What Happens if your Term Life Policy is Expiring?

If your Term Life Policy is nearing its “term,” you need to decide what to do.  First, ask yourself a few questions –

• Why did I buy this coverage in the first place?
• Would my family suffer financially if I die without life insurance?
• Is there money to cover my final expenses?
• What legacy do I want to leave?
• Is there other coverage I should be considering?

If you don’t replace this coverage, the death benefit is forever lost to your family.  You could let it lapse and no longer have coverage, but that is not usually the smartest or best choice. First, the actual policy itself may not be ending, but the amount you are paying is.  Most Term Life Policies allow you to pay a level premium for a specific number of years, typically  10-20 years, but sometimes even longer.  When the “term” or number of years is up – you have several options:

1. Extend – While this may be your most expensive option, it is still an option to consider.   When you extend – you pay the new, usually considerably higher premium, and every year that premium is going to increase.  The older you are, the greater risk you are to the insurance company, so they are going to charge you for that added risk.  If you have failing health and have no other choice, you may choose to extend at the higher rate.

2. New Policy – If you are in decent health, and still insurable, or maybe even improved health – for example, you have quit smoking, lost weight or have an improved health condition, you may be able to buy another term policy for a lower rate than what you had or significantly less than if you extended the policy.

3. Convert – Many Term Life policies have a provision that allows you to convert your term plan to a permanent life insurance policy. A conversion option allows you to keep your same rate class, regardless of your current health condition and does not require a new application or medical exam.  You also may have what is called a conversion credit.  A conversion credit means a portion of the premium you have paid for your term coverage can be credited to your new permanent life insurance policy premium, thus reducing your 1^st-year cost.  Your permanent policy will cost more than a term plan but has several outstanding features that a term policy does not – cash accumulation, dividends, and can be used as your family bank.  Make sure to talk with us about how we can build a plan for you that meets your needs.  The flexibility of these plans allows us to design a policy that provides the coverage you need, with the benefits that you want at a price you can afford.

4. Combo – For many clients, a combination of term and permanent insurance is the perfect answer. Term can provide affordable coverage at a lower rate, while the permanent policy can provide true “lifetime” benefits at a fixed cost that you can use throughout your lifetime to finance large expenses like college tuition, weddings, trips, homes, or even fund your retirement and provides a guaranteed death benefit.

It is important to know what coverages you have and the provisions that are in your contract.  You should talk to your insurance professional at least once a year and always review your coverage when you have a major life event – such as death, divorce, new child, or as your income increases.  Not sure what you have or if what you have is still the best option for you and your current needs?  We offer free policy reviews.  We will be happy to talk a look at what you have and answer any questions.  Give us a call today – we are here to help!

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