that you may not get the terms you want. You may also have to pay a little more than you would otherwise.
In any case, your Universal or permanent life insurance policy will be based on your age at the time you convert, so it will likely be more expensive than your term insurance rate was. It’s important to shop around before you decide to take the conversion option.
- Option 3 – Renewing Coverage
Renewing coverage may be the least expensive option on the list. However, there are things to consider.
When you renew coverage, you apply for a new term life insurance policy. If you stick with the same company, you generally use the exchange or re-entry provision in their contract. If you decide to go with a different firm, you complete the application process. Either way, you’ll most likely be subject to a new medical exam.
If you’re still young and in relatively good health, this may be the best way to go. We still encourage you, though, to do your research and shop around for the best rate. If you are experiencing more health issues, this might not be the best option for you.
Rates are at a 20-Year Low
With life insurance premium costs at historic lows, there’s no better time to prepare for your future, explore your options, and lock in a low rate. Let us help! Contact us directly at 877-794-TERM, or click here to request a free quote.