5 Options When Your Term Life Insurance Policy Expires

Options When Your Term Life Insurance ExpiresCongratulations! You’re about to outlive your term life insurance policy.

Many consumers aren’t aware of all their options when their term life insurance expires…or is about to expire.

The common move is to research another life insurance policy which is a fine option under certain circumstances.  However, as an agency that speaks with dozens of consumers daily about their life insurance options, we find that many are suited for much better options.

We’ll discuss those options in this article.

When you’re approaching the end of your term life insurance policy , here are your choices:

1. Continue your current policy
2. Conversion to a permanent policy
3. Life settlement
4. Purchase a new policy
5. Go without coverage

1. Continue your current policy

This is the option you want to avoid. Most term policies typically turn into an “annually renewable term” (ART) policy which basically means your life insurance rates at the end of your term will skyrocket.

The rates are typically so expensive you can’t afford them. Even if you can afford them, the rates will go up every year (unless you have a term/ul hybrid policy). We’ll note that some carriers will keep the premium level, but dramatically decrease the coverage at the end of the term – this isn’t common, but worth noting.

Contact your life insurance company and ask for an “in force illustration” and you’ll see your projected premiums will be pretty steep.  If you need more coverage and you can qualify, you’re better suited to purchase a new life insurance policy…even if you’re much older and in poorer health – the rates will still be more competitive.

2. Conversion to a permanent policy

Depending on the life insurance company and their conversion options, you may be able to convert your policy with no evidence of insurability to a permanent policy just by filling out some simple forms.  Even if you have serious health issues, you may have the opportunity to convert your term policy to a permanent one – qualification is based on your current age and the life insurance company’s guidelines on conversions.

If someone has developed health issues and can no longer qualify for traditional life insurance and they’re within their conversion period, this is typically the best route.

The process to explore a term life conversion is to contact your initial agent and let them know you want to explore coverting your life insurance policy – they’ll let you know your options. If you don’t have anymore contact with your agent, contact us and we’ll let you know what your conversion options are.

A good rule of thumb is if you’re under the age of 65, you likely have a conversion option.

The worst thing you can do is contact the customer service at your life insurance company.  The reason being is (1) they’ll likely refer you to a local agent or (2) they’ll provide you the information, but aren’t licensed to make any recommendations or design the policy to be the best possible option for situation.  Permanent life insurance policies require an agent to design the coverage and an off the shelf version of a life insurance policy typically isn’t designed for maximum efficiency.

All you have to know is that every life insurance company’s conversion options are different.  Contact a veteran life insurance agent that has done conversions before.  And actually ask your agent these questions: (1) Have you ever converted a life insurance policy before (many haven’t, walk away if so) and (2) How comfortable are you with designing permanent life insurance policies?

3. Life Settlement

If you’re in poor health, on a fixed income and you can’t afford your term life insurance policy anymore, you may be able to sell it on the secondary market. Meaning you could get a significant amount of money.

If the policy is within the conversion period and your health has declined, we can solicit offers from investors who will essentially buy your policy off you.  What they’ll do is convert the policy to a permanent one and take over the payments.  When you pass away, the investors will receive the death benefit.

Many are uncomfortable with this, but this is a legitimate marketplace and is completely legal. It’s a highly regulated segment of the industry, especially since seniors are involved.  Keep in mind, there are seniors selling their policies to investors every day and we’d be happy to help you evaluate your policy and get offers on it.

This simply involves collecting a lot of data points. On your side, we’ll need to complete a health profile and get some information from the life insurance company as to what your conversion options look like.  From there, we’ll put together a package and send it to our investors anonymously without your name attached to it.  We’ll get multiple offers back, do a little negotiating to try and get you more and then if you choose to accept one of the offers, we’ll formally apply.

Typically you need to be over age 65 and in declining health to explore this option.

4. Purchase A New Policy

If you’re still in good health, you can purchase a new life insurance policy. Many times, it simply makes sense to start a new guarantee period over again. Maybe even consider some type of permanent insurance or even a mix of a small permanent insurance policy and some term coverage .

Typically at the end of a term, many of our clients will buy a small $10,000-$100,000 permanent policy and a small term life insurance policy.

Keep in mind that rates will be a lot more expensive because your older so make sure you speak with an independent life insurance agent who can look at all the options on the market for you.

5. Go Without Coverage

If no one is financially dependent on your income or will be burdened from your untimely passing, then going without coverage makes sense.

If your life insurance is set to expire within the next few years, you should start weighing your options now because your age may limit your future choices.

The best thing to do is contact an independent life insurance advisor. We’ll weigh all your options and present them to you…so YOU can make the best decision.

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About Jeff Root

is the owner of rootfin.com. He's an independent life insurance agent who has helped 1,000's of consumers purchase life insurance online and over the phone.

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