Happy New Year! Welcome to 2019. It is hard to believe we are just one more trip around the sun away from marking 2 decades since the hype of Y2K. 2 decades? Twenty years can sometimes pass in the blink of an eye.
Twenty years, in many cases, is the length of a term life insurance policy. Which means, it is fair to say, that the policies we bought to protect our beloveds will come to term just as quickly as our newborn children are suddenly graduating high school.
We are often asked, “do you get your money back at the end of a term life insurance policy?” The good news is you outlived your policy but, no, you do not get your money back on a term life insurance policy. So, what exactly does it mean when a policy comes to term?
It is not the policy nor the insurance protection that expires when you outlive your term policy, it is the guaranteed level premium that expires. Most term policies will provide coverage through age 95 as long as the premium is being paid. But, upon the expiration date of the policy, the low premium that you locked in when you were 20 years younger will see an immediate and significant spike in its rate. And, it will continue to rise each year thereafter. Many factors go in to determining the initial increase and it does not take long before the policy becomes unaffordable. Once you stop paying the premium, the coverage lapses, and you are no longer insured.
Twenty-year terms are hardly enough anymore. With the average lifespan continuing to rise, having a lapse in coverage around retirement age can mean going uninsured for another 15-20 years. This often translates to leaving your loved ones with a financial hardship should you pass while still far too young. Although the amount of insurance you need has possibly changed since your first policy, your need for insurance remains as pertinent as ever.
Can you renew your life Insurance policy if your term policy is expiring? There are some options when it comes to renewing, including extending your term by way of conversion or getting a brand-new term life insurance policy.
It is to your advantage to consider your options before the expiration.There is no obligation to buy life insurance when you ask for term life insurance quotes and, since age is always a factor in determining premium, the younger you are (the sooner) the better.
Also, if your health is good, it is wise to take advantage of your good condition and lock-in to better rates just in case there is ever a turn in your health. Unfortunately, even small changes to your overall health can have a big impact on life insurance premiums.
Additionally, there may be fewer options available as you near the expiration date. Many life insurance policies come with a conversion option* which means you can exchange the term policy for a more permanent product (Universal Life, Whole Life, Variable Universal Life) without having to get a medical exam. In some situations and for certain people, taking advantage of this option is ideal, even necessary. But the conversion option has its own expiration and may not extend out the full length of the term.
For these reasons, and more, if your policy is at least half-way through its original term, it is highly advised to review your policy, consider your options, and see what makes the most sense for you.
Are you unsure what your policy offers or even of the expiration date? Your broker should review the document with you and help you understand exactly what you have and what options are available and suitable for you.
Call us for a free policy review and life insurance quotes-215-396-2888.
*please check the policy document to know if your policy has a conversion option.