Our website provides a crash course in life insurance education to people who are new to life insurance.
Life insurance is relatively straightforward at its core.
The life insurance company pays a death benefit to your beneficiary when you die, but what if you live?
What happens if your term life insurance expires? You have several options for your term life insurance expires. You can convert the policy, replace the policy, cancel the policy, or pay an increased annual rate to maintain your term life insurance.
All the top life insurance companies have slightly different details built into their term life insurance policies.
However, there are many similarities between companies.
Term life insurance is affordable for a reason; it’s temporary.
You can see for yourself using our free rate comparison tool that will display the rates of over 30 highly-rated term life insurance companies.
Our articles will cover what happens to term life insurance if you don’t die in great detail.
Feel free to skip ahead to a section that interests you.
What are Your Term Life Insurance Expires
- Cancel Your Policy
- Replace Your Policy
- Convert Your Policy
- Renew Your Policy Annually
- Final Thoughts on What Happens to Term Life Insurance if You Don’t Die
What are Your Term Life Insurance Options if it Expires
Term life insurance is a product created to fulfill a temporary need, such as mortgage protection life insurance.
The life insurance companies know the odds of someone dying before your term runs out are extremely low thanks to the advancements in modern medicine and price term insurance accordingly.
However, once you reach the end of your level term period, you have some decisions to make.
Clients will often ask us if they get their money back if they don’t die.
Now there are some life insurance policies that have a return-of-premium feature, but these types of life insurance policies are rare and more expensive than regular term life insurance.
You see, the way term life insurance works are you select a period that your death benefit will never go down, and your premiums will never go up.
This type of term life insurance is also known as level-term life insurance since your death benefits and premiums remain level for the term you select.
Once that level-term period ends, most policies don’t stop; although, the life insurance company can increase your premiums afterward.
As you’re approaching the end of your level-term period, you have a few options.
Cancel Your Policy
When your level-term period is approaching its end, this is a great time to reconsider if you need life insurance in the first place.
Simply put, you may no longer need life insurance protection anymore.
For example, if you originally bought your term life insurance policy to protect your family while you were working, you may no longer need it if you’re retired and your children are financially independent.
If you no longer need life insurance protection after your level-term period is up, you can cancel your policy and eliminate a monthly bill.
Replace Your Policy
If you still need life insurance protection, then canceling your policy may not be an option.
Sometimes life doesn’t go as we plan, and even the most well-thought-out plans need to be adjusted.
If you need to extend your life insurance coverage, you may want to replace your policy altogether.
Replacing your life insurance policy means that you will purchase a new life insurance policy to replace the old one.
You will need to requalify for the policy and redo underwriting, but if you are in good or excellent health, this shouldn’t be too difficult.
If you are running short on time, you can try for a no-exam term life insurance policy to get a policy in days instead of weeks.
However, if you want to get life insurance with a pre-existing condition, replacing your current policy may not make the most sense, or even be possible.
Convert Your Policy
If you are uninsurable, you should see if your policy is convertible into a permanent life insurance policy.
Term conversion is when you exchange your term life insurance policy with a new permanent life insurance policy without having to requalify medically.
The life insurance company will charge you the health class that you were approved at when you purchased your life insurance policy originally.
Presumably, you would have been healthier when you originally bought your life insurance policy, so this may be a better value than replacing the policies if your health has changed.
If you’re uninsurable, a term conversion may be your only long-term option.
Renew Your Policy Annually
Most term life insurance policies will continue after the level-term period in what is known as the annually renewable term life insurance period.
The life insurance company can increase your rate on an annual basis, usually until age 90 or age 95.
This may sound like a good option, but in practice, the annual renewable term option is rarely used due to the cost.
Life insurance companies know that people who keep their term policies beyond the level-term period are usually in poor health, and they want to hedge against that.
It may make sense to keep your term life insurance for a year or two past the annual renewable term period, but this is certainly not a long-term solution.
Some term life insurance policies will decrease your death benefits instead of increasing your premiums.
This option is generally seen as a better option since it keeps your insurance payment manageable and allows you to maintain some coverage after the level-term period.
Final Thoughts on What Happens to Term Life Insurance After it Expires
While there are some return-of-premium life insurance options, you generally don’t get any money back if you don’t die during your term life insurance policy.
Simply put, if you don’t use it, you lose it!
Once your term life insurance level-rate period ends, you have some decisions to make.
If you don’t need coverage anymore, you can cancel your policy and save some money.
If you do need coverage, you can try to replace it with a new term or permanent policy.
Term life insurance rates keep going lower.
Use our free rate comparison tool to see just how low the rates of over 30 top-rated life insurance companies are today.
Replacement works best if you are in good health.
If you’re uninsurable or buying new life insurance is too expensive, you can try converting the life insurance policy into permanent life insurance, such as universal life or whole life.
Finally, you can renew your policy annually at an increasing rate.
However, paying an annually increased rate can be very expensive in the long-run, and is done very little in practice.